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Industrial Marketing Management 33 (2004) 175–183
Managing in complex business networks
Thomas Ritter
a,
*
, Ian F. Wilkinson
b,1
, Wesley J. Johnston
c,2
a
Department of International Economics and Management, Copenhagen Business School, Howitzvej 60, DK - 2000 Frederiksberg, Denmark
b
School of Marketing, Faculty of Commerce and Economics University of New South Wales, Sydney, NSW 2052, Australia
c
Center for Business and Industrial Marketing, Georgia State University, Atlanta, GA 30303-3083, USA
Received 1 December 2002; accepted 1 October 2003
Abstract
For many years, research and management thinking has focused on understanding business relationships and networks. Now, the focus is
shifting to managing business relationships and networks. This new approach focus poses two questions. Since networks are loosely coupled
systems, to what extent are business networks manageable? Furthermore, how can a firm’s ability to manage a network be characterized and
measured? This paper addresses these two questions by synthesizing the current state of knowledge on management issues in networks and
the contribution to managerial abilities in complex relationships. The discussion leads to a set of propositions describing the abilities firms
will need to successfully manage complex business networks.
D
2004 Elsevier Inc. All rights reserved.
Keywords: Relationships; Networks; Complexity; Ability; Management
and competencies
Ritter, & Gem¨nden, 2001)
. Therefore, managing business
relationships and being able to manage in business networks
is very important. However, effectively doing so appears to
be a difficult issue, given that an estimated 60% of partner-
ships fail
Furthermore, the firm itself is nothing more than a
complex network of internal relationships among people,
departments, and functional units that form the basis of its
ability to develop and implement its strategies. Consequent-
ly, firms are confronted with the management and integra-
tion of these internal and external relationships. Firms are
seldom in total control of all these relationships and are
subject to the control and influence of others within and
around the relationship. As a result, business networks are
not generally under the control of an individual firm but are
self-organizing systems, in which order emerges in a bot-
tom–up fashion from the local interactions taking place
among firms in the relationships in which they are involved
(
. This situation presents a
challenge and a dilemma for management
1. Introduction
A firm is embedded in a network of ongoing business
and nonbusiness relationships, which both enable and con-
strain its performance. ‘‘A business enterprise looks more
like a linking unit where its strategic attributes lie in how it
connects other market participants to each other. Thus, the
picture of both the possibilities and the means to manage the
business enterprise become quite different’’
Snehota, 1995)
. As such, firms should not be seen in
isolation but as being connected in business systems.
Focusing on any one single firm cannot provide a
significant understanding of the processes of business
A firm’s relationships ‘‘are one of the
most valuable resources that a company possesses’’
They provide direct benefits in terms
of the many valued functions they perform and the resources
they help create and provide access to, including knowledge
and markets. They also provide indirect benefits because
they grant access to other relations, organizations, resources,
in terms of
developing and implementing strategies.
While the study of relationships and networks in business
has a long history
their role and impor-
tance in value creation and delivery is the subject of
increasing attention in the marketing and business literature.
* Corresponding author. Tel.: +45-3815-2518; fax: +45-3815-2500.
E-mail addresses: ritter@cbs.dk (T. Ritter), i.wilkinson@unsw.edu.au
(I.F. Wilkinson), wesleyj@gsu.edu (W.J. Johnston).
1
Tel.: +61-2-9385-3652; fax: +61-2-9663-1985.
2
Tel.: +1-404-6514-184; fax: +1-404-6514-198.
0019-8501/$ – see front matter
2004 Elsevier Inc. All rights reserved.
doi:10.1016/j.indmarman.2003.10.016
D
 176
T. Ritter et al. / Industrial Marketing Management 33 (2004) 175–183
Examples of this are the development of concepts of
collaborative advantage
the role and impor-
tance of cooperative strategies and alliances
Lorange, 2002)
; cooperation and competitive advantage
the
development of the Industrial Marketing and Purchasing
(IMP) Group and the markets-as-networks tradition
son & Mattsson, 1994; H
˚
kansson & Snehota, 2000)
; the
rise of relationship marketing in marketing management
theory
focus on the network properties of markets and economies
and advances in
logistics and supply chain management
2001; Peck & J¨ ttner, 2000)
.
