Self- and collective-interests: Using formal network activities for developing firms' business

Industrial Marketing Management xxx (2014) xxx–xxx

IMM-06981; No of Pages 9

Contents lists available at ScienceDirect

Industrial Marketing Management

Self- and collective-interests: Using formal network activities for developingfirms' business

Kristin Balslev Munksgaard a,⁎, Christopher John Medlin b,1

a Department of Entrepreneurship and Relationship Management, University of Southern Denmark, Engstien 1, 6000 Kolding, Denmarkb Marketing and Management, Business School, The University of Adelaide, 5005, Australia

⁎ Corresponding author. Tel.: +45 6550 1467; fax: +4E-mail addresses: [email protected] (K.B. Munksgaard

(C.J. Medlin).1 Tel.: +61 8 8303 3361; fax: +61 8 8313 0170.

0019-8501/$ – see front matter © 2014 Elsevier Inc. All rihttp://dx.doi.org/10.1016/j.indmarman.2014.02.006

Please cite this article as: Munksgaard, K.B.,business, Industrial Marketing Management (

a b s t r a c t
a r t i c l e i n f o
Article history:Received 5 April 2013Received in revised form 1 November 2013Accepted 11 December 2013Available online xxxx

Keywords:NetworkTime flowInteractionFood industryNetwork competence

Many inter-firm network initiatives supported by government funds are based upon the idea that benefits riseincrementally as more actors connect with each other. This paper takes the stand that self-interest andcollective-interest are evident in how firms participate in network activities, and how these activities are relatedto the development of the network. A time-flow model is presented of firms' participation and activities in anetwork according to specific blends and understandings of self- and/or collective-interest. Theway the networkis formed also shapes managerial understanding of why firms participate in activities and how self- andcollective-interests coincide. A qualitative study in the Danish food industry establishes that every firm viewsbusiness network activities as important, but each engages differently in these activities. The results of thisstudy reveal interesting patterns between self- and collective-interests for those participating in networkactivities and the resulting network development. A key finding of this study is the importance of a firm's abilityto convert the collective-interest of joint network activities into self-interest gains for the firm. This ability isproposed as an additional network competence to those already present in the literature.

© 2014 Elsevier Inc. All rights reserved.

1. Introduction: Network activities shaping a firm's business

The business development and innovative efforts of a firm are oftenrooted in a network effect (Gadde, Huemer, & Hakansson, 2003;Hakansson, 1989; Powell, Koput, & Smith-Doerr, 1996), where thedevelopment of strong supplier relationships is essential for drawingupon complementary resources (Gadde & Hakansson, 1994; Gadde,Hakansson, & Persson, 2010). The quality of supplier relationships alsoaffects the efficiency of activity coordination (Gadde & Hakansson,1994; Gadde et al., 2010). Also, viewing customers as co-producerselevates customer relationship development as an important way ofcreating value (Vargo & Lusch, 2004). In addition, firms may also coop-erate with complementor firms ‘whose outputs or functions increasethe value of (a firm's) own outputs’ (Ritter, Wilkinson, & Johnston,2004: 177). These complementor firms also lead to new ways for afirm to create value (Munksgaard & Freytag, 2011).

What drivesfirms to coordinate their activities in a network is essen-tially self-interest (Hakansson & Snehota, 1995). However, networkdevelopment, is also derived from the collective effort of actors in thenetwork. In other words, joining a network offers collective benefitsalongside a firm's self-interest. We suggest that understandingthe ways in which a firm's self- and collective-interests operate in a

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& Medlin, C.J., Self- and colle2014), http://dx.doi.org/10.10

network will offer insights into process questions concerning hownetworks develop and importantly how, why and when firms join anetwork.

Network participation is necessary for a firm to engage in business.However, a growing interest in formal network schemes for stimulatingsuch areas as exports or regional development has emerged (Welch,Welch, Wilkinson, & Young, 1996; Welch, Welch, Young, & Wilkinson,1998). A formal network scheme is a policy applied to improve the com-petitiveness of a group of firms or industry (Welch et al., 1996). Wefocus on such formal network schemes, wherein there is a choice tojoin, rather than an economic necessity. Whenever referring to “a net-work” in this paper, we refer to such formal network schemes. Thisspecific focus allows us to examine why firms choose to participate ina network and how they perceive the specific activities of that network.Essentially, we seek to develop our understanding of firms' differentinterests in participating. The research question we pose is this: whatcharacterizes a firm's interest in participating in network activities,and to what extent do network activities influence the firm's business?We expect the answers to this question to inform and increase ourunderstanding of how a network is developed and changed, and howand why firms participate in the broader business network.

2. Theoretical considerations— relating self- and collective-interestsin networks

Ford and Hakansson (2005: 8) claim: “we are still a long way fromhaving a clear understanding of the process of interaction from an

ctive-interests: Using formal network activities for developing firms'16/j.indmarman.2014.02.006

http://dx.doi.org/10.1016/j.indmarman.2014.02.006

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Fig. 1. Interests, participation and network development.

2 K.B. Munksgaard, C.J. Medlin / Industrial Marketing Management xxx (2014) xxx–xxx

economic perspective.” Even though the literature related to theIndustrial Marketing and Purchasing (IMP) Group has as its mainfocus the study of the interaction of firms in B2Bmarkets and networks(Anderson, Hakansson, & Johanson, 1994; Ford & Hakansson, 2005;Hakansson, 1982; Hakansson & Snehota, 1989), most studies focus onrelationships and business conducted in dyads, neglecting those effectspertaining to the network level.

One issue is that effects on the network level are very complex anddifficult to evaluate (Hakansson, Henjesand, & Waluszewski, 2004).Another issue is that the value of the network effect will most often beevaluated differently by network firms (Walter, Ritter, & Gemunden,2001). Yet another issue is that interaction is a time bound concept(Medlin, 2004). Together, these issues mean that managers face thetask of coordinating activities while in time flow (Halinen, Medlin, &Törnroos, 2012), and so confronting changing conceptualizations oftheir environment.

