Bachelor Thesis
Networking within the public sector
How the effect of networking and competitive advantages facilitate growth
Authors: Sandra Janson 940725 Victor Halvardsson 910103 Supervisor: Peter Ceasar
Examiner: Dr. Pejvak Oghazi
Date: 27.05.2016
Program: International Sales and Marketing
Level: Bachelor
Course code: 2FE22E
Abstract
The purpose of the study was to describe how networking can provide competitive advantage to facilitate growth when offering consultancy services toward the public sector. The majority of companies are looking to expand their business due to different reasons. With todays intense competiton on the market it is becoming increasingly important to outperform competitors in order to maintain the current customerbase aswell as it is to gain new businesses. Companies that work toward the public sector have special laws, directives and regulations that have to be taken into account when conducting business. Involvement with networks is based on different reasons, it can be due to gaining new customers, contacts and knowledge to name a few.
The authors have performed a qualitative case study with a focus on two companies. The empirical findings is based on information collected through interviews with these companies and through a quanitative self-completion questionnaire with a sample group of 16 repondents. By analysing the empirical information the authors have concluded that networking activities are important in order to prosper growth. However, there is a lack of networking strategies among the two companies of focus which constraint the firms to get the most out of the networks.
Keywords
Networking, Cometitive advantage, Resources, Social capital, Growth, Consultancy services, Public sector, Public procurement.
Acknowledgements
Firstly, we want to send our gratefulness and sincere thank you to our contact persons at Company A and Company B. We are grateful that you helped us to conduct this study, it would not have been possible to do this work without your participation.
Secondly, we want to send our gratitude and sincere thanks to all 16 respondents of the questionnaire. Your response helped us moving forward with our thesis.
Thirdly, we wish to send our greatest appreciation and a sincere thank you to our supervisor, Peter Caesar and our examiner Dr. Pejvak Oghzai. We are grateful for the help, inspiration and guidance that you have given us throughout this whole project.
Lastly, we also want to thank Sten Janson and Catharina Halvardsson for your expertise and support in receiving feedback and letting us pre-test our interview and questionnaire with you.
Ljungby, May, 2016
Sandra Janson and Victor Halvardsson.
Table of Contents
1 Business Growth _____________________________________________________ 6 1.1 Preknowledge ____________________________________________________ 7 1.1.1 Business service _______________________________________________ 7 1.1.2 Consultant industry ____________________________________________ 7 1.1.3 Public sector and procurement ___________________________________ 8 1.1.4 Networking __________________________________________________ 8 1.2 Problem Discussion ______________________________________________ 10 1.3 Purpose ________________________________________________________ 11 1.4 Research Questions ______________________________________________ 11 2 Theoretical framework / Literature Review ______________________________ 12 2.1 Ansoff’s Growth Matrix ___________________________________________ 12 2.2 Competitive Advantage ___________________________________________ 13 2.3 Networking _____________________________________________________ 15 2.4 Resources ______________________________________________________ 16 2.4.1 Resource Based View (RBV) ____________________________________ 16 2.4.2 Social Capital Theory _________________________________________ 17 2.5 Public sector ____________________________________________________ 18 3 Methodology ________________________________________________________ 20 3.1 Research Approach _______________________________________________ 20 3.1.1 Deductive approach ___________________________________________ 20 3.1.2 Qualitative approach __________________________________________ 20 3.2 Research Design _________________________________________________ 21 3.3 Data Sources ____________________________________________________ 22 3.4 Research Strategy ________________________________________________ 22 3.5 Data Collection Method ___________________________________________ 23 3.5.1 Qualitative Data Collection Method ______________________________ 23 3.5.2 Quantitative Data Collection Method _____________________________ 24 3.6 Data Collection Instruments ________________________________________ 25 3.6.1 Operationalization ____________________________________________ 27 3.6.2 Interview Guide ______________________________________________ 28 3.6.3 Pretesting of interview guide ____________________________________ 29 3.6.4 Self-Completion Questionnaire __________________________________ 29 3.6.5 Pretesting of self-completion questionnaire ________________________ 30 3.7 Data Analysis Method ____________________________________________ 30 3.8 Sample Selection ________________________________________________ 31 3.8.1 Case Study Companies ________________________________________ 31 3.8.2 Snowball sampling ____________________________________________ 32 3.9 Quality Criteria __________________________________________________ 32 3.9.1 External Validity _____________________________________________ 33 3.9.2 Face Validity ________________________________________________ 33
3.9.3 Reliability __________________________________________________ 34 3.10 Ethical Consideration ____________________________________________ 34 4 Empirical findings ___________________________________________________ 36 4.1 Goals for growth _________________________________________________ 36 4.1.1 Company A _________________________________________________ 36 4.1.2 Company B _________________________________________________ 37 4.2 Market position and internal communication ___________________________ 37 4.2.1 Company A _________________________________________________ 37 4.2.2 Company B _________________________________________________ 39 4.3 Networking involvement and activities _______________________________ 39 4.3.1 Company A _________________________________________________ 39 4.3.2 Company B _________________________________________________ 41 4.4 Resources within the organization ___________________________________ 42 4.4.1 Company A _________________________________________________ 42 4.4.2 Company B _________________________________________________ 42 4.5 Networking within the public sector – purchasers perspective _____________ 43 4.5.1 Constraints of networking within the public sector ___________________ 43 4.5.2 Involvement and contribution of networking ________________________ 45 4.5.3 Development of public sector and procurement _____________________ 46
5 Analysis ____________________________________________________________ 49 5.1 Firm growth and future goals _______________________________________ 49 5.2 Market position and internal perspective ______________________________ 50 5.3 Networking involvement __________________________________________ 51 5.4 Managing internal and external resources _____________________________ 52 5.5 Networking within the public sector, purchasers perspective ______________ 53 5.5.1 Constraints of networking within the public sector ___________________ 53 5.5.2 Involvement and contribution of networking ________________________ 54 5.5.3 Development of public sector and procurement _____________________ 55
