Managing networks: The nature, levels, and roles of relational capabilities

The past decade has witnessed a marked shift in the foci of those who study collaboration away from a very heavy emphasis on issues related to structures and governance mechanisms of inter-organizational relations (Williamson, 1985; Kogut, 1988; Hennart, 1988; Ring and Van de Ven, 1992); towards an improved understanding of the relationships that are manifested in joint ventures, strategic alliances, long-term buyer-supplier relationships, public partnerships, networks, etc (Dyer and Singh, 1998; Lorenzoni and Lipparini, 1998; Hansen, Hoskisson, Lorenzoni and Ring, 2001; Capaldo, 2007). The number and variety of collaborations among and between firms and among and between firms and other kinds of organizations (governmental agencies, non-profits, non-governmental organizations [NGOs]) has reached a point in the past two decades that they must be considered as one of the most important tools available to management in its approaches to achieving an organization’s fundamental objectives (Smith et al, 1995). And one of their key managerial and organizational challenges in managing these collaborative relationships is the creation of the capabilities that will be required of individuals and the organization (Zollo, Reuer and Singh, 2002) if they are to succeed in establishing and maintaining those relationships. In addition, a substantial amount of the significant body of research on collaboration that has been undertaken in the past two decades has focused on the content of these collaborations (Eisenhardt and Schoonhoven, 1996; Hagerdoorn, 2006) rather than the processes by which they emerge, evolve, and are transformed over time (see, e.g., Ariño and de la Torre, 1998 for a discussion of this point). Again, over the past decade greater attention has been devoted to the study of the processes of collaboration (Larson, 1992; Ring and Van de Ven, 1994;Gulati, 1995; Doz, 1998; Ariño and de la Torre, 1998; Doz, Olk and Ring, 2000; Ariño, de la Torre, Doz, Lorenzoni and Ring, 2002; Ring Doz and Olk, 2005) and their implications for issues such as structure, governance and performance. The review of the literature on collaboration that we have just briefly characterized has led us to conclude that although there has been an increase in scholarly attention paid to the broadly defined topic of relational capabilities, many of these researchers have failed to fully articulate a few critical points. First, the literature fails to provide specifics about what relational capabilities actually are. Second, it says even less about where they come from. Third, the alliance specific literature fails to make distinctions between capabilities and routines, or behaviors other than learning. Fourth, the alliance literature has largely ignored the emerging theory of dynamic capabilities (Leonard-Barton, 1992; Teece, Pisano, Shuen, 1997; Eisenhardt and martin, 2000; Zollo and Winter, 2002; Winter, 2003). Fifth, as with much of the literature on capabilities (Helfat, Finkelstein, Mitchell, Peteraf, Singh, Teece and Winter, 2007; Dyer and Kale, 2007), where researchers who have focused on collaboration have addressed capabilities (e.g., Zollo, Reuer and Singh, 2002; Dyer and Kale, 2007; Kale, Singh and Perlmutter, 2000), they have tended to assume that these capabilities flow from existing organizational routines. In this paper we will endeavor to address these shortcomings. In doing so, we offer a framework that proposes that the creation of relational capabilities is a function of initial conditions (Doz, 1996; Arino and de la Torre, 1998; Doz, Olk and Ring, 2000; Das and Teng, 2002) that exist at the time two or more firms consider the possibility of collaborating. We will argue that these relational capabilities must be developed at both individual and organizational levels. We will explore how and why individual and organizational capabilities differ. We will explore them from a dynamic perspective, relying in part on the work of (Ethiraj, Kale and Singh, 2006; Jacobides and Winter, 2005; Kim, Oh and Swaminathan, 2006;, Zollo, Reuer and Singh, 2002; Zollo and Winter, 2002; Winter, 2003) and more recent arguments by Gong, Baker and Miner (2006/7) based on earlier work by Miner and her colleagues (e.g., Miner, Bassoff and Moorman, 2001; Moorman and Miner, 1998; Baker, Miner and Eesley, 2003). We will begin the paper with a review of the relevant literatures to (1) establish the existence of the shortcomings in the research that we have just asserted; and (2) to provide conceptual definitions for the key concepts in the framework to be developed in the following section of the paper. In the next section of the paper we address the dynamic aspects of the proposed framework, and close with a discussion of the implications of the framework for scholars with interests in inter-organizational relationships in general, and in networks in particular, as well as for those who manage these manifestations of IORs.