There is a strong association between positive network characteristics and network outcomes (Ritter 2000). The network characteristics construct has established linkages to network competence, trust, allegiance and strength of relationship. The idea of network characteristics varies according the firm’s focal perspective depending on the frequency of contact, resources committed and the social dimension of the relationship (Easton 1992).
A firm is likely to have a mix of strong and weak ties in a network (Granovetter 1973).
Kale et al (2000) argue that firms benefit from a portfolio of network characteristics which appeal to the network members, depending on the conditions surrounding the firm.
The model proposed in this chapter, argues that network characteristics are an important antecedent to understanding aspects of networking outcomes within the paradigm of
networking performance. A strong allegiance to a positive set of network characteristics was seen to be more beneficial in terms of execution and integration into a network (Easton and Araujo 1994). Network characteristics foster the capability to interact with firms and encourage a sense of reciprocal benefit and closeness among firms. Issues such as mutual respect, social skills, communication skills and the level of co-operation are part of network characteristics and network capability. Finally, trust is seen as a networking characteristic which affects the depth and richness of exchange relations and is an essential prerequisite for most forms of interdependent relationships in networks (Moran 2005). This model proposes examining network characteristics as an indicator of networking outcomes.
Strength of Relationship
Relationships are seen as a prerequisite to successful networking and the development of inter-firm relationships. There has been a considerable body of research investigating the nature and development of relationships in networks (Achrol 1997; Anderson and Håkansson 1994; Håkansson and Snehota 1995). As Ritter et al (2002) observe that the ability of a firm to develop and manage relations with key suppliers, customers and other organisations is a core competence of a firm, having a direct bearing on a firm’s competitive strength and performance. The extent to which firms are able to manage relationships is the subject of continuing research (Möller and Svahn 2003). Medlin (2003) suggests that in considering the interaction between firms to create various forms of business relationship it is important to recognise the difference perspectives between actors’ views of the relationship. Relationships are also seen to be influential in creating
business networks and therefore important in managing relationships in networks (Ritter et al. 2004). Terziovski (2003, p.91) suggest that networking practices have a significantly positive effect on business excellence and found that the strength of relationship between networking practices and business excellence to be significant and positive. Relationships in networks have been considered by a number of characteristics , including mutuality, symmetry, power dependence and resource dependence. However, Holmlund and Törnroos (1997, p.306) suggest that in considering the long-term character of relationships in networks, the two important aspects are (1) continuation; where relationships are said to endure and be long lasting and (2) strength; where strength refers to a firm’s resistance to disruption in a relationship, which is said to increase over time, strengthening network bonds and increasing respective firm performance. Similarly, Richards and Jones (2009, p.312) found that relationship effectiveness had a positive effect on sales performance. From early discussions with executives in firms willing to collaborate on this research project, it became evident that it was not the relationship alone but the strength of the relationship that was likely to be significant.
Strong versus weak ties
It is acknowledged that networks with different structural and relational characteristics have specific strengths and that a number of network ties are required to support business development (Aldrich and Zimmer 1986; Brass et al. 2004; Dubini and Aldrich 1991;
Gargiulo and Benassi 2000; Granovetter 1973; Johannisson 1988). Brass et al (2004) argue that the shift of network research from simple considerations such as the existence or non-existence of a relationship, to consideration of the relative strength and content of
the relationship is needed to distinguish between theoretical predictions. The network literature is primarily concerned with the nature of the relational bond between two or more actors, as well as the effect this bond has on shared activities (Frenzen and Nakamoto 1993; Granovetter 1985a; Hansen 1999; Uzzi 1997). Researchers typically classify the relationship between actors as being linked by either a strong tie or a weak tie (Rindfleisch and Moorman 2001). By treating strong and weak ties as separate constructs rather than degrees of one another, Rowley et al (2000) state that this captures richness in the data, which past researchers see as important in understanding network effects and firm behaviour (Rowley et al. 2000).
Uzzi (1996) argues that strong ties are associated with the exchange of high-quality information and knowledge. In the development of strong ties, inter-firm partners learn about respective organisations, they become more dependent on one another and develop relational trust (Larson 1992).
