The last three decades has witnessed a rapid adoption of networks and the benefits of networking across a wide range of disciplines. The ideas developed by the early pioneers of applying social networks theory to the examination of organisations and organisational networks have irrevocably changed the perspective of networks theory and its application across many business environments (Alba 1982; Bagozzi 1975; Cook and Emerson 1984;
Granovetter 1973; Sheth 1973; Van de Ven 1976). The network paradigm is clearly established in the business psyche, as is the notion of interconnectedness and interconnection between the network parties (actors). In this section the emergence of the relational phenomena and their influence on the study of networks and the practice of business networking within the context of marketing is explored.
FIGURE 2.3
The Interrelationships among Networks, Marketing and Relationships
The importance of relationships in networks may have been underestimated in the earlier studies of networks but the interrelationships among the domains of networks, marketing and relationships, as identified in Fig 2.3 above by Iacobucci (1996), describing the relevance of relationships to networks and marketing. This offers a perspective on the importance of networks to marketing where much of marketing is said to be relational;
“Networks are an excellent means of studying relational phenomena and therefore networks are an excellent means of studying much of marketing’ (Iacobucci 1996, p.112). This recognition linking the importance of relationships in networks to marketing outcomes endorsed the shift in re-appraising the importance of relationships in networks which had begun in Europe with the markets as networks theorists and was soon to reach a global audience through the IMP Group of researchers.
The term ‘relationships in networks’ is used in this study to emphasise the distinction between the earlier work on developing the markets as networks, or the ‘interaction’
approach, and the growing recognition that the study of ‘relationships’ in networks is making to current thinking on business networks and networking. The last decade has seen a significant contribution by researchers to better understanding the importance of relationships in networks and the growing contribution this is making to the literature and to future research (Ellis and Mayer 2001; Ford et al. 2003; Ford and Håkansson 2006;
Gadde and Håkansson 2007; Henneberg et al. 2006; Jiang et al. 2009; Leek et al. 2002;
Medlin 2005; Ritter et al. 2004; Wilkinson and Young 2002).
Looking at the antecedents of relationships in networks, there is a tendency in early network research, where the focus is on dyads and their connectivity, to treat actors in the network as equals, with little emphasis on relationships. It was some time before the notion of central and marginal actors within a network was recognised and how important these relationships are to the development of the network (Stern and Reve 1980). It was not until the arrival of the network interaction theorists, exemplified by Håkansson (1982) where social relationships were recognised as having important role in business relationships and secondly, that interdependencies and continuity in relationships favour in particular the development of networks. The importance of relationships in networks has been fundamental to the subsequent development of the interaction approach to networks favoured by the IMP Group and typified by Ford (1980) in an appraisal of business relationships in industrial markets.
There are close parallels between the recognition of network relationships and the development of customer relationship portfolio analysis, which offer a similar insight into the growing importance of understanding and managing customer relationships (Turnbull and Cunningham 1981). Relationship portfolio analysis emerged as one way of understanding the complex issues surrounding supplier or customer relationships, which required firms to allocate resources efficiently and effectively to get the best from different types of relationship (Leek et al. 2002).
With discussion on relationships in vogue with marketers, Customer Relationship Marketing was seen by business in the 1980’s as a panacea to reverse the reputation of
many commercial firms for poor understanding of customer requirements, poor customer service and a paucity of customer knowledge. Customer relationship marketing was subsumed by the desire to manage customer relationships and marketing became obsessed with managing customer relationships. As a result, a plethora of customer relationship management (CRM) literature ensued. It is not the intention here to introduce the very extensive domain of customer relationship literature. Rather to suggest that considerable attention was being directed towards ‘customer relations’ by the wider marketing community. It is therefore perhaps not surprising that those interested in networks and networking should also make the connection between networks, relationships and marketing, as described so eloquently in Mattsson (1997).