Taking a stationary view, to the firm, the present network is both‘pipes and prisms’ (Wilkinson, 2008). The network is formed as aset of pathways for accessing and creating resources, or accessingcustomers, as well as a lens through which managers view and makesense of business opportunities. This conceptualization of the networkis said to call for a more reactive approach by firms to systematically in-vestigate and learn about the business of network partners (Hakansson& Ford, 2002). This is not to say that the firm should sit around andwaitfor others to do (or direct) their business. Instead, managers will inter-act with their different business partners based not only upon thepresent goals and objectives they set for their own firm, but also upontheir present perception of the goals and interests of others (Hakansson& Snehota, 1995). This means that how actors perceive each other'sroles and interests in the network will have implications for theirsubsequent actions and the development of the network (Halinen &Tornroos, 2005).

Whenmanagers seek to coordinate activities with another firm theypurse value creation. In fact value creation is considered the raison d'êtrein a business relationship (Anderson, 1995). However, firms also seektheir own self-interest, which is the act of pursuing one's share of thevalue created, namely profit (Medlin, 2006). However, the very natureof interests is necessarily a matter of relativity to other parties.Collective-interest, which is not diametrically opposed, involvesthe joined self-interest of a group of firms (Medlin, 2006). Howev-er, the joined activity of firms creates a network effect, where thevalue created is greater than that which the firms alone create.That is, the result of network activities is qualitatively more thanthe sum of individual firm outcomes. Thus, a collective-interest,as an outcome that cannot be achieved alone, is created by a firmjoining a network activity.

The dynamics of firms in a network are complex to understandbecause collective action forms a new environment that is composedof changing network opportunities (Medlin, 2006). In a business-to-business relationship Medlin (2006) has shown that achievement ofself-interest stems from successful joint action. Firms act collectivelyby joining resources with other firms. Joining resources and connectingactivities leads to the development of business relationships and also tothe network. This suggests that within a network, firms pursue theirinterests by maneuvering and influencing the development of relation-ships. However, changing business relationships also has an influence ata network level and so changes collective-interest. This suggests thatthe collective-interests of firms are served by collaborating and coordi-natingmutual activities in a network. In addition, by so doing, the firmsmeet their own interests (i.e. profit, and other goals) and their ownunderstanding of collective-interest.

Taking a forward view: firms attune themselves to the actions ofothers, in order to navigate in a network (Geiger & Finch, 2010). Firmsmust coordinate their activities toward changing network opportuni-ties. Coordination as an activity is inherently a matter of ‘here andnow’, but firms must also plan and negotiate for future interaction

Please cite this article as: Munksgaard, K.B., & Medlin, C.J., Self- and collebusiness, Industrial Marketing Management (2014), http://dx.doi.org/10.10

with partner firms. This means that timing and the future become im-portant (Halinen et al., 2012). However, each firms' expectations forthe future of a network will vary, resources will change value, technol-ogies will change and firm ownership will change. The result is thatthe outcomes of planning are uncertain, i.e. the content of businessrelationships will change in unexpected ways and the network willdevelop accordingly.

Interaction in business relationships, where the actors engage incollective activities and apply resources in interactions with eachother, also creates a joint future (Medlin & Saren, 2012). In this flowingand partially stable environment, firms engaging in network activitieswill navigate and coordinate by applying their understanding of otherfirms' interests and roles (based on the collective-interests of the net-work) as well as pursing their own self-interests. In the case of a formalnetwork scheme, continuing joined activities are evidence of a bound-ary and some level of collective-interest. Thus, firms' involvement insuch a network provides a basis for understanding how self- andcollective-interests are implicated in firm and network development.

For a deeper understanding of network-interaction, we claim that itis of particular interest to discuss how interaction frames actor choicesand interests in initiating and participating in future network activities,and how past and present network activities shape a firm's business.Fig. 1 illustrates the discussion of this section. The three concepts of;(1) interests, (2) firm participation and (3) network development, areinter-linked and will change over time. The figure has arrows pointingboth to and from the concepts, as the model concerns the dynamics ofcause and effect in time flow (see Langley, Smallman, Tsoukas, & Vande Ven, 2013: 8). Also included in themodel is the changingmanagerialunderstanding of each concept in time flow (Halinen et al., 2012). Nostage of network development or phase of development is implied inthe model, but rather the concept in focus provides insights concerningthe path of the other two concepts.

At first, the model appears to present three levels of analysis: (1)manager perception, (2) firm and (3) network. However, none of theconstructs are static, as each is embedded in time flow and eachacquires meaning only as a part of the others (see Langley et al.,2013). In time flow, the three constructs gain their meaning from thepast, from each other, and from expectations and planning concerningthe future. Thus, one cannot clearly say that the model is at three levelsof analysis. Rather, the model presents a way of analyzing change in anetwork context from one period to another within time flow. Percep-tions of self- and collective-interests are from the present and concernthe future, given a prior understanding of firm participation andnetwork development. Firms' participation includes all business rela-tionship development activities and involvement in network activities(these are not firm level constructs). The result of firms' participation



3K.B. Munksgaard, C.J. Medlin / Industrial Marketing Management xxx (2014) xxx–xxx

is both expected and unexpected network development, and so changesin perceptions of interest.

In the present study, firms' participation in the activities of anetwork naturally necessitates an explicit choice. This decision to par-ticipate in network activities arises from an intention to seek eitherself- or collective-interest, or some combination of interests. Further,there is a continuous reproduction and transformation of interests inthe network as change occurs. Network development is an outcome ofperceived and understood interests and firm participation in thenetwork. The very acts of firms' participation affect perceptions of inter-ests and so the direction and purpose of ongoing firms' participation inthe network.

3. Research and analysis method

As the previous sections have outlined, understanding the interplayof self- and collective-interests is difficult, and when studied in anetwork context the matter is further complicated. For the presentpurpose, the solution has been to undertake a multiple data collectionapproach and carry out quasi-longitudinal research based upon mana-gerial perceptions and firm participation in network activities. Suchresearch allows observations of a changing business environment andchanging interests, thus allowing managers to determine meaning andresearchers to derive deeper understanding.

