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Long Range Planning

40/2 April 2007

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Charles Baden-Fuller Editorial

Networking and Partnering

Our first four papers deal with different dimensions of partnering and networking. Successful networking can be vital for creating and maintaining organisational growth and momentum, yet success requires attention to many dimensions, from partner selection, to setting the right environment for the deal and finally executing the details. Paul E. Bierly and Scott Gallagher look at partner selection mechanisms. The text book rules of rational, well-informed choice are often far away from the reality of imperfect information and the need for speed. The authors look at how firms can best respond to these constraints, and put forward tried and tested guides for better practice. Mathew Hughes, R. Duane Ireland and Robert E. Morgan examine how incubators that foster young high technology firms can do better in their tasks. They stress that a critical role of an incubator is to foster the right kind of relationships between the young firms to improve access to knowledge, as well as to enhance more tangible resources. They present cases to provide practical tips. Anna Nosella and Giorgio Petroni draw lessons from the single case of Carlo Gavazzi Space to look at how small resource constrained firms can reach out to undertake large projects successfully. They stress the importance of leadership in managing the partnerships collectively. Finally, Gianluca Colombo, Valter Conca, Massimo Buongiorno & Luca Gnan look at the ultimate alliance: the cross border merger. Two factors appear critical for success here - speed and clarity of purpose - and the authors explain how these can be achieved using statistical work to reinforce their findings.


Exploiting the Internet

Our last two pieces explore the management of the internet space. Peter J. Brews and Christopher L. Tucci look at the ‘internet-enabling’ of business operations. The pressure to move on-line is intense in many businesses, and this brings a parallel pressure to restructure the organisation to make it flatter and more responsive. Notwithstanding the considerable effort needed to make internet working effective, the authors point out that, paradoxically, it can be hard to create a sustainable advantage. Finally, George Balabanis and Vangelis Souitaris look at on-line retail strategies and come up with some practical guides on how to increase customer satisfaction and loyalty.

 

Paul E. Bierly III and Scott Gallagher Explaining Alliance Partner Selection: Fit, Trust and Strategic Expediency bierlype@jmu.edu

The past decade has seen a sharp increase in the use of strategic alliances between firms, especially in fast-moving industries such as biotechnology or software. Well-matched alliances can bring synergies and competitive advantages for both partners e but selecting the right partner can be a complex and challenging business, and the failure rate is high. So what are the critical components of successful partner selection? When managers have the time and information available to evaluate the suitability of potential partners, they can make rational, informed decisions based on ‘strategic fit’ between the firms. Trust e between both firms and individual managers e also plays a significant role, particularly where a decision must be with limited information.
But the authors argue that another factor, strategic expediency, plays a key role in successful partnerships, particularly in hypercompetitive industries where time is at the greatest premium and is increasingly treated as a strategic resource in its own right. Thus, instead of searching for the best possible partner (and in some cases failing to set up an alliance if it cannot be formally justified in those terms), managers up against the clock may supplement their use of formal analyses with intuitive judgements based on their own experiences. Intuition, the authors assert, can be a powerful tool to supplement the rational decision-making process. Moreover, firms can take various steps to hone their strategic expediency capabilities, for example by developing a template of critical issues to guide managers’ thinking when they assess potential strategic partners.

 

Mathew Hughes, R. Duane Ireland and Robert E. Morgan Stimulating Dynamic Value: Social Capital and Business Incubation as a Pathway to Competitive Success direland@mays.tamu.edu

Studies of business incubation have tended to examine how managing the incubator can help incubating firms create value. Emphasis has centred on the provision of core business services and the design of the incubator, while more recent approaches focus on the provision of a rich network through which an incubating firm can engage in collaborations. This paper argues that such provisions dictate only the opportunities for value creation; how incubating firms choose to behave and pursue network opportunities dictates the extent to which these opportunities can be realised and, thus, the value creation. It contends that firms’ destiny lies in the hands of their combinations of strategic networking activities, and incubation outcomes do not occur because of a firm’s mere presence in an incubator. The authors identify two value-stimulating behaviours (networking activities)dresource pooling activity (resource-seeking behaviour) and strategic network involvement (knowledgeseeking behaviour)dand develop a value matrix that classifies incubation into four types of outcomes on the basis of the extensive versus narrow combinations of these activities. Different combinations generate different levels of social capital, which generates unique incubation outcomes that contain varying levels of value creation potential. Each incubation outcome has merits and can be used to inform the evaluation of incubating firms and the relational strategies of their managers. The authors test this four-group typology using data generated from a postal survey of young, high-technology incubating firms. They conclude with a set of implications for incubating firms, incubator management teams, public policymakers and incubator sponsors, and further research.