Besides this long-standing interest in understanding net-
works, interest in managerial aspects of networking is fairly
new and diverse. A firm’s ability to develop and manage
successfully its relationships with other firms may be
viewed as a core competence, which varies among firms
and which is an
important source of competitive advantage
But
what exactly is this ability and how can it be conceptual-
ized? An answer to this question is important for both
academics and managers. Academics need to find a com-
mon ground for discussion to produce a comprehensive
understanding of the phenomena. Managers who invest a lot
of resources in networking, partnering, and alliances can
only be offered guidance when issues are made explicit and
research is conclusive. This, in turn, requires an overall
conceptual understanding of the networking ability of firms.
In this paper, we discuss the nature and components of
firms’ networking ability. First, we consider the types of
relationships in which a firm is embedded and the meaning
of the terms relationship management and network man-
agement. Hereby, we address our first question: To what
extent can a firm manage its network? We distinguish
between managing of versus management in relationships
and networks and between the proactive and reactive roles
firms can play. We then present previous research focused
on relationship and network management in various con-
texts to identify the key components of firms’ network
ability. This section will present propositions on how
relationship and network management can be characterized
and classified based on today’s understanding of the
concept. The final section examines the management and
research implications.
relationships may vary in their properties
1980)
. In carrying out their business activities, firms may
develop relationships with various types of firms and other
types of organizations because they affect, directly or indi-
rectly, their performance. One study reports that, on average,
firms have 10 important business relationships
(
& Henders, 1992)
. The different types of potential relation-
ship partners may be conceptualized in terms of the firm’s
value net
The value net identifies four types of firms and organ-
izations that affect a firm’s ability to produce and deliver
value to an intermediate or final customer: suppliers, other
customers, competitors, and complementors. We have ex-
tended the model of
by
incorporating intrafirm relations, both within the focal firm
and other firms
This is an important consideration
given that (1) firms interact with other organizations through
its networks of internal interpersonal and cross-functional
relations, and (2) an important strategic issue confronting
management is the interfacing of intra- and interfirm rela-
tionships
In addition to the
types of actors in the value net, there are also governmental
agencies, research and development institutions, educational
institutions, and industry associations.
Business relationships may be formed with any of the
types of actors depicted in the value net. The range of
relationships a firm participates in represents its relationship
portfolio. This overall portfolio, sometimes also called net,
is made up of a number of subportfolios concerning each
type of relationship partner. Thus, we can talk about a firm’s
supplier, customer, complementor and competitor portfolio.
These business relationships can perform a variety of
functions for those involved
(
Walter et al., 2001)
, through the activity links, actor bonds,
resource ties, and schema couplings that result
(
& Snehota, 1995; Welch & Wilkinson, 2002)
:
.
Relationships with customers: Developing good work-
ing relationships with customers is a means by which a firm
2. Types of business relationships
A business relationship can be defined as a process where
two firms or other types of organizations ‘‘form strong and
extensive social, economic, service and technical ties over
time, with the intent of lowering total costs and/or increasing
value, thereby achieving mutual benefit’’
Narus, 1991, p. 96)
. The notion of a process suggests that
Fig. 1. A firm’s value net (adapted from
.
 T. Ritter et al. / Industrial Marketing Management 33 (2004) 175–183
177
understands and serves customers’ needs and codevelops
new products and services. Relationships with intermediate
as well as final customers are included here, such as those
with distributors and ECR systems but also relationships to
prospective customers.
.
Relationships with suppliers: Relationships with sup-
pliers of strategically valuable products and services can be
an important and durable source of competitive advantage
and one that is hard for others to imitate or steal
Singh, (1998)
. Firms are embedded in production networks
involving various chains of suppliers specializing in differ-
ent aspects of the value creation process. The functioning of
these networks depends on the capabilities of the actors as
well as on the working relationships between them.
.