Therefore, having extended the view of networks in markets theory beyond the dyadic exchange, where networks are seen as being positive, neutral or negative and primarily concerned with network activities, actors and resources, the effect of relationships is introduced to the focal firm (Anderson and Håkansson 1994). Network perceptions are developed over time and by adapting the network activities in several relationships, there will be a complimentary sequence of independent activities and a shared perception of how relationships in the network change (Gummesson 1995). The critical point here is that there is no simple dyadic relationship in a network, the consequences of network relationships may be have stabilising or destabilising effects (Holmlund and Törnroos 1997).
What may be influenced is the constantly changing network of relationships within the network. Ford et al (1998) in their view of managing relationships, suggest that relationships are the primary asset of a business, which require continuous investment to maximise the return on investment. Ford et al. (1998) also believe that managing relationships in business networks in the short term is likely to be based on its current relationships and network position and that in the longer term, managing relationships in the network is likely to be based on influencing its position in the network. This is to suggest that network relationships may be changed over time which Ford et al (2003) say may involve the firm in choices between attempting to coerce others to act in a particular way and conceding to the wishes of others.
Relationships in networks are both complex and multifaceted, as well as being highly dependent on the context in which they are embedded (Holmlund and Törnroos 1997, p.308). Håkansson and Snehota (1995) suggest that business relationships comprise three layers or effect parameters based on the Actors-Resources-Activities (ARA) model discussed in the previous section. Within the context of the ARA model, actor bonds are said to refer to how actors respond in a network relationship perceive and respond to each other Welch and Wilkinson (2002), introducing the idea that shared cognition plays a role in the development of actor bonds within relationships.
Gadde and Håkansson (2007) return to the theme that network relationships are the ‘key ingredient in today’s economic landscape’ but acknowledge that with so many schools of thought, finding a consistent description for network relationships is difficult. However,
they seem to share a common view that there is a strong association between a company’s relationships within a network and its perceived economic outcomes.
According to Medlin (2003b) the very nature of dyadic relationships presents a problem for researchers using quantitative methods due to the difficultly of conceiving and measuring a construct that encompasses both parties views of the relationship. This is based on the idea that respective parties are unlikely to report equivalently on items such as trust and commitment, and this cannot be measured without normally aggregating the result to explain the difference (Medlin 2003b). However, from this work, the construct of relationship performance in the network emerged as a viable approach to explaining the relationship from the focal firm perspective. This led to the notion of self and collective interest in network relationships, where the self interest of a firms economic goals are compared to the collective interests of the group (Medlin 2005). Relationship performance in networks has rarely been examined in a quantitative manner, however Medlin (2005) shows the apparent important role that relationships play in the perceived overall success of the network and business outcomes.
Relationships within networks are said to be particularly important to SME’s who practice networking and word of mouth (WOM) marketing as a means to access market information by sharing information and keeping themselves informed about new business opportunities (Collinson and Shaw 2001). Word of mouth networks are recognised as important in tracing information about products and services. Referral networks contain key individuals, frequently described as market makers or opinion leaders for which
network analysis is said to be ideally suited to identifying the leading characters identified as sources of information Iacobucci and Hopkins 1992, p.7).
As relationships are strengthened through participation in the network, knowledge gained and shared extends beyond the common goals of economic value to finding joint solutions to common problems, which can demonstrate how networking between small firms can bring about real benefits (Dennis 2000). The benefits of business networking is seen by Ottesen et al. (2002) as a crucial aspect of SME marketing, where firms create, use and maintain relationships with relevant market actors. Through such relationships SME’s also obtain material resources and other inputs needed to compete effectively in the marketplace. However, the advantages of networking for business within the context of marketing are not restricted to SMEs, as Doyle (1995, p.38) suggests; “Networking in the future will be more proactive and offer greater opportunities for managers with marketing skills, as tomorrow’s marketing managers will be scanning more broadly and looking at any organisation with capabilities or resources that offer synergies that can be exploited in the market.”