Granovetter (1973) argues that weak ties are conduits across which an actor can access novel information. Weak ties are more likely than strong ties to be ‘local bridges’ to distant others possessing unique information. The strength of weak ties argument is as much about structural embeddedness as it is about relational embeddedness. A weak tie can be beneficial because it is more likely to embed an actor in or provide access to divergent regions of the network rather than to a densely connected set of actors. For example, Granovetter (1973) suggests that an actor’s collection of weak ties is more likely to reach divergent regions of the surrounding network. In practice, a firm
embedded in a network is likely to have access to a range of both strong and weak ties and use these both strategically and tactically in the pursuit of business aims.
Trust
Without a notable dimension of trust, concepts like networking seem to promise little efficiency (Morgan and Hunt 1994). Consequently, trust is considered as being important in building relationships a strategic and operational level. There are difficulties concerning actors in a network trusting an organisation, rather than another individual and indeed firms trusting each other. The issue is to what extent trust can be generalised and institutionalised beyond individual perceptions. It is recognised that inter-firm trust is especially dependent on and mediated by the institutional framework in which the relationship is embedded (Lane and Bachmann 1996). However, despite trust being an important component in creating relationships, researchers in the markets as networks tradition have often ignored trust when describing network effectiveness and networking performance.
Allegiance
Like trust, allegiance is also frequently identified as a network construct in dyadic studies (Wellman and Berkowitz 1988). Creating effective relationships in networks requires a co-operative approach towards inter-firm interaction, focusing on the quality and strength of the relationship which in-turn reinforces the allegiance of the network partners (Andersson and Forsgren 2000). If the focal firm has to select between two or more potential exchange partners, the perception of goal compatibility, trust and performance
of the different candidates are likely to be important indicators. Such types of information, in particular concerning compatibility and trust, are most likely to be based on direct experience (Moorman et al. 1993; Morgan and Hunt 1994). From a network perspective, these ideas are important because they suggest that the context of trust, which will differ systematically across business environments, exerts an important influence on the network relationship, linking the degree of trust and the strength of the relationship.
Networking Competence
Network competence is defined as the degree of network management task execution &
the degree of network management (Ritter and Germunden 2003). Networking competence is considered a core competence of the firm according to Prahalad and Hamel (1990), highlighting the importance of networking as a root to competitive advantage. According to Prahalad & Hamel (1990, p.83), membership of a network provides potential access to a wide variety of market benefits and “can make a significant contribution to the value of the firm and may be difficult to imitate’’. Increasing attention has been paid to a firm’s competencies by both academia and managers. While the focus traditionally has been on technological competencies and their impact on corporate success, more recent studies have included managerial competencies and networking competence in particular (Freis et al. 2003). The term networking competence is used to describe the skills, knowledge and resources necessary to perform certain network tasks.
Network competence has been defined also as a process of activities (Drucker 1992).
This view is endorsed by Ritter (2003) who examined aspects of network competence,
including the necessary knowledge, skills and qualifications to network effectively, distinguishing between the tasks that need to be performed in order to manage a firm’s technological network and the qualifications, skills, and knowledge that are needed in order to perform these tasks.
In this study, competencies form the collective networking knowledge of a firm and in particular the capacity for the team of resources to perform some tasks or activities (Grant 1991). A competency is created from a combination of network resources, created by networking processes that are used to achieve a desired objective (Ritter and Germünden 2003). Network competence and network capability are seen to possess different attributes in the development of this construct and the subsequent model development.
Ritter and Gemünden (2003) incorporated both aspects in their concept of network competence including both having the necessary knowledge, skills, and qualifications as well as using them effectively. With regard to network competence, they distinguish between the tasks that need to be performed in order to manage a company’s technological network and the qualifications, skills, and knowledge that are needed in order to perform these tasks (Gemünden & Ritter 1997; Ritter 1999). Therefore network competence is created from a given combination of resources which have been made by using network processes that are used to achieve a desired objective (Ritter et al. 2004).