Relationships with complementors: Firms develop
relationships with many other types of firms whose outputs
or functions increase the value of their own outputs. One
example is joint marketing schemes, whereby firms coop-
erate in reaching out to customers in the form of joint
promotion and distribution agreements, such as Lego
teaming with Hewlett Packard to serve the children’s toy
market and Procter and Gamble teaming up with comple-
mentary product suppliers (Coca Cola or Pizza Hut) in
promotion campaigns. Suppliers of complementary prod-
ucts and services may also be innovation partners, as new
products can arise from recombining their outputs in
productive ways. Lastly, these relationships include rela-
tionships with government agencies that can be important
in entering new markets or in keeping informed about
legislative developments.
.
Relationships with competitors: Cooperative relation-
ships among competitors may be developed for various
purposes, beyond the typical collusion to control and
subvert competition. For instance, competitors collaborate
to develop product and technology standards, such as the
3G mobile telephone
Collaboration among competitors from one country to enter
and develop new international markets is another form of
cooperative relationship among competitors
Wilkinson, & Young, 1996)
.
We can also distinguish a firms’ subnetworks along the
different functions they may perform, for example, produc-
tion networks, innovation networks and distribution net-
works
The value net focuses on the
relationships in which the focal firm is a direct participant.
But all these relationships are themselves connected to other
relationships forming various types of overlapping value
chains.
have been termed ‘‘hub firms’’ and the networks involved
‘‘strategic networks.’’
Others have continually argued that firms are not in total
control over their resources as other actors influence or
restrict the actions taken by a given firm
(
H˚kansson & Ford, 2001; Wilkinson & Young, 1994,
2002)
. ‘‘There is no ‘invisible hand’ creating a situation of
efficiency and health. Instead there are several ‘visible
hands’ that try to create situations that are beneficial to
themselves’’
In this view, firms
and networks of firms are seen as complex adaptive systems
that are not centrally directed. Instead, firms are seen to
comprise complex interacting sets of business and social
relationships among people and units that are not complete-
ly orchestrated by top management
(
In busi-
ness networks, firms participate in a self-organizing process
in which order emerges in a bottom–up manner from the
microinteractions taking place among firms involved
Young, 2002)
. From this point of view, networks are
unmanageable, in the sense of being controlled and directed
by a single participant firm. All firms are simultaneously
involved in the ongoing management of the network, and
the resulting structure and performance is coproduced by
their actions. This raises important issues for the meaning of
the term management, and the extent to which firms can and
should try to ‘‘manage’’ their relationships and networks.
The differences between these two points of view have
been attributed recently to the difference between intentional
and unintentional networking, whereby the former is a
deliberate activity and the latter is an emergent activity
We argue that both these points of
view are relevant and that firms confront different types of
relationship and network management situations, including
those when they are in a powerful and controlling position,
those when they are the subject of others control, and those
in which multiple parties have strong influence over each
other. All these situations require relationship and network
management and draw on the skills and competencies of a
firm or individual to handle the kinds of interactions taking
place in the best interests of their firms and themselves. At
one extreme, we have the management of relationships,
when a firm is able to choose its relationship partners and
control and direct the way the relationship operates. This
may arise when a monopolist, such as a government utility
provider, deals with its customers and distributors or when a
franchisor controls and directs its franchisees. But more
typically, there is some degree of mutual interdependence
such that each party has some ability to influence the other.
The management challenge is that of management in rela-
tionships. The firm has to cope with managing the inter-
actions taking place in a relationship, which may be with a
partner not entirely of the firms choosing; have been in
operation for some time and, therefore, has a history that
exerts an influence on how things are done; and a relation-
ship in which the counterpart has complementary, compet-
3. Managing or being managed in networks
There has been a long debate on the nature and possi-
bility of management in networks. Some authors have
argued that firms are in control of themselves and even of
their surrounding firms
Such ‘‘controllers’’
178
T. Ritter et al. / Industrial Marketing Management 33 (2004) 175–183
ing and conflicting views and agendas. In a similar manner,
we progress from the relationship level to the network level
where (1) a firm is in control of a network of other firms and
operates as a hub firm, channel, or network captain, and is
concerned with the management of the network, and (2)
management in networks, where the firm operates as one of
many having an influence on the structure and functioning
of the network.
