Of the significance of business relationships

Abstract

The Industrial Network Theory aims to describe and explain the business relationships and networks in which the focal firm is deeply embedded. One of its major propositions is that business relationships somehow influence, to different extents and over time, the focal firm’s survival. This pertains to the diverse and time-varying significance of business relationships for the focal firm. It has often been implicitly sustained that such significance is strongly related to the role played by business relationships and consequently the relationship outcomes accruing to the focal firm. The logic underlying the relationship significance proposition is outwardly oriented, somewhat overlooking the focal firm’s inside and in particular the conspicuous influence of business relationships on what the focal firm does competently both within and across its vertical boundaries. Arguably, the (predominantly ‘functional’) network-based arguments currently advanced represent a necessary but not sufficient condition for relationship significance. This conceptual paper tentatively suggests that there may be missing a supplementary (essentially internal) explanation supported by Competence-based Theories of the Firm.Industrial Network Theory; relationship significance proposition