The empirical basis of this paper is a single case study of a regionalformal network scheme called ‘Temptations of Southern Denmark.’ Atthe time of first data collection, membership was 26 firms, but thisgrew to 34 at the time of final data collection. These new firms werenot included in this study.

Easton (1998) recommends the use of single-case design to providemore depth and breadth. Given the complexity of investigating self- andcollective-interests in a network setting, we believe a single networkcase study is appropriate. Choosing a suitable network for a study nor-mally requires a researcher to arbitrarily decide on a network boundary.However, choosing a formal network scheme immediately provides astudy boundary. The network under study was set up as a regional,government-funded initiative, with the formal goal of promotingregional food products and providing support between member firms.A qualitative case method is appropriate for exploring such a novel,complex and social phenomenon (Yin, 2003). A qualitative case studyis also suitable for understanding why firms choose to join a networkand their perception of how network activities influence their busi-nesses (Dubois & Gadde, 2002; Halinen & Tornroos, 2005). The casewas also selected based upon a ‘theoretical sampling’ (Eisenhardt,1989). Within the food industry, firms are mutually dependent in thechain from field to fork (Munksgaard, 2009). Food firms very seldomserve the end-consumer single handedly. Thus, firms in the food indus-try are specifically prone to seek collective-interests to serve end-consumers and, as such, this industry provides special possibilities forexamining self- and collective-interests.

Twenty-one firms agreed to participate in the study. Five declinedfor reasons such as lack of time and interest in the research. Semi-structured, face-to-face interviews were conducted in Danish withinformants at the CEO level in every firm. The interview protocolpertained to the issues of: (1) purpose for participating in the network,(2) intentions for joining activities in the network, and (3) firms'perception of how and the extent to which network activities shapedand delineated business opportunities for the firm.

Data was collected in three phases. In round one, interviews werecompleted with those firms who initiated the first network activities.These ‘initiators’ were identified by the network coordinator as thosewho were directly involved in the first network activities. These inter-views were conducted during August and September, 2011. In thesecond round, interviews with the remaining firms were completedby April, 2012. In the third and final round, data on firm participationin network activities in 2011 and 2012 was collected from the network


coordinator in December 2012. This quasi-longitudinal network activitydata provided a basis for discussing managerial interests and percep-tions versus actual participation.

In line with this multiple approach for data collection, an ‘abductiveapproach’ (Dubois & Gadde, 2002) was undertaken to develop a deepunderstanding of relevant theoretical and empirical issues. In applyingan abductive approach, a cyclic and spiral process of analysis and inter-pretation of the evolving empirical observations and theories studiedwas completed (Andersen & Kragh, 2010; Walters & Young, 2001).The iterative process between theory, analysis and data collectionallows for the discernment of patterns of similarities and differencesbetween firms. We consider the spiral and longitudinal analysis of theabductive approach particularly suited to distinguishing the patternsbetween self- and collective-interests.

Analysis of interviews was undertaken using the Leximancer soft-ware to understand the ways in which interests, firm participation injoint activities and network development occur. Analysis was complet-ed with different groupings of interview data according to timing andnetwork membership, The Leximancer (2010) software was applied tofind and support the analysis of central constructs. Based on the Danishinterview transcripts, Leximancer generated concepts that character-ized the text using statistical information on co-occurrence betweenhigh-frequency words. The program evaluates the text according tothe amount of sufficient relevant words around a concept. Where thethreshold is achieved, the concept is added to the thesaurus built byLeximancer. In the next phase of analysis, the concepts are placed in amulti-dimensional hierarchy of themes according to the weighting ofinter-concept connections measured in the text. The actual number ofthemes is a decision made by the researchers, which is based on parsi-mony in presenting the concepts the algorithm finds in the texts. How-ever, the size or content of a theme is an outcome of the Leximanceralgorithm. Themulti-dimensional hierarchy of themes is then projectedonto two dimensions for researcher interpretation, with different colorsnoting the level of a concept in the hierarchy (Leximancer, 2011).

For analysis purposes, the software not only assumes that thereis a single objective reality present in the multiple informant textsapplied as input to the algorithm, but it also recognizes that eachinformant has a different point of view. This means that the soft-ware finds commonalities with regard to how firms express theirinterest in participating in the network and their perception ofhow joint initiatives and activities influence their business. Inessence, the software generates a deep understanding of theconcepts and connections between concepts that CEOs apply totheir participation in the ‘Temptations of Southern Denmark’ net-work. This understanding is an abstract representation of themanagers' logic, or schemas (Welch & Wilkinson, 2002), for net-work participation.

Smith and Humphreys (2006) argue that computer coding of textresults in an objective conceptual framework based upon quantitativecriteria, which provides a stronger foundation for successful qualitativeinterpretation. Our analysis follows the recommended Leximancer pro-cedure (Leximancer, 2010; Smith & Humphreys, 2006). However, inpresenting the results, we have translated to English the Leximanceroutput of ‘themes’, ‘concepts’ and ‘thesaurus words’, as well as relevantinterview quotes. The translations were checked between the tworesearchers and through discussions we resolved ambiguous meanings.

The issue of separating self- and collective-interests, so as to under-take analysis, was not so clear at the beginning of this research. Howev-er, as Luhmann (1979) notes, action requires a reduction in meaning.Following our abductive approach and as the research progressed, weobserved that firms participated in network activities differently andin different patterns, which we considered as being reflective of theirinterests. Our understanding of interests was also enhanced by notinginterview text concerning the specific purposes for firm participation,or inaction. To explore the patterns of self- and collective-interests, weapplied a specific strength of the Leximancer software (Leximancer,



able 1uotes extracted from the Leximancer analysis illustrating the range of collective-interests of firms in a formal network scheme.

Firm Illustrative quote

Lapwing Farm This is a network designed to help each other. If you feel you have some weaknesses yourself, then you can use the network because they have some skills that youmight need.