presents a simple typology of network situations
based on how dependent each firm is upon the other and is
similar to classification schemes proposed by
M¨ ller, and Rosenbr¨ ijer (1999)
and
If firm A is highly dependent on firm B, B has substantial
power over A because power stems from the dependence of
one firm on another
Similarly, B’s depen-
dence on A can be high or low, and this affects A’s power
over B. If neither A nor B are dependent on the other, there
is no relationship to be managed. This may be the case in
perfectly competitive markets, with numerous similar cus-
tomers and suppliers and low switching costs. A firm’s
purchases of consumables, such as paper and pens, may be
of this type. But if firms enter into a long-term purchase
agreement or establish e-procurement systems, the situation
changes to one of greater mutual dependence.
Followship relationships are those in which a firm is
highly dependent on another firm, but the other is not very
dependent on the firm. In this case, the nondependent firm is
free to choose with whom they transact and to exert
considerable influence over the way the relationship devel-
ops. The dependent firm must become a follower and adapt
to the wishes of the more powerful firm. But the less
powerful actor is not without means of influence and faces
the problem of how best to manage its interactions with the
more powerful firm. From the perspective of the powerful
actor, the relationship is a leadership relation.
The last type of relationship involves mutual depen-
dence, in which no firm is clearly more powerful. Each
depends on the other for important inputs. Here, some form
of collaborative relationship may be established, or one firm
may take the initiative in directing the relationship with the
agreement of the other, so long as their needs are also
considered.
Relationships do not always fit neatly into these ideal
types, but rather, they involve mixtures of interdependencies
that can vary across issues and over time. In addition, the
form of the interdependence can be both positive and
negative. Positive dependence is when another firm’s
actions help a firm achieve its objectives, which is typical
of relationships with customers, suppliers, and complemen-
tors. Negative dependence is when another firm’s actions
hinder a firm from achieving its objectives, as is typical of
relationships with competitors. All relationships will have a
mixture of both positive and negative dependencies con-
taining cooperative, competitive, and conflictual elements.
From this discussion, we can see that network and
relationship management is as much about ‘‘being manage-
able’’ as it is about managing
2002)
. They simultaneously involve both proactive and
reactive elements. They involve initiating and responding,
acting and reacting, leading and following, influencing and
being influenced, planning and coping, strategizing and
improvising, forcing and adapting. As such, networking
happens in a space of paradoxes
2001)
, and the mix and balance of these elements will vary
over time in a given relationship, as circumstances change
across relationships. In short, relationship and network
management is about managing interactions with others,
not about managing others. This is a two-way process and
involves influencing others and letting others have influence
over you: ‘‘the extent to which a company will allow others
to influence its nominally internal activities and will seek to
involve itself within others is an important issue of mana-
gerial decision-making and control’’
p. 48)
.
The term ‘‘to manage’’ has two meanings
3
, which nicely
reflects the above distinction between the proactive and
reactive elements of relationship and network management.
On one hand, to manage means to lead, to determine, to
organize (‘‘I am managing this firm’’). On the other hand, to
manage means one can cope with a given situation (‘‘I can
manage this situation’’).
This discussion leads us to our first proposition:
Proposition 1: (a): The management of interactions with
other firms and organizations both directly and indirectly is
a key part of a firm’s managerial activities.(b): The ability to
effectively manage such interactions is critical for achieving
economic goals and as such is a core competency of a firm
and its personnel.(c): The management of interactions in
relationships is matched to relationship conditions, includ-
ing the different types of relative dependencies that exist
between relationship partners.
Table 1
Types of relationship situations
4. The components of relationship and network
management
B’s perceived power over A
(A’s perceived dependence on B)
Low
The tasks of managing in relationships and networks
have been discussed in various ways in the literature, using
High
A’s perceived
power over B
Low
(a) No relationship
(c) Followship
relationship
B’s perceived
dependence on A
High
(b) Leadership
relationship
(d) Mutual
relationship
3
We thank Jens Geersbro for pointing out this distinction.
