A PROCESS BASED FRAMEWORK OF HOW RELATIONSHIPS DEVELOP

This thesis is based on a metaphorically based diamond framework of interorganizational relationships (see Figure 2). The relationship diamond is developed from both Parkhe (1993) and Wetzels, de Ruyter & van Birgelen (1998). The diamond illustrates different elements of the relationships. Next, Figure 3 presents the actual processes of these elements.

Parkhe (1993) stated that strong relationships are stable and formed for specific reasons (e.g., motives) and express the preferences their partners have. The framework used in this thesis (see Figure 2) is an extension of the Parkhe framework. Specifically, Parkhe (1993) related motives and partner selection to trust and reciprocity. The core diamond framework is similar to Parkhe (1993) but also to Wetzels, de Ruyter & van Birgelen (1998) that also empirically examined ideas before interaction between partners actually takes place. Wetzels, de Ruyter & van Birgelen (1998) proposed that during the stage before interaction takes place, referred to as awareness, partners prepare themselves for interaction. This stage is followed by a stage of trial and error (Wetzels, de Ruyter & van Birgelen, 1998). Furthermore the process of developing relationships moves into a stage of expansion where partners start to form trust and the true character of the relationship (Parkhe (1993;

Wetzels, de Ruyter & van Birgelen, 1998). Finally, Wetzels, de Ruyter & van

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Birgelen (1998) emphasize that the ultimate stage of relationships is commitment. The implications of these two studies provided a metaphorically based framework which implies that relationships if successful are long term.

This thesis also considers in accordance with Parkhe (1993) that relationships are preceded by cooperative motives and preferences that suggest a basis for how a partner should be selected. The next stage then is expansion of the relationships in which friendship, interpersonal commitment, reciprocity and trust are included. This thesis further proposes that interorganizational commitment is the ultimate stage but it also is complemented by cooperation and loyalty.

Partner Selection

Cooperative motives to enter networks

Long term orientation Tru

st Inte

rpe rsonal com

mitm ent

Friendsh ip

Reciprocity Coop

era

tion Loyalty Interorganizational

commitment

Figure 2: The relationship diamond

Specifically, Wetzels, de Ruyter & van Birgelen begin their study by saying that relationships “do not just emerge or exist” (1998:407) but evolve through a

process. Relationships can therefore be considered as a process. Their process had following stages:

1. Relationship starts by awareness which means recognizing a feasible partner. At this stage there is no interaction.

2. The second stage the relationships develop into exploration, which is based on true interaction and permeated by trial and error. At this stage relationships are examined if it involves obligations or just benefits.

3. In the third stage, expansion, relationships develop into interdependence. Wetzels, de Ruyter & van Birgelen (1998) emphasize that the biggest difference between expansion and exploration is that the partners know to what extent they can trust other partners and what elements of the relationship they are less satisfied with.

4. Finally, Wetzels, de Ruyter & van Birgelen (1998) propose that relationships can develop into the most preferable level which is commitment. They say that at this level the relationships are based on concrete pledges that give continuance to the relationship.

This thesis proposes a similar process view and considers implications from both Parkhe (1993) and Wetzels, de Ruyter & van Birgelen (1998). The process of relationships (see Figure 3) is thus a combination of both Parkhe (1993) and Wetzels, de Ruyter & van Birgelen (1998). The framework contains five stages that involve a long term orientation, which takes place throughout the whole process, and is decided upon before interaction takes place (Wetzels, de Ruyter & van Birgelen, 1998). The second stage of the process involves cooperative motives to enter interorganizational networks (see Figure 3), which also are chosen before interaction takes place (Parkhe, 1993). The third stage of the relationship development process involves preferences upon which partners are selected (see Figure 3) and also commences before actual interaction (Parkhe, 1993). The fourth stage of the process is expansion of the relationship (see Figure 3) in which the relationship takes the form of friendship, interpersonal commitment, trust and reciprocity (Parkhe, 1993; Wetzels, de Ruyter & van Birgelen, 1998). The fifth stage is based on making the relationship enduring, which has consequences on the future and involves stability and maturity (see Figure 3). During this final stage, the relationship includes interactions, but also shows a propensity for enduring the relationship based on specific intentions and promises. This stage is therefore proposed to also include interorganizational commitment (Wetzels, de Ruyter & van Birgelen, 1998), cooperation (Pesämaa & Hair, 2007; Eriksson & Pesämaa, 2007) and loyalty (Pesämaa, Örtqvist & Hair, 2007). This process moves, therefore, from no interaction to more explicit interaction. It should also be emphasized that relationships may not last forever and can also take other directions. The process model is thus only one suggestion of a feasible direction of relationships.

