A New Value of Business Relationships

Small companies developing new technologies strive to survive the process of technology development: they have scarce resources to engage in business relationships. Is there any value on which they are missing out?

Small companies and their business relationships

In the process of developing new technologies, small companies face unique challenges due to their size, age and industry. This, what we call liability of smallness and newness (Aldrich, 1986), means they lack resources and legitimacy, and have limited capacity to act and react in a new market. Diverse strategies are used to address these challenges depending on their level of development, type of industry, and capacity, amongst others.

However, one of the main, but often overlooked, factors that need to be managed are social factors, as they have been shown to facilitate access to and exchange of the resources needed (Nahapiet, 1998). This means that small companies should use these social factors (in the form of business relationships) to access e.g. investments and infrastructure (Dyer, 1998).

Traditionally, the value of business relationships is derived from the access they provide to scarce resources, especially during the process of technology development. This resource-based value has been researched to understand its benefits to create competitive advantage (Barney, 2001). Theory and practice tell us that the strategic value derived from business relationships implies an established and well-known industry context.

For small companies in the process of technology development, the time and resources needed to develop business relationships are commonly not in place. Additionally, context conditions are dynamic and uncertain (Geels, 2007) with business relationships and networks not well established in the industry. Then, capturing the value of relationships is not easy nor enough to support the process. So, how could we address this issue?

Our research: new value of business relationships

A qualitative analysis of the clean technologies industry in Australia showed us that in an industry context of technological change relationships are valued in two ways. First, there is the traditional value of relationships as a resource to access other actors’ assets, which we call transactional value of relationships. Second, our results suggest a new value of relationships for industry actors, especially for small companies, that we named transitional value of relationships.

Going beyond the use of relationships for resource access and exchange, transitional value of business relationships refers to the use of relationships as a mean to connect with other actors, share experiences and explore new ideas and situations. The struggles implicit in the process of technology development can be overcome when relationships are based on moral connections without pursuing tangible results in a set timeframe. This type of relationships provides industry actors with stronger connections that help to overcome in the long term the lack of resources and regulatory support.

Looking deeper into the differences between the transactional and transitional value of relationships, a main finding of this research is the different perception of goals when using relationships. In the transactional use of relationships, goals are concise and specific within a set period of time. In contrast, transitional value is linked to goals that are not defined in terms of time and content.

Our research reveals that the perception of goals by industry actors is a key aspect of managing relational assets. In practical words, this means that relationships can be managed according to the mind-set of industry actors, their needs and goals during the process of technological change. Assigning a transitional value to relationships implies the development of new relational skills and diversifies the type of activities pursued by small companies.

In conclusion, we question whether small companies are prepared to invest time and scare resources to manage business relationships in a way that goes beyond accessing resources. Small companies should rather influence their industry context to create new conditions for their technologies through business relationships without predetermined goals. Are small companies prepared for this?

“the best way to predict the future is to create it”

References

Aldrich, H., & Auster, E. R. (1986). Even dwarfs started small: Liabilities of age and size and their strategic implications. Research in organizational behavior.

Barney, J. B. (2001). Resource-based theories of competitive advantage: A ten-year retrospective on the resource-based view. Journal of Management, 27(6), 643-450.

Nahapiet, J., & Ghoshal, S. (1998). Social capital, intellectual capital, and the organizational advantage. Academy of Management Review, 23(2), 242–266.

Dyer, J. H., & Singh, H. (1998). The relational view: Cooperative strategy and sources of interorganizational competitive advantage. Academy of Management Review, 23(4), 660–679.

Geels, F. W., & Schot, J. (2007). Typology of sociotechnical transition pathways. Research Policy, 36(3), 399–417.

About the author

Lina Marcela Landinez

I am a Junior Professor at Münster University of Applied Sciences and the Team Leader of the Science-to-Innovation Group at the Science-to-Business Marketing Research Centre. I finished my PhD on Innovation Management and I am passionate about how technological change comes about.

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