  T. Ritter et al. / Industrial Marketing Management 33 (2004) 175–183
179
a number of different concepts. To structure these contribu-
tions, it is helpful to distinguish between several levels of
management. These are depicted in
where each dot
represents an individual actor, which could be a person,
business unit, firm, or other type of organization.
The first level of management is the individual actor
viewed in isolation, which is similar to most resource-based
theories of firms. But as we have pointed out, a firm is not
an island but is connected to other firms and organizations
in important ways that require management attention. In
addition, within each firm, there are still networks of
relationships among people and business units that deter-
mine how firms can and do behave.
The second level is that of the individual dyad. This has
been the focus of much research attention in the study of
buyer–seller relationships in business markets and distribu-
tion systems (see
for a review). The man-
agement of individual relationships has been referred to as
the management of micropositions in networks
& Mattsson, 1987, 1992; Mattsson, 1985)
and corresponds
to
relationship management
level 1. But relationships, like firms, are not isolated from
each other but are interconnected forming networks
Young, 2002)
. This leads to various types or levels of
network management, including management within and
between relationships
Halinen, 1999)
.
One form of connection between relationships centers on
an individual actor or firm, which is simultaneously in-
volved in a number of relationships. These constitute an
actor or firm’s relationship portfolio and the set of tasks
involved in managing such a set of relationships, which is
described by
as the ‘‘extended interpreta-
tion’’ of relationship marketing. The tasks involved include
the problem of allocating resources to different relationships
and managing interactions within each relationship
1992; Ford, 1980; H
˚
kansson, Johanson, & Wootz, 1976)
.It
also includes the management of positive and negative
interactions among portfolio relationships, such as the
management of supplier relationships and cross-functional
relationships to enable the management of interactions with
customers.
The third level of management is that of connected
relationships in which the actor is not directly involved,
such as the indirect connections between a firm and its
customer’s customers or supplier’s suppliers
(
al., 1994)
. The management problem here involves dealing
with the indirect effects of management action in one
relationship on other relationships in the network, including
responding to opportunities and problems arising from
action taking place in connected relationships. Here, the
role of relationships as bridges or conduits to other relation-
ships becomes important, giving rise to various types of
indirect network functions of relationships
(
Snehota, 1995; Walter et al., 2001)
. The strength of weak
ties as important potential bridges to different types of actors
and knowledge becomes relevant
The final level of management is that of the network
itself. Here, the concepts of network or macroposition
and
network identity
become relevant.
These arise as a result of the interactions taking place among
actors in the network, from the various micropositions of
actors, including interaction between and within firms and
other types of organizations (government actors), and busi-
ness and nonbusiness interactions
1995; Welch & Wilkinson, 2002)
.
Several propositions arise from this conceptualization of
levels of relationship and network management:
Proposition 2: Management in business relationships and
networks arises at the individual, group, or business unit
and firm level and these levels are interrelated.
Proposition 3: Management in business relationships and
networks involves relationship-specific and cross-relational
tasks.
4.1. Relationship-specific tasks
Under this heading are all activities aimed at managing
interactions in one relationship, including the initiation of
relationships.
talk about
‘‘relationship management capability,’’ which ‘‘refers to a
firm’s competence in handling individual exchange relation-
ships.’’
suggests five tasks on this level: (1)
searching for appropriate actors in the two firms, (2)
bringing these actors together, (3) exchanging information,
(4) coordinating activities between the two firms, and (5)
getting negotiation results.
develop a set of three relationship tasks: exchange, coordi-
nation, and adaptation activities.
(2001)
operationalize ‘‘relational capabilities’’ in terms of
substantial cooperation, communication and involvement.
The importance of communication (i.e., exchange of infor-
mation) and coordination is also highlighted by
Dwyer (2000)
as a ‘‘cooperative competency’’ of a relation-
Fig. 2. Levels of relationship and network management.
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