1. Business Strategy & Network Structure Dr. Emanuela Todeva Director of Research Centre for Business Clusters, Networks and Economic Development University of Surrey

2. Examples of Business Networks buyer-supplier networks, or vertical industrial networks within a value-chain;buyer-supplier networks, or vertical industrial networks within a value-chain; horizontal diversified industrial networks of the type of Keiretsu and Chaebol;horizontal diversified industrial networks of the type of Keiretsu and Chaebol; networks of subsidiaries and subcontractors to multi-national corporations;networks of subsidiaries and subcontractors to multi-national corporations; family business networks;family business networks; entrepreneurial networks of autonomous small businesses;entrepreneurial networks of autonomous small businesses; project network, including R&D alliance networks, and counter trade networks;project network, including R&D alliance networks, and counter trade networks; utility networks.utility networks. buyer-supplier networks, or vertical industrial networks within a value-chain;buyer-supplier networks, or vertical industrial networks within a value-chain; horizontal diversified industrial networks of the type of Keiretsu and Chaebol;horizontal diversified industrial networks of the type of Keiretsu and Chaebol; networks of subsidiaries and subcontractors to multi-national corporations;networks of subsidiaries and subcontractors to multi-national corporations; family business networks;family business networks; entrepreneurial networks of autonomous small businesses;entrepreneurial networks of autonomous small businesses; project network, including R&D alliance networks, and counter trade networks;project network, including R&D alliance networks, and counter trade networks; utility networks.utility networks.

3. Types of Supply Chain Networks Ego-centred Dispersed Project based Value-chain based A combination of value-added chains & strategic control networks

4. Business networks are sets of repetitive transactions based on structural and relational formations with dynamic boundaries comprising interconnected elements (actors, resources and activities). Networks accommodate the contradictory aims pursued by each member, and facilitate joint activities and repetitive exchanges that have specific directionality and flow of information, commodities, heterogeneous resources, individual affection, commitment and trust between the network members. (E. Todeva, 2006). Definition of Business Networks http://www.surrey.ac.uk/BCNED/ http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1124332

5. RELATIONSHIPS STRUCTUREACTORS cultural approach relational approach structural approach The Network Diamond Emanuela Todeva (2006) Business Networks: Strategy and Structure, New York: Taylor & Francis.

6. The Behavioural System of Business Networks Reactive & Strategic Behaviour in Networks Firm’s conditions & attributes Business operations Market conditions Manageability/Control Legitimacy & Role Relational framework / context Relational attributes Industry conditions Factor conditions Mediating factors Other connected activities Decision making & goal setting Negotiating identities, interests & agreements Bargaining & negotiating contracts Ascribing and accepting roles Structuring information flow Coordination Maximising profits, payoffs, benefits Minimising costs / Sharing costs Optimising behaviour & maximising ‘expected utility’ Manage the use of their assets Accumulation of heterogeneous resources Investment in assets capabilities & relations (incl. diversifying assets & capabilities) Building strategic capabilities Specialisation Initiation of contacts and entrepreneurship Contracting resources Developing relationships Extending commitments to partners (buyers, suppliers) Acquiring & maintaining power Monitoring & evaluation of partners, building expectations Exchange of incentives Strategic positioning Mimicry, conformity & compliance Legitimacy seeking Forming coalitions and partnerships Cooperation for a final outcome Learning Knowledge sharing Manipulating external & internal environment f a c t o r s © Todeva, 2006

7. Relational Analysis What constitutes a business relationship (a question about the nature of inter-firm associations); Why actors connect to each other (a question about their motives and drivers); How actors connect to each other (a question about forms and types of network links, and business relationships); What takes place in a relationship (exploring the possible content of communications, exchanges, and transactions, their dynamics); What are the implications of being connected © Todeva, 2005

8. EGO ALTER Attributes / Affiliated members and sub-units Dyadic & Multilateral Relationships E. Todeva, 2003

9. Connected Relationships Focal firm Direct counterpart of the focal firm Indirect counterpart of the focal firm Indirect counterpart of the focal firm Focal relationship Connected relationships Past relationship Future relationship © Todeva, 2005

10. A-R-A model Adapted from Hakansson, H. and Johanson, J. (1993) Actors / Resources /Activities Model (A-R-A model). resource commitments by actor 1 resource commitments by actor 2 activity participation emerging interdependencies Resource B2 Resource A2Resource A1 Resource B1 Actor 1Actor 2 Activity A Activity B dyadic exchange relationship resource Interdependence activity Interdependence 1 1 22 33 1.resource links 2.commitment links 3.participation links 4.interdependence links 44 4 44

11. Initiating a link (including learning about the other) Establishing a relationship (including certain reciprocity) Market transaction (including agreement) Repetitive transactions (including a partnership agreement) Mutual recognition between human actors, or interaction with objects Single exchange of resources between human actors Repetitive exchanges, employing an object into a process Knowing someone or something Relation / Association between subjects & objects ► ▼ ◄ ♦◘♦◘ Co-presence in a field Interconnected relationships (including transactions & resource flows) Community exchanges & interconnected processes POTENTIAL RELATIONSHIP LONG-TERM RELATIONSHI P DYADIC MARKET RELATIONSHIP INTERACTION / COMMUNICATIO N LINK NETWORK RELATIONSHIP PRE- RELATIONSHIP Categories and Levels of Network Relationship © Todeva, 2005

12. Evolution of Relationships pre-relationship stage exploratory stage negotiation stage development stage stable execution stage termination stage -relationship management- identifying needs - evaluation of potential partners - designing transactions - agreements - framing - selecting partners - initiate relationship - reciprocate partner’s efforts - framing - individual commitment - learning - seeking complementarities & synergies - framing -relationship assessment -decision-making -attempts for restoration -dyadic communication of termination -network communication of termination -disengagement -sense-making -aftermath