Sparkling K This network is a way to spread your message to the people in your network. Networks are rather different and you have to give some thought to what you want fromthe network.

The Chicken Farm The aim is to show that products from Southern Denmark are of high quality. I would say that the network is building cooperation and sharing experiences amongmembers.

The Cross Mill What is important in ‘Temptations of Southern Denmark’ is simply the network wherein you know someone who struggles with the same issues as yourself.


TQ

2011: 149) i.e., the ability to analyze according to tagged groupings oftranscripts.

4. Self- and collective-interests in a food network: case presentationand analysis

‘Temptations of Southern Denmark’ is a formal network schemefunded by a grant from the regional government, where all activitiesare organized by a paid coordinator. The network coordinator has anoffice and works on a daily basis at the small organic dairy, NaturesMilk. While the coordinator organizes joint activities, the network ismanaged as a formal association with a chairman and an electedboard. The chairman holds the position of marketing manager atNatures Milk.

The ‘Temptations of Southern Denmark’ network includes firms ofmany types. There are smaller firms producing single products (e.g. cab-bage or asparagus), while others are large farmers who, in addition totheir agricultural production,maintain a farm shop selling quality prod-ucts manufactured on a small scale. Other firms are medium-sized foodproducers of such items asmilk, bread and sausage. The networkmem-bership also includes some restaurants and cafés as well.

Approximately ten different network activities are coordinated eachyear. Some activities aremainly promotional, such as providing ingredi-ents for national gourmet chef contests and sending promotional sam-ples to food journalists. Other activities focus on learning how to usesocial media for marketing or applying for regional project funding. Agrowing number of activities relate to selling firms' products throughjoint participation in regional or national gourmet fairs. Due to theirsmall size, few firms could single-handedly leverage such promotionaland competition advancing activities. On average, 5.3 firms participatedin any activity, and the range was between 2 and 12 participating firmsper activity over the two years of the study.

The declared purpose of ‘Temptations of Southern Denmark’, as stat-ed in the articles of association, is to “unify initiatives to develop localfood articles of high quality”. This declaration manifests the overalland formal collective-interest of the network firms. This is further illus-trated in the quotes listed in Table 1, which show examples of CEOs'perceptions of their purpose for participation in the network. Thesequotes are extracted from the Leximancer analysis, and relate to theconcepts ‘network’ and ‘Temptations,’ which are elaborated in the fol-lowing sections.

In the first phase of analysis, we set out to understand the rationalefor firms' participation in the network by analyzing separately the inter-views of the four initiating firms. Table 2 depicts the most frequentlyappearing concepts, based on independent single firm analysis byLeximancer. The concepts and their frequency reflect the different sche-ma of the four initiating firms. The concepts are further elaborated by aLeximancer thesaurus, which indicates the words that define anddescribe each concept. For example, the table shows that the most fre-quent concept for the firm, The Mill Café, is ‘products’ (within 13 twosentence blocks). The same concept appears for the firm, The Manor(within 23 blocks). The thesaurus for the ‘products’ concept includesthe same words for each firm, indicating a common concept.


Examining the concepts and thesaurus in Table 2 provides insightsinto how each firm perceives network activities to contribute to theirbusiness. The organic dairy, Natures Milk, evaluates network activitiesas contributing to the gathering of various business partners. This firminitiates and coordinates activities that strengthen the business of thesmaller firms in the network. The firm is very interested in achievingcollective goals, particularly by investing extensively in coordinatingnetwork activities. However, as the Coordinator and Chairman of‘Temptations of Southern Denmark’ work on a daily basis at the dairy,self-interest is also at play. These interests appear as a perception ofhow collective activities will also benefit the firm's own business:“What we gain from it – besides strengthening joint activities – is an in-creased awareness of Natures Milk and our products.” Natures Milk isfully aware that this collective commitment has a very positive spillovereffect on its own publicity. For this firm, self- and collective-interests fornetwork participation are closely intertwined.

Farmer Green runs a large production operation for berry fruit, withmost produce being sold through distributors. However, celebrity res-taurants and chefs are among his more fashionable customers. In addi-tion, Farmer Green produces a small quantity of high qualitymarmaladeand juices that are sold through local farmer's shops. This firm seeksnetwork activities that directly contribute to its production and salesof berries. Farmer Green holds a strong self-interest by seeking knowl-edge and trying to learn from other firms who are able to assist in theselling of the firm's own products, as illustrated in this quote: “Youlearn just as much from talking to other firms at network meetings.Rather than observing what they do, you can learn a lot from hearingabout their mistakes.” For Farmer Green, self-interest is more dominantthan collective-interest.

This is contrary to TheMill Café, which chose to join ‘Temptations ofSouthern Denmark’ to invest time and resources in joint activities forthe benefit of every firm in the network. The Mill is a gourmet caféthat, to a large extent, has built its cuisine upon locally-produced foodingredients. The owners show interest in network activities related topromoting local food produce for they argue: “People are not interestedin the product rhubarb by itself. But if we stand together we becomestronger. Then we have a story to tell… and we can create a total expe-rience to customers.” The Mill Café believes every firm should use thisnetwork for the promotion of their own business, but also as an extend-ed business network for buying and selling each others' products. Thisfirm believes that it is through a collective-interest that the full businesspotential will be reached.

The Manor – as the name suggests – is an old manor restored forconference and local cultural purposes. In addition, The Manor runs alarge organic farm. The primary interest of the owner is to utilize TheManor's extensive informal business network as a mean for creating abusiness for selling organic produce aswell as themore general culturalservices related to the conference center. The owner claims: “We workwith food products, but we also work with TheManor as a firm— thereis more to the story than just the products.…We acknowledge that TheManor is only a smaller part of a larger world— only by networking canwe secure our business.” Essentially, The Manor feels obligated to par-ticipate in the formal network activities coordinated by ‘Temptations




of Southern Denmark’ and so participates selectively. The reality is thatThe Manor believes little is actually gained from its participation in theactivities of ‘Temptations of Southern Denmark’, and so it focuses moreon the broader network.

