Although this chapter has already established that inter-organisational relationships and business networks can provide firms with substantial benefit, they are rarely problem-free (Håkansson & Ford, 2002; Zineldin, 2004). Reportedly, around two-thirds of
collaborative ventures have serious problems in their first two years, and as many as seventy per cent eventually fail (Hanson, Dowling, Hitt, Ireland & Hoskisson, 2008). Many of the problems associated with inter-organisational collaboration derive from the reluctance of firms to make a long-term commitment and set aside their own self-interests (Dieke & Karamustafa, 2000). Problems also arise when the companies involved do not want to forgo their autonomy and independence (Henriksen, 1995; Williams, 2005; Zineldin, 2004). In particular, Tidström (2009) found that firms in horizontal networks find it difficult to surrender their „own way of doing things‟ in favour of what the network desires.
Inherent in any inter-organisational relationship is the tension between conflict and cooperation (Cova et al., 2010). While Chapter Two demonstrated that inter- organisational relationships vary along a continuum from weak to strong, they also exhibit different combinations of conflict and cooperation. Thus, some relationships may be more adversarial than they are collaborative (Tidström, 2009). If competition centres on a fight for resources or market share, Stern (1971) suggests that conflict is grounded in a more personal fight between opponents. Conflict may also arise after one or more firms question if they are receiving an equitable share of the relationship‟s benefits (Easton, 1992). Conflict also manifests itself in terms of incompatible goals, values, organisational domains, and responsibility (Achrol, 1997). In more specific cases, conflict has been found to be linked with incompatible perceptions of the proper way to run a business (Tidström, 2009). Overall, conflict is common to business networks where there is greater incompatibility between firm expectations (Geersbro & Ritter, 2010).
In horizontal networks, it is only natural that some conflict occurs given the close
94 However, the literature suggests that social factors, rather than organisational or
commercial barriers, may be more likely to lead to conflict surfacing in horizontal networks. This makes sense given that horizontal networks are based on non-economic exchange, and because commercial problems are often the same for each of the firms involved (Henriksen, 1995). Also, the simple fact that horizontal network members produce the same product and target the same customer may be more likely to lead to more social and personal forms of conflict.
While the diversity and number of members may be an indication of a network‟s growing strength and success, increasing size may cause conflict and create new challenges for coordinating operations because more individuals must now be consulted (Gomes-
Casseres, 1994). This view is supported by Human and Provan (1997), who found that as a network‟s membership increases, it becomes more difficult to reach consensus and coordinate the network‟s activities. In contrast, increasing the number of firms involved in a network can increase the legitimacy of the network, which in turn simplifies the financing of network activities (Andresen et al., 2009).
A recent conceptual paper by Geersbro and Ritter (2010) posited that uncertainty, ambiguity and conflict were the main reasons why business networks may hinder, rather than enhance, a company‟s performance. Ambiguity is generally more prevalent in larger networks, where it is difficult for firms to specify their expectations (Geersbro & Ritter, 2010). Additionally, because the boundaries of larger networks are more difficult to define, there is likely to be uncertainty at both the individual firm and collective level about what environmental changes may impact on the network (Geersbro & Ritter, 2010). Uncertainty is closely related to issues of role conflict and stress within networks,
whereby the representatives of each firm are unsure of exactly what their role in the network should be, or their responsibilities and obligations (Bengtsson & Kock, 2003; Nygaard & Dahlstrom, 2002). Firms can also feel uncertain about their investment in a network (Zineldin, 2004).
95 Incompatibility and conflict may also derive from other areas within a business, not just those related to organisational domain or internal company policy. For example, when firms are at different levels of maturity, they are more likely to have divergent views on what constitutes a close and beneficial relationship (Peters et al., 2010). Furthermore, the size of the firms involved can also be an issue, because of the incompatibility between the marketing budgets of small and large firms (Neves, 2007). Problems also emerge when owners and managers from different corporate cultures engage in formal networks (Henriksen, 1995). In this regard, the social norms and language that are unique to each individual firm may come into conflict, which can subsequently cause individual representatives to be offended (Henriksen, 1995). In overcoming these issues, networks should consider setting membership criteria, nominating an impartial coordinating committee, and making clear where the boundaries of joint activity lie (Neves, 2007). By doing so, any incompatibilities between firms are thought to lead to less-destructive conflict.
While some degree of conflict is common in horizontal networks, Fyall and Garrod (2005) felt that it was not clear whether conflict promotes or retards network effectiveness. With respect to the latter, if conflict resolution results in positive outcomes, the process may actually stimulate organisational learning and enhance the network‟s effectiveness. Potential conflict between network actors can, however, be lessened, or resolved, through establishing formal agreements at the outset of any network activity (Zeffane, 1995). In particular, creating a code of ethics or conduct, and meeting frequently, can assist firms to overcome many of the potential barriers to inter-organisational collaboration (Neves, 2007). Parameters should also be established regarding what type of information may or may not be shared (Morris et al., 2007). This is important in alleviating network members feeling uncertain or unsure about how to behave, and to avoid sensitive information being shared inappropriately.
Research has also found that networks can severely drain resources from the firms involved, and in the process, sensitive information may be lost and conflict regarding intellectual property may arise (Rampersad et al., 2010). Parker (2000) argues that being
96 in a cooperative relationship involves additional time and financial burdens for a firm, which over time, may significantly reduce the benefits of the relationship. Zineldin (2004) supports this view by suggesting one of the main disadvantages for firms belonging to networks is the demand on their resources. In particular, networks require firms to commit time, money and attention. If a firm ends up neglecting their core business activities because they are too tightly involved in a network, they risk losing some element of flexibility (Zineldin, 2004).