13. Interorganisational Relations joint ventures; equity investments; co-operatives; R&D consortia; strategic co-operative agreements; cartels; franchising; licensing; subcontractor networks; industry standards groups; action sets market relations hierarchical relations joint ventures; equity investments; co-operatives; R&D consortia; strategic co-operative agreements; cartels; franchising; licensing; subcontractor networks; industry standards groups; action sets market relations hierarchical relations Todeva & Knoke, 2002

14. REPRESENTATIVE & MARKET RELATIONSHIP – Exporting, Equity investment HIERARCHICAL RELATIONSHIP - Wholly Owned Subsidiary, Franchising, Subcontracting AUTONOMOUS PARTNERSHIP RELATIONSHIP - Contractual & Equity Joint Ventures INTER-DEPENDENT PARTNERSHIP RELATIONSHIP – R&D Consortia, Industrial Co-operation Agreement, Management Contracts, Turnkey Contracts © Todeva, 2005 Subcontractors, Franchisees, Suppliers, Business customers Outsourcing / Subcontracting relationship A B C D Production / implementation network in host economy A2 Partners by contractual agreement Equity control & resource sharing agreements Transfer of operational control C A, A2 B Subsidiary, Franchisor, Local distributor Main relationship Sharing agreements, Equity control Competitive relationship E E Exporter, Licensee, Portfolio investment Subsidiary, Joint Venture D Headquarters

15. hegu, hui, guanxi, kongsi Chinese Family & Community Business Networks © Todeva, 2005

16. Structural Analysis What constitutes a business network structure (a question about the nature of inter-firm associations); Why some structures survive over time (a question about their motives and drivers); How network structures facilitate actors’ behaviour (a question about forms and types of network links, and business relationships); What interactions take place in a different structural configurations (exploring the possible content of communications, exchanges, and transactions, their dynamics); What dynamics take place in different structural formations © Todeva, 2005

17. Types of Structural Configurations hierarchical organisation (Weber, 1947) trans-national (Bartlett & Ghoshal, 1989) multidivisional organisation (Simon, 1962; Chandler, 1962; Williamson, 1975) matrix organisation functional organisation horizontal organisation / value-chain, supply chain - through vertical integration of activities (Porter, 1986) hegemonic / Ego-centred clustered / dispersed / distributed circular / regular / small-world universal / core-periphery / scale-free heterarchy (Hedlund, 1986) community / dispersed / distributed hybrid organisation (Miles & Snow, 1986, Powell, 1987) broker producer designer distributor supplier ▼ ◄ ♦◘♦◘ ▼ ▼ ▼ industry groups (Porter, 1980)

18. Hegemonic Tree Circular Regular Universal Value Chain Clustered Core/Periphery (Scale-free) Small world Types of Network Structures

19. Network Based Businesses © Todeva, 2005

20. Distributed Supplier Networks and Commodity Chains BUYER PRODUCER MANUFACTURER BANK TRADING COMPANY SUBCONTRACTOR DISTRIBUTOR

21. Sogo Shosha trading company Foreign partners BANK Keiretsu network Firms Japanese Sogo Shosha Networks © Todeva, 2005

22. HEADQUARTERS LICENSEE JOINT VENTURE SUBSIDIARIES EMBEDDED IN LOCAL CLUSTERS REPRESENTATIVE IN FOREIGN COUNTRY INDUSTRIAL CO-OPERATION AGREEMENT TURN-KEY CONTRACT FRANCHISEES MNC Networks © Todeva, 2005

23. Competing products Scientific and knowledge fields Research laboratory Research laboratory Government innovation policy agencies MNC International Standardisation agency Scientific Association Competing technologies subcontractor Government standardisation agency RESEARCH CONSORTIUM R&D Alliance Networks © Todeva, 2005

24. The Global Information Sector, 2002

25. Electrical Equipment and Component Manufacturing Cluster in Zhe Jiang Province in China: Chint (led by Mr Nan) and Delixi (led by Mr Hu)

26. Qiujing Swith Plant, 2005 Networks with Banks (1) and Others (2)

27. Networks with Clients (1) and Suppliers (2)

28. Regional Inter-University Alliances & Partnerships Bio-Medical & Health, Greater South East, 2008 Database Research Projects ‘Regional University Collaborations’ Greater South East, UK

29. Location of Capabilities Bio-Medical & Health, Greater South East, 2008 Database Firms ‘Regional Concentrations of Capabilities Measured with a Two-mode Graph of Relationships Between Regions and Clusters’ Greater South East, UK

30. Cluster Value Chain: SURGICAL & MEDICAL INSTRUMENTS MANUFACTURING (198 firms, ties between firms based on 5 or more shared industry codes) (87% of firms have the core industry codes: 334510 Electro-medical and Electrotherapeutic Apparatus Manufacturing; 334517 Irradiation Apparatus Manufacturing; 39112 Surgical and Medical Instrument Manufacturing; 339113 Surgical Appliance and Supplies Manufacturing) © Todeva (2007) Holding companies All other personal care stores Wholesale Misc. metal products Electro-medical, electro- therapeutic, irradiation apparatus; surgical & medical instruments; surgical supplies manufacturing R&D Plastic products 198 firms 87% in 4 core industries Misc electrical equip & component manuf.

31. Conclusions Acknowledge the presence of relational aspects and long-term commitments between business partners and the role of content, context and relational dynamics Relational and structural properties of business networks do affect performance and the effectiveness of international partnership agreements Heterogeneity of actors in business networks has an impact on coordination and management of partnerships Different dimensions of business networks do require distinctive research methodologies © Todeva, 2005