The four initiators of the network ‘Temptations of SouthernDenmark’ agree that the main purpose of joint activities is to facilitatenetworking amongstfirms, and to promote local food products in differ-entways. However, while the collective-interest is understood oneway,it also differs in other ways. Even the active firms hold rather differentperceptions of how these activities could benefit their own and eachother's business. The variation in choosing to participate in the networkis attributable to firms' different perceptions of the specific collective-interests of this network andwhat is required for success in network ac-tivities. For example, The Manor views network meetings as being lessproductive and being ‘too much talk and too little action.’ On the otherhand, joint meetings and the sharing of experiences are vital to FarmerGreen. Both of these firms are guided primarily by self-interest with re-gard to participating in the network. Natures Milk and TheMill Café areattuned more to what they believe to be in the interests of other firmsand coordinate joint activities accordingly.

Following our abductive approach, these observations lead us to thesecond phase of analysis wherein we examined: (1) the nature of inter-ests for firms depending upon their level and type of participation innetwork activities; and (2) whether the level of participation is relatedto the ability to convert collective-interest to self-interest.

4.1. Patterns in the interests of active, less active and not active networkfirms

As a result of finding groupings of firms according to different formsand levels of participation, we prepared tagged groupings of transcriptsfor analysis (Leximancer, 2011: 149). This stage of analysis included all21 interviewed firms, divided into three groups according to their par-ticipation in network activities. The network coordinator provided thelongitudinal data on a total of 20 activities initiated within the period2011–2012. In Table 3, the bracketed numbers indicate the count ofactivities in which each single firm participated.

In addition we present in Fig. 2, a Leximancer result based on threegroupings of interviews according to Table 3. Fig. 2 illustrates thethemes and concepts that the firms applywhen responding to the inter-view questions about their involvement in the activities of the network.The figure presents nine core concepts (written in black italics), whichrepresent those significant and central concerns of the firms beingpart of ‘Temptations of Southern Denmark’. These core concepts illus-trate the interest of these firms in participating in joint activities. Toarrive at these nine concepts we sought a parsimonious solution byaccepting six main themes presented by Leximancer. Themes areshown as circles — with the Leximancer given theme names in gray.In the following, we will first describe the output from this Leximanceranalysis and then discuss the results in more detail.

Fig. 2 shows that the most important theme is ‘network’ (indicatedby its ‘hot’ color according to Leximancer, 2011). The next most impor-tant themes in hierarchical order are: ‘temptations’ and ‘customer’,followed at a lower order by ‘time,’ ‘consumers’ and ‘difficult.’ The fivecore conspicuous concepts appearing in the three most importantthemes of Fig. 2 are: ‘temptations,’ ‘network,’ ‘products,’ ‘example’ and‘customer.’

Examining the words comprising the thesaurus of these conceptssuggests that participating in activities related to networking, sharingof experiences and cooperation between firms are the main interestsof firms in the formal network of ‘Temptations of Southern Denmark.’The figure indicates that networking between the firms being part of‘Temptations of Southern Denmark’ is perceived as the most importantset of concepts in the managers' schemas.

The analysis further shows how firms join in activities to promoteand tell the stories of their products to both business customers and


end-consumers,with regard not only to selling to each other and locally,but also to customers all over Denmark. The theme ‘time,’ including theconcepts ‘timing,’ ‘around’ and ‘using’ concerns processes of using re-sources, time and money to bring products to industrial customersand end-consumers. From these deeper level meanings of managers'schemas, we infer that the network also plays a role in the timing andadaptation of products to be presented to firms' respective markets.

The analysis above has shown how firms' interest in participating inthe activities of ‘Temptations of Southern Denmark’ is related to net-working, promoting products and reaching end-consumers. These ac-tivities are undertaken jointly, in one form or another, so as to achieveoutcomes that cannot be achieved alone. Thus, collective-interests arecreated through firms joining activities.

In this next section,we consider the differences between the ‘active,’‘less active’ and ‘not active’ firms. These three levels of activity aredisplayed in Fig. 2 by the notation ‘GROUP_nn’. The groupings revealsome very interesting variations in firms' intent for joining activitiesand how they perceive activities to be shaping their business interests.Table 4 providesmore detail on themost frequent Leximancer conceptsrelated to each of these activity levels.

Comparing the concept counts and co-occurring concepts across thegroupings of ‘active’, ‘less active’ and ‘not active’ firms provides an inter-pretation ofmanagers' schema according to the level of firms' participa-tion in network activities. ‘Active’ firms join activities to sell theirproducts to each other or for the joint selling of products. These activefirms seek to present a local product designed to bring a feeling of‘being home’ to the consumer by accentuating the history of the localarea. Promoting, as well as buying the products of other firms, is seenas a benefit to their own reputation. Gaining experience from othersand creating a shared strategy is important for some. For example, as ar-gued by Farmer Green: “It is the sumof dialogues, with other firms, thatgives a basis for developing our own strategy.” Furthermore, activefirms also participate and contribute actively in developing the potentialof the collective-interest of the formal network: “Wehave to start some-where — but I do think that we could be much more visionary, in thenetwork.” Having stated this, the owners of The Mill Café later initiateda joint activity, theChristmas Fair, for thepurpose of selling the productsof firms in the network. This activity was highly supported by firms inthe network and attracted new firms to the network. In summary, the‘active’ firms have collective-interests at play in theway they undertakeand organize network activities. At the same time, these active firms areable to achieve their self-interest goals from the collective outcomes ofnetwork activities.