 

Anna Nosella and Giorgio Petroni Multiple Network Leadership as a Strategic Asset: the Carlo Gavazzi Space Case gpetroni@unirsm.sm

In 1979 Carlo Gavazzi Space was a small company on the fringes of the European space market. But visionary leadership from its CEO Lanfranco Zucconi led the company towards the blossoming market in small satellites for developing countries. The journey towards developing the capability to serve this market led CGS to build, and act as the strategic guide to, a sophisticated system of four strategic networks. The article focuses on CGS and its relationships with its partners in these networks, who include suppliers, collaborator/ competitor space SMEs, universities and public research centres, and regional and sector political structures. The authors analyse how the multiple network system contributes to helping CGS gain the competitive advantages of increased contractual power with public space agencies, increased innovation generation and improved technological transfer opportunities which have underpinned its successful entry into the small satellites market. They illustrate how the lead company organizes and manages the system of networks, each of which require different coordination mechanisms and degrees of formalization. They pay tribute to the skill and determination of the lead company, and its CEO’s expertise in recruiting, negotiating with and motivating network partners and creating an environment of trust and respect where their interests converge on a common goal, have been repaid with very positive results for both CGS and its network partners.

 

Gianluca Colombo, Valter Conca, Massimo Buongiorno & Luca Gnan Integrating Cross-Border Acquisitions. A Process-oriented Approach gianluca.colombo@lu.unisi.ch

Acquisitions and mergers of equals often fail to deliver shareholder value, largely because poor integration practices do not allow synergies to be created. The issue has been addressed by several studies from two different research streams: the first looks at the combination of resources after the acquisitions and the second focuses on the human factor. This paper proposes an integrated model where the effects of these key aspects are tested simultaneously and where three independent variables are included: the extent of planning and knowledge from previous acquisitions and knowledge from previous relationships. The authors believe that through the model managers can prioritise their actions and select an appropriate time horizon for the integration. This paper considers managerial resources redeployment and the change in organisational climate as endogenous variables of a structural model where the exogenous variables are merger planning, knowledge from previous acquisitions, knowledge from previous relationships and the temporal lag between the closing date and the beginning of integration. The model is tested on a sample of cross-border acquisitions. The results contain several lessons for managers. First, an accurate and detailed merger plan helps in resources redeployment. Second, the knowledge acquired through previous acquisitions and previous relationships with the target positively affect the resource transfer. Surprisingly, the acquisition experience has a negative effect on the organisational climate. Finally, the sooner the integration process is begun, the more likely it results in a successful acquisition.

 

Peter J. Brews and Christopher L. Tucci The Structural and Performance Effects of Internetworking peter_brews@unc.edu

All over the world companies are spending many billions of dollars on upgrading their information technology to internet-based systems. They justify this expenditure on hardware and software that permits internetworking saying it improves business operations. But is this money well spent? First of all, the implementation of these systems fundamentally changes a company’s organisational structure. Second, does such enabling actually improve operational efficiency? And third, if every company is doing this, how will a competitive advantage be achieved? This paper addresses these issues, drawing on data gathered from a multinational sample of 550 firms. The authors’ research shows that internet-enabling of business operations is profoundly affecting the scope, structure and operational performance of firms. However, because the majority of the internet-enabling done so far involves business processes and activities that organisations perform in a similar way, little firm-level competitive advantage can be achieved by it. The authors do stress though that because the ‘‘non-strategic’’ effects of internetworking are so profound in their own right, they warrant focused managerial attention. They also outline the conditions under which internetworking is likely to contribute to a firm’s competitive advantage. In particular, as new and more complex applications of operational internetworking are still appearing, late adopters may find that their tardiness in making the transition proves very costly.

 

George Balabanis and Vangelis Souitaris Tailoring Online Retail Strategies to Increase Customer Satisfaction and Loyalty v.souitaris@city.ac.uk

The growth of internet shopping has widened the retail environment and created challenges for retailers. One of the main challenges is to build up customer loyalty, and therefore repeat business, as shoppers are only ever a few mouse clicks away from another website which may have similar offers. Sites therefore must differentiate themselves and their offers and focus their market scope. This paper examines how online retailers can combine their differentiation and market scope strategies to increase customer satisfaction and loyalty. It says that online shoppers fall into one of two broad categories which define their motivation: goal-oriented and experiential. The majority of shoppers are goal-oriented, are motivated by convenience, selection and information, while experiential shoppers are the browsers, motivated by recreation and experience. The authors examine differentiation and market scope strategies from a demand-driven perspective, collecting data from UK shoppers who buy groceries online. Respondents were categorised into benefit segments, based on their responses to the two shopping motivations. The authors found that differentiation strategies based on convenience and customer care are more likely to retain the loyalty of goal-oriented shoppers while experiential shoppers will be won over by differentiation based on an eye-catching website, product assortment and customisation. The overall message is that differentiation, if combined with the appropriate market scope, can lead to a competitive advantage. Moreover, the authors suggest that online retailers can satisfy both types of customers with different strategies and that certain differentiation strategies can be more effective in terms of satisfaction and loyalty generation when focused on specific segments.

 

 

This issue is available in full on-line at www.sciencedirect.com

 
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