Network relationships that are too close may also cause firms to lose control of their activities and resources (Zineldin, 2004). In the most extreme of cases, firms may lose proprietary information to others within their network (Håkansson & Ford, 2002). This issue was also identified by Neves (2007), who through case study research found that the possibility of inside information being shared with firms outside of the network reduced the likelihood of firms engaging in collaborative activities. In their comparative study of Australian SME business networks in the manufacturing and service sectors, Dean et al. (1997) also found that many businesses were concerned about disclosing information to their competitors in the network, while others simply wanted to remain independent. These reasons, along with individuals feeling uncertain as to how to behave in networks, were the most inhibiting factors to SMEs engaging in formal network arrangements (Dean et al., 1997).
Another source of weakness in business networks is the tendency for firms to fight for power and control (Hadjikhani & Thilenius, 2005). Firms involved in networks may acquire such power from their expertise, market share and size, the superior technology they have access to, or the respect other network members have for them (Thorelli, 1986). Additionally, some firms try to exert considerable influence over the activities and
resources embedded in the network and by doing so create feelings of conflict and uncertainty among other network members (March & Wilkinson, 2009; Milward & Provan, 2003). If and when a new firm enters the network, the more controlling firms may react unfavourably, which is to the detriment of the network as a whole. In response to these challenges, firms need to develop the managerial skills and capabilities for
97 dealing with simultaneous cooperation and competition with another firm (Morris et al., 2007). Additionally, managers should learn how to reconcile their potentially conflicting roles of competitor and collaborator (Palmer, 2002).
Among the factors Williams (2005) cited as common barriers to cooperative relationships forming in inter-organisational networks was a lack of trust among actors, firms being reluctant to give up their independence, the complexity of joint projects, and the inability for some firms in a network to collaborate. These risks and negative consequences do, however, vary in their severity depending on a number of contextual factors. For example, the competitive and economic environment surrounding the industry in which the
network is positioned, can exert pressure on cooperative relationships and therefore lead to network failure. Selin (1993) studied inter-organisational collaboration in the tourism industry, and in doing so, identified some of the more common barriers and antecedents to this particular type of network activity. Many of the factors constraining effective collaboration and open communication within the tourism industry relate to issues of industry fragmentation and ideological differences (Selin, 1993). Jurisdictional boundaries may also create a barrier through the notion that many cities, states, and nations compete with adjacent entities for a „slice of the tourism pie‟ (Selin, 1993: 219).
A similar finding was made by Brown and Butler (1993) who attributed the natural borders between regions as being barriers to information sharing among local businesses in networks. Furthermore, Neves (2007) found that the geographical distance between firms reduced the likelihood of collaboration between firms in Brazil. Disagreement over network objectives, differing management styles and marketing priorities, and an
inability to adapt to changes in the external environment, are additional reasons why many attempts at inter-organisational collaboration fail (Neves, 2007; Palmer, 2002).
Finally, it should be acknowledged that not all firms will be interested in cooperating with their industry counterparts, or forming networks at a horizontal level. On the one hand, some firms adopt a more transactional approach to their exchange processes, and for this reason, it is important for this study to consider the possible reasons why firms
98 avoid forming horizontal relationships, in addition to learning why conflicts develop and how they should be managed (Welch & Wilkinson, 1999). On the other hand, some networks and business relationships simply end because they have served their purpose and the firms no longer need to cooperate (Tidström & Ǻhman, 2006). They may also come to an end because the value of the relationship has changed over time (Zineldin, 2004). In such cases, the network should not be studied in terms of failure, but rather in terms of success.
4.7 Chapter summary
This chapter has reviewed the nature of collaborative marketing within horizontal networks, and between SMEs. The first section outlined the main benefits of networking for SMEs. In the process of reviewing this literature, this chapter emphasised that SMEs lack marketing expertise, resources, and opportunities. In response to such issues, collaborative marketing has emerged as a particular form of network activity pursued by small agricultural firms or tourism enterprises. This chapter has borrowed definitions and understanding from this stream of literature, and reviewed the implications of this work for the current study.
Although there is a wealth of information and insight on collaborative marketing from a tourism perspective, the general tourism industry does differ from the context of this research. Most notably, within a tourism destination or industry, the core product is much harder to define. That is, there is a diverse range of businesses that have different
objectives depending on whether they offer an accommodation service, hospitality, or are a visitor attraction. This leads to greater industry fragmentation, and possibly rivalry for a share of a tourist‟s patronage. One of the key aims of this research was to study the dynamics of horizontal networks and collaborative marketing in context of an industry that offers the same product to the same segment of target consumers (i.e. it comprises direct competitors). Although Tasmanian wine producers vary in their business
99 backgrounds and objectives, they share many more similarities in terms of the resources they use, and the organisational problems they encounter.
In the second half of this chapter, the main reasons why firms join business networks, and some of the reasons for network failure, were reviewed for the purposes of the current research. Many of the factors attributed to network failure are heightened in the context of horizontal networks, because competitors are generally thought to have conflicting interests and objectives, and are reluctant to share information. That said, if organisations can find a way to work together effectively, the benefits of comparative advantage are substantial, particularly for small firms. The thesis will now shift its focus to the nature of marketing within the wine industry, and under what conditions wine producers, grape growers and wine distributors opt to form collaborative relationships and networks.
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