The larger group of ‘less active’ firms – those who have participatedin less than ten activities over the two-year period under investigation –

hold somewhat different interests. These firms call for activitiesconcerning the buying and selling of their products and commodities,and they view the purpose of joint activities as related to promotingthe local area to the entire Danish food market. These firms representwell the generic reasons for joining a network: to gain access to re-sources and to customers (Hakansson & Snehota, 1995). Several ofthese ‘less active’ firms argue that they join in order to achieve whatare specific issues of self-interest and, accordingly, they choose to par-ticipate in those specific activities that are relevant to their business:“…of all the activities in ‘Temptations of Southern Denmark,’ we joinin whenever it seems relevant for us” (Sparkling K). For these firmsthe managers' focus is strongly on self-interest.

What distinguishes these less active firms as a group is a differentunderstanding of the collective-interest or even the joint vision. Onefirm (The Manor) states: “There are many interests in such a networkand that's OK, but I miss an overall vision for how this network can con-tribute.” To generalize, the less active firms see participation asmeetingtheir self-interest and do not see how creating a collective-interest leadsto other broader benefits for their business.

The firms in the ‘not active’ group are characterized by their focus onconsumers buying their products which are of a higher quality. Just as



Table 2The nature and frequency of concepts are related to how the four initiating firms perceivetheir joint network activities to influence their own business.

Firm Concepts Frequency Thesaurus

Natures Milk Firms 20 Firms, acceptActivities 10 Activities, initiatingMeetings 10 Meeting, meet, organize

Farmer Green Business 24 Business, prerequisite, alternativeSale 11 Sale, sellingProducts 10 Products, culture, present

The Mill Café Products 13 Products, culture, presentTime 11 Time, timing, long termCreate 9 Create

The Manor Products 23 Products, culture, presentWork 12 WorkNetwork 11 Network, pattern, accept

Key: concepts (bold italic text)themes (globes and plain grey text)

Fig. 2. The ninemost prevalent concepts related to all firms' perception of formal networkactivities, given three groupings of network participation. (For interpretation of the refer-ences to color in this figure, the reader is referred to the web version of this article.)


with the ‘active’ firms, these ‘not active’ firms care strongly about bring-ing a feeling of ‘being home’ to those who use their products. Moreover,what distinguishes this group is the perception of differences in poten-tial benefits between firms in the network, especially the larger andsmaller ones. Someof the ‘not active’firms argue that the network activ-ities are too costly for a very small business, as put forward in this illus-trative quote from Elma Farming: “It is only the larger firms that have abudget for that—we smaller firms simply can't attend. I don't think thatwe would ever take part in these kinds of activities.” Other ‘not active’firms argue that activities are not aligned to their production season.These firms claim that potential opportunities will not develop forevery network member. These ‘not active’ firms see neither a commer-cial self-interest nor a sound collective-interest for participating. Never-theless, they are network members for other reasons such as politicaloutcomes, external promotion, and simply to leave open the possibilityof future activity. For the ‘not active’ firms, some unrelated self-interestis their prime reason for network membership.

4.2. Pattern in network participation

Distinguishing between the ‘active’ firms is enlightening, becauseeven though all are involved in collective-interest creation, theirmodes and purposes are different. The firms Natures Milk and TheMill Café are guided by collective-interest. Both firms engage in coordi-nating network activities to create business opportunities for every firmin the network. These opportunities are also connected closely to theirown business interests. Specifically, these two firms convert joint activ-ities to also achieve success for their own businesses through brandingor increased sales. NaturesMilk's business is comprised of rawmaterialsfor other firms in the network, which makes their self-interest high.However, their collective-interest is also high, since they are concernedto initiate and coordinate activities which benefit a variety of firms par-ticipating in the network. The Mill Café uses the products of other firmsas rawmaterials for preparingmeals in the café and to sell in their shop,and so converts collective-interest to self-interest. In these two firms,

Table 3Numbers of network activities in which firms have participated within a period of two years. T

Active firms: Less active firms:

Have participated in 10 or more activities Have participated in

Natures Milk (20) LS Sausage (5)The Mill Café (17) Helle Ford (4)Lapwing Farm (13) Danish Cabbage (3)Farmer Green (11) Hillock Sausages (3)

The Chicken Farm (Sparkling K (3)The Manor (2)RP Poultry (1)The Cross Mill (1)Drop Inn Steakhous


self- and collective-interests are closely intertwined. The two other ‘ac-tive’ firms, Lapwing Farm and Farmers Green are more guided by self-interest when participating in network activities. These firms hold theability to ‘utilize’ joint activities, through tapping into the experiencesof fellow firms, for building business opportunities for their ownbusinesses.

How network activities are perceived to shape business opportuni-ties also varies between ‘less active’ firms. The distinction is in the ratio-nale and so theway the firms undertake activities in the network. Someargue that network participation is important to strengthen the firm'sown efforts, as stated in this illustrative quote from Hillock Sausages:“Story-telling and branding is important … everyone can claim tohave high-quality products. We differentiate from others and createstronger branding by referring to ‘Temptations of Southern Denmark’.”Others claim that joining activities build up personal relationships thatare invaluable for exchanging knowledge and experience. For ‘less ac-tive’ firms, opportunities in the network are related to firms' self-interest. These firms use selected activities in specific and differentways to strengthen particular areas of their own businesses.

‘Not active’ firms tend to perceive that not much is gained from par-ticipating in the network activities and they tend to use their resourcesin other networks: “The solidarity and team spirit you get there, in theother network, is difficult to find. This is not built overnight, it's like ev-eryone is working in the same direction” (Limousine Farm). Still, mostof these ‘not active’ firms renew their membership year after year, but

he table lists only the interviewed firms in the network.

Not active firms:

less than 10 activities Haven't participated any activities

Limousine Farm (0)Teatime House (0)Elma Farming (0)Stay Inn Tavern (0)

3) Southern Cape Garden (0)The Asparagus Farm (0)VB Berries (0)

e (1)



Table 4Top concepts co-occurring for ‘active,’ ‘less active’ and ‘not active’ network firms,respectively.

