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Relationship significance: is it sufficiently explained?

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  • Filipe J. Sousa

    ()
    (Instituto Superior de Administração e Línguas (ISAL))

  • Luís M. de Castro

    ()
    (Faculdade de Economia, Universidade do Porto)

Abstract

The Industrial Networks Theory (cf. Axelsson and Easton, 1992, Hakansson and Snehota, 1995) sets out to describe and explain the business relationships and markets in which the focal firm is deeply embedded. One of its major propositions pertains to the (time-varying) significance of business relationships for the focal firm (Gadde et al., 2003), i.e., business relationships influence to some extent the focal firm’s survival. Such significance seems strongly related to the role played by business relationships and consequently the relationship outcomes accruing to the focal firm. The theoretical justification underlying this proposition is outwardly oriented, somewhat overlooking the inside of the focal firm - in particular the influence of business relationships on what the focal firm does competently within and across its boundaries. Arguably, the creation and appropriation of relationship value by the focal firm is a necessary but not sufficient condition for relationship significance. A supplementary (internal) explanation supported by Knowledge-based Theories of the Firm (e.g., see Kogut and Zander, 1992), we suggest, may be missing. Our aim here has been to intuitively pinpoint a theoretical flaw, further suggesting a feasible path for its solution.

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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 183.

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Length: 38 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:por:fepwps:183

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Keywords: Industrial Networks Theory; relationship significance proposition; relationship functions; dysfunctions; benefits; sacrifices; and value;

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  1. Joao Mota & Luis M. de Castro, 2004. "A Capabilities Perspective on the Evolution of Firm Boundaries: A Comparative Case Example from the Portuguese Moulds Industry," Journal of Management Studies, Wiley Blackwell, vol. 41(2), pages 295-316, 03.
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  9. Håkansson, Håkan & Snehota, Ivan, 1989. "No business is an island: The network concept of business strategy," Scandinavian Journal of Management, Elsevier, vol. 5(3), pages 187-200.
  10. Filipe J. Sousa & Luis M. de Castro, 2004. "The strategic relevance of business relationships: a preliminary assessment," FEP Working Papers 163, Universidade do Porto, Faculdade de Economia do Porto.
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