18 Cooperative motives to enter

interorganizational networks

Time

Interaction No interaction

Partner selection

Long term orientation

Expansion

Stability & maturity Cooperation

Interorganizational commitment Loyalty

Friendship Interpersonal commitment

Reciprocity Trust

Figure 3: The process of how relationships develop

To obtain insights into the literature on development of networks, a search was performed on commitment (from 1986 to present). The reason commitment was selected as a key term for this search was that many scholars, including Andersson & Weitz (1992); Morgan & Hunt (1994); Wildeman (1998); Wetzels, de Ruyter & van Birgelen (1998); Mavondo & Rodrigo (2001); Gounaris (2005); and Sharma, Young & Wilkinson (2006), point out that this term more than others reflect the success of a relationship. The search was conducted in September 2007 and yielded 23,859,814 scientific peer reviewed articles, of which the article by Morgan & Hunt (1994) had 891 citations. Thus, their findings are considered the most influential work on commitment in business related studies. Following this overall search a narrower search was undertaken. The more specific search was made on “interorganizational commitment” (from 1986 to present). This search yielded three studies. Of these three studies only one, Mavondo & Rodrigo (2001), conceptualized interorganizational commitment and moreover included other types of

relationship constructs related to interorganizational commitment. Their instrument on commitment also differentiated between interpersonal and interorganizational commitment, which makes their research important for the proposed diamond in this research. In addition, Portes (1998), one of the most cited articles in this field, argues that commitment, reciprocity and trust are key elements of cooperation. Moreover, Wildeman (1998) examined motives and partner selection and proposed that many lasting relationships are represented by commitment.

The interorganizational relationship process is represented in several of the articles appended to this thesis (see articles 4-10). These articles include different frameworks describing how contents in interorganizational relationships develop. In addition to this metaphorically based framework all constructs are assumed to have a direction supported by several arguments (Pesämaa, 2007a).

The first argument proposed here is that firms search for something particular.

This search emerges in the motives expressed by firms when entering networks. Motives are therefore related to the way partners are selected.

Specific business related motives are likely to affect the way partners are selected and the kind of access to resources the firms are likely to develop.

Partner selection likely directly affects the kind of relationships that ultimately are established between reciprocity, trust and interorganizational commitment (Pesämaa, 2007a).

A second argument for the proposed sequence between the constructs is that firms avoid certain situations they do not want to be involved in (Lundbäck, 2005). This avoidance thus expresses certain motives in searching for partners and establishes certain relationships to avoid situations in which they do not want to be involved. One typical example is that a firm may join a certain network to achieve a certain type of legitimacy and reputation.

A third argument is that firms want to limit their uncertainty (Chronéer, 2003).

It is assumed that they limit uncertainty by entering networks with specific motives, selecting certain partners and also by establishing relationships. An example here is loyalty where firms minimize uncertainty by associating themselves with partners known to be loyal.

A fourth argument is that firms are trying to minimize risk (Pesämaa, 2007a).

This argument has the same logic as the previous one. When firms know exactly what they will accomplish then they know what to expect. Motives to enter networks, partner selection and certain contents in relationships are adopted to minimize risk and gain further knowledge of what to expect. An example here is that firms enter networks to share risks and they search for the kind of partners that do this best.

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A fifth argument is awareness. The firms are persistent about finding routines and plans that worked in the past and which they have perfected (Audia, Locke & Smith, 2000). When the same routine applies a second time as good as the first, then they know that this will more likely also work the next time.

Hence, the firm establishes a record of what works and what does not. By doing so they identify motives they feel confident with and partners they are familiar with (Gulati, 1995). In addition they also pursue trust if trust worked in the past. Trust is therefore assumed to breed more trust (Morgan & Hunt, 1994) and make the firm aware and persistent about those routines that work in terms of their interorganizational relationships.

A sixth argument is that individuals in firms establish a particular kind of relationships for social reasons. This means that individuals enter certain networks because they like the individuals in that network and therefore select partners they like the most. The interpersonal part is sometimes underestimated but the fact that conflicts can ruin many potentially strong relationships makes this aspect very important in developing knowledge in this area.

A seventh argument is that firms want to approach and come closer to certain other firms or industries in selected geographical areas. Proximity is pursued because it often creates efficiency in operations.

A final argument is that network members enter them in order to “maximize their rewards and minimize their costs” (Bagozzi, 1974: 77).

Based on these arguments this thesis also emphasizes a process perspective where all constructs were given a specific sequential order. The proposed sequential order in this thesis is presented in section 2.4 – 2.8 that follows.