Concept Count Co-occurring concepts

Active firms (4 firms)Products 77 New, selling, cooperateExample 61 Interesting, local area, usingLocal area 52 Firm, example, buyingFirms 37 Network, working, usingHome 32 Bringing, firm, buying

Less active firms (10 firms)Firm 43 Personal relation, communicate, workingDenmark 41 Relation, difficult, local areaProduct 39 Buying, money, sellingCommodity 38 Selling, time, buyingSmaller 35 Firms, using, example

Not active firms (7 firms)Consumers 127 Buying, bringing, homeBuying 45 Products, commodity, local areaDifficult 42 Product, selling, consumerFood 35 Important, buying, qualityDifferences 31 Before, smaller (firms)


still never engage in any activities. Neither do these firms promote theirmembership. However, there are some of these ‘not active’ firms whoare new members of the network, who are yet to find their place andyet to participate in activities.

4.3. Network development

The development of the ‘Temptations of Southern Denmark’ net-work has generally followed a path prepared by the more ‘active’firms. These ‘active’ firms are guided by an understanding ofcollective-interest, which is not found amongst ‘less active’ and ‘notactive’ firms. Rather these less and not active firms are focused onself-interest when engaging in network activities. However, the ‘active’firms are also following self-interest, while initiating and coordinatingactivities for the collective-interest of all network members. This sug-gests that the development of this network is largely dependent onthese ‘active’ firms and how they understand collective-interest andwhat is their self-interest.

The active firms develop the network by building collective-interest,not just by seeking their own self-interest. In our theoretical model, thebuilding of collective-interest by the more active firms occurs by creat-ing new network activities. Members of the formal network participatein the activities according to their self- and also collective-interests. Theactivity also attracts new firms and the network develops. As the net-work develops there are changes in the firms' understandings ofcollective-interests and self-interest across the firms. New opportuni-ties are apparent, firms can access resources from the newly joiningfirms, new paths to customers are created, new network activities arecreated, and firms participate according to their changed understandingof self- and collective-interests. These changes do not occur in a cycle, orin stages, nor even phases; rather as time passes the changes occur ina haphazard manner, often according to firm self-interest, but alsoaccording to each firm's understanding of a network's collective-interest. However, behind these changes are the ‘active’ firms replicat-ingpast activities and creating newactivities, whichby their very naturecreate the collective-interests of the formal network.

Network development is apparent not only along the lines of the ‘ac-tive’ firms. For example, a ‘less active’ firm (The Manor), which ismotivated more by self-interest, also creates special events for thecollective-interest of the network. These activities are designed to pur-sue the broader business goals of The Manor's conference and culturalcenter. The Manor invites firms from ‘Temptations of SouthernDenmark’ to join in these activities. In this way, The Manor harnessesthe network to make their activity more successful. Conversely, these


activities support the continuing development of the ‘Temptations ofSouthern Denmark’ network. In this instance, self-interest is a strongdriver of network development, yet without the collective-interest ofthe ‘active’ firms and the investment by the local government, it is un-likely that the ‘Temptations of Southern Denmark’ network wouldhave successfully developed.

To conclude, with regard to network development, in a formalscheme, the role of active firms is central. The way the active firms ini-tiate network activities, so as to involve other firms in creating acollective-interest, shapes network development. How network firmsunderstand the collective-interest, and how they can see opportunityfor self-interest leads the firms to participate and so change the net-work. Thus, in formal network schemes the creation of collective-interests by active firms is paramount for the direction of networkdevelopment.

5. Concluding discussion

The results of the present study highlight the way activities in a for-mal network scheme shape and delineate the business of participatingfirms. Not surprisingly, firms generally think of a network as a meansto gain access to the resources of others or to customers (Hakansson &Snehota, 1995). However, the study presented here highlights thevery differentmixtures of interests that firms bring to their engagementin a formal network scheme. In such a networkmore active firms are, toa larger extent, more driven by collective-interests than less or not ac-tive firms. These active firms seek to develop the benefits of the net-work. For these firms, the collective-interests of the network are alsoclosely aligned to the firm's self-interest. Furthermore, the active firmsare also very conscious about how the collective-interest of a networkprovides the basis for obtaining their own business goals (branding,business strategy development, sales, etc.).

An important finding from the study is the ability, or competence, toconvert the collective-interest of network effects into self-interest gainsfor the firm. The idea that firms are more or less competent atconverting value created in a network into self-interest is related to aspecific network competence. Effectively, this is an extension of thework by Ritter (1999) and Ritter, Wilkinson, and Johnston (2002),who claim that network competence is essential for a firm's success.Whereas Ritter and colleagues frame network competence in twodimensions, viz., task implementation (relationship specific vs. cross re-lational) and qualifications (specialist vs. social), we add a new dimen-sion to network competence, namely a competence to convert thecollective-interest of network effects into self-interest for the firm.While this study has focused on a formal network, we contend thatthe competence to convert collective network effects to a firms' self-interest is relevant to any network context.

In a formal network, we find that the competence to convert thecollective gains of network activities into self-interest gains is differentfor firms, depending upon their understandings of collective-interestsversus self-interest. At issue here is that managers have qualitativelydifferent understandings of the collective-interests at play in a network.However, we do not present amatrix of firms by combinations of collec-tive and self-interest. Such a presentation cannot capture the qualitativedifferences, as the concept of collective-interests is always from a man-ager and a firm's perspective. However, we have identified three mainsets of firms according to how self- and collective-interests are mixedas well as on the basis of their participation in network activities.

First, there are firms that have an understanding of collective-interests, and they seek both collective and self-interests (e.g.The Mill Café). For these firms, the alignment of interests is a keyto how they achieve their self-interests. These firms see thatbuilding a specific set of collective-interests is the way forward —

self-interests then follow.Second, there are firms that understand a collective-interest and

they apply that understanding to seek self-interest (e.g. The Manor).




For these firms, the collective-interest is not so important. Although thissecond set of firms have an understanding of a collective-interest, thisunderstanding is qualitatively different from other firms. These firmsdo not see the forward movement of the collective-interests in thesame way as the first group of firms. Rather, their interest in the collec-tive is more in line with functional self-interest. For these firms, thecollective-interest exists as a way to serve their own interests. Thesefirms will seek their own self-interest by applying their understandingof a collective-interest.

Finally, there are the firms that simply seek self-interest from a net-work. For these firms, a network is a way to access resources and/orcustomers, and no great understanding of the collective is considered.While these firms are mostly guided by self-interest, they also under-stand utilizing joint activities to support their ownbusinesses. However,these firms do not seek to build network collective-interests, whereasthe second set of firms will seek to develop a collective-interest whentheir own self-interest is served.

In a formal network these ideas have some interesting outcomes,because we cannot conclude that firms guided by self-interest are lessactive in network activities. Rather, these firms are more selectiveabout which activities they join according to their specific self-interestgoals. In their selective participation these firms will appear less active.The reasons for inactivity aremany. Either these firms do not see a closealignment of their interests with the other firms in the network, or theydo not have the resources to participatemore fully, or theirmembershipprovides benefits in another network. Based upon the present study,wecannot argue that a network scheme would be better off excludingthese not active firms. There is no evidence that passive firms influencethe network in any negativeway. On the contrary, just adding to the ‘listof firms in the formal network’ provides active firms with a benefit. Forexample, the network is growing or at least keeping members. In addi-tion, the increase in members in the network, whether active or inac-tive, necessarily changes the network effect by increasing the numberof future business possibilities.

A second conclusion from the study is that the competence toconvert collective-interest to self-interest is unrelated to a firm's levelof activity in the network. The very active firms characterized by a com-bination of self- and collective-interests are the ones making the mosteffort to organize joint activities. That is, they are managing the cross-relational network tasks of Ritter et al.'s (2002) first dimension ofnetwork competence. However, those active and less active firms, guid-ed mostly by self-interest, have only to decide whether to participate inany given activity. Even when they do not participate, the ongoingnetwork activities continue to strengthen the network for the timewhen they are ready to participate. Thus, thesefirms still hold the abilityto ‘utilize’ the collectivity to their own benefit, even though they aremore directed by self-interest.

We also infer that the ability to combine or convert collective- andself-interests is independent of the firm's organizing role in thenetwork. The organizing role is not how a firm converts collective-interest into self-interest. A firm's organizing role in a network is bothgiven and taken from other firms, and that is shared by the networkparticipants (Abrahamsen, Henneberg, & Naudé, 2012). Whereas, howa firm participates in a formal network scheme is largely subject totheir own control. Thus, the way in which a firm participates in a net-work, by the choice of activity and how the firm engages in that activity,is how the firm converts self-interest from collective activities.

There are at least two promising areas for future research inferredfrom the present study. First, it is relevant to study the different waysfirms understand the ideas of collective-interest in relationships, andevenmore so in a network. This is interesting for firms and governmen-tal institutions who seek to organize formal network scheme activities,aswell as forfirms in informal business networks. Second,we call for re-search on how firms convert network effects to a self-interest gain. Thisis a relevant consideration for the management of a single firm whenengaging more or less actively in a network. It is also relevant, when a


firm seeks to influence specific partners to follow and participate in anetwork activity and when a firm or firms seek a certain networkdevelopment.

The managerial implications to be drawn from this study number atleast three. First, being explicit about self- and collective-interests as thereasons for participation in a network opens managers' understandingof their own firm's network strategy. Being explicit about self-interestand collective-interest is one part in the conversion of collective-interest into self-interest. Indeed, we argue this is an essential elementof network competence, because being explicit allows a deeper under-standing and less implied attribution of interests from managers. Wesee Fig. 1 as providing a useful guide to aid managers' understandingof why their firm should participate in a formal network and how thatshapes network development and future opportunities for their firm.

Likewise, being explicit to other firms about self- and collective-interests as reasons for participation in formal network activities isworthwhile. Managers in other firms are attributing the firm's interestsin each activity as a natural way of understanding the network.Matching a firm's participation pattern with espoused interests willbuild trust in a firm's capability and also limit the extent of commitmentexpected by the firm to any collective-interests of the network in specif-ic ways. Being untruthful about interests will eventually become appar-ent, as the pattern of network participation will tell another story.

Second, benefitting from collective-interest requires the ability tocommunicate and negotiate with other firms to join activities thatfurther develop a network in a direction which fulfills self-interest.Thus, we argue that an additional network competence dimension isrequired. The issues are: (1) how does a firm create self-interest out-comes from the collective network activities; (2) how much effortshould a firm exert in collective activities and why; and (3) to what ex-tent does a firm negotiate the development of the self-interest of fellowfirms to enhance collective benefits? The answers to these questionswill depend upon the context and the nature of the relationships in anetwork. Clearly, each firm must decide their efforts for self- andcollective-interests over time.

Third, since more active firms drive the direction of network devel-opment through the activities they coordinate, thesefirmswill be betterplaced to achieve their collective and self-interest goals. In formalnetworks we find that the direction of network development followedfrom the different understandings of collective-interests among themore active firms. In a network, some firms must undertake the cross-relational tasks noted by Ritter et al. (2002). These are essentiallycollective-interest tasks, without which a formal network scheme orthe business network would falter. Undertaking collective tasks is notonly an extra resource commitment, but there is also the opportunityto shape network development.

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Kristin B. Munksgaard is an Associate Professor in BtB Marketing and Innovation atthe University of Southern Denmark. Her research focuses on innovation, strategizingand design in inter-organizational relationships and networks. She has published inthe Industrial Marketing Management journal, Journal of Business and IndustrialMarketing, European Business Review, Logistics Research, and European Journal ofInnovation Management.

Dr. Christopher Medlin is a senior lecturer in Marketing at the University of AdelaideBusiness School, Australia. His research interests are in the areas of business-to-businessmarketing, and specifically the role of time and timing in business interactions, relation-ships and networks. He has published in the Industrial Marketing Management journal,the Journal of Business-to-Business Marketing, and the Journal of Business Research. Hiscurrent research focuses on process research under different time configurations, andthe study of business network dynamics.






























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Self- and collective-interests: Using formal network activities for developing firms' business