6 Conclusion _________________________________________________________ 57 6.1 Theoretical Implications ___________________________________________ 59 6.2 Managerial Implications ___________________________________________ 59 6.3 Limitations _____________________________________________________ 60 6.4 Future Research _________________________________________________ 60 7 List of References____________________________________________________ 62
8 Appendices __________________________________________________________ I
Appendix A - Definition of SMEs _________________________________________ I
Appendix B – Interview questions _______________________________________ II
Appendix C – Self-Completion Questionnaire _____________________________ III
Appendix D – Interview with Company A ________________________________ IV
Appendix E – Interview with Company B _______________________________ VIII
Appendix F – Self-compleation questionnaire 1-16 ________________________ XIV
List of Tables
Table 1. Operationalization for Interview Guide ___________________________ 27 Table 2. Operationalization for Self-Completion Questionnaire ______________ 28 Table 3. Interview Guide ______________________________________________ 28 Table 4. Likert scale questions, part I of self-completion questionnaire ________ 29 Table 5. Case study companies _________________________________________ 31
List of Figures
Figure 1. Ansoff’s Growth Matrix ________________________________________ 12 Figure 2. Porter's Five Forces __________________________________________ 14 Figure 3. Constraints with networkin in the public sector ____________________ 43 Figure 4. Importance of networks _______________________________________ 45 Figure 5. Network involvement _________________________________________ 45 Figure 6. Development of networking within the public sector _______________ 46 Figure 7. Development of using consultancy services within the public sector __ 47
1 Business Growth
This chapter will introduce the reader to the topic of business growth, also present preknowledge that is a good tool in order to be familiar with when reading the thesis. The chapter starts with presenting business services, continue on to the consultancy industry, then moving to the public sector and procurement, and finally, an introduction of networking.
Businesses1 are established due to both societal- and firm perspectives. Businesses are one essential and important way for the government to collect money through, for example taxation. This money will provide an important portion of the amount that the government can allocate and for this reason the society, in turn has an interest in businesses and their growth2. A study by Tillväxtverket (2016) (The Swedish Agency for Economic and Regional Growth) found that in 2014, 68% of the small and medium sized companies (SMEs) wanted to achieve growth in revenue, staff or both. The reason why a person chose to start a firm can change on an individual basis, however, the idea of starting a firm is to achieve profits.
The majority of firms have goals in order to prosper and to build value, this can be achieved through expansion and profitability. Expansion and profitability are a measure of value creation.
Anderson et al. (2010) state that growth has been recognized as a complex process.
“Moreover, research has emphasized that small businesses are part of complex networks of economic actors, and are dependent on the existence of other entities” (Lewin & Regine 1999, in Wiklund et al. 2009, p. 353). There are different paths of how a business chose to approach growth and what a firm needs to consider in order to expand. The attitude of a manager in small firms have been found to help contribute to growth in sales, staff or both (Weber et al., 2015; Kirkwood. 2009; Hansen & Hamilton, 2011; Mazzarol et al., 2009). Most businesses start off as small and aims to expand or achieve profitability. According to Kirkwood (2009) small firms can be found in having problems with gaining access to resources. Which is a difference from larger firms that have resources more available than the small firms. Newbert (2008) explains that access to rare or valuable resources can be a source of competitive advantage.
1Throughout this thesis, the terms ”business”, “company”, “organization” and ”firm” are used interchangably
2Throughout this thesis, the terms “growth” and “expansion” are used interchangably
To achieve growth, it is necessary that a firm has access to resources (Hessels & Parker, 2013). Having European Commission (A 2016) state that 99% of the companies in the EU are belonging to the SME category. Statistics from Ekonomi Fakta (A 2016) shows that 99.4% of businesses located in Sweden have between one and 49 employees which means that they are, according to European Commission (ibid), considered as micro- or small businesses (See Appendix A). Based on those data it could be suggested that the majority of small firms have problems with accessing the resources and knowledge needed.
1.1 Preknowledge
1.1.1 Business service
Services are a crucial part of the business world, the European Commission (D 2016) states that over 70% of EU employment and Gross Domestic Product (GDP) comes from the service sector. Ekonomifakta (B 2016) found that 62.6% of all companies in Sweden are working in the service sector. Technical services, for example, engineering, architecture and IT, legal services, employment services and facility management are all services which are counted as business services (C European Commission, 2016); consultancy activities are a type of professional services (Gummesson, 1979), which is a category within business services. Considering the European competitiveness, business services are of great significance since these are essential when it comes to manufacturing and other service sectors (C European Commission, 2016). The market of business service has high potential for growth in the EU and are an important role when it comes to the European economy (ibid).
1.1.2 Consultant industry
Consultancy services are offered within the service sector, this type of service seem to have a stable growth curve. According to Consultancy.uk (2015) the Swedish consultancy market has grown with 5.5% from 2014 until 2015; and is forcasted to continue growing. The value of the Swedish consulting market was just under €800 million and by that it is the largest consultancy market of the Nordic countries (ibid). For external consultants the public sector, retail and financial services has been the key sectors of clients from the industry perspective (ibid).
1.1.3 Public sector and procurement
Public procurement is an important factor that is contributing to the societal economy.
Public procurement is functioning with a purpose for contributing to sustainable development and to establish valuable competition on the market (A Konkurrensverket, 2016); which is the base for how the The Swedish Public Procurement Act (Lagen om Offentlig Upphandling in Swedish, from now on called LOU) is built.
Opportunities
Public procurement is the term used for the process of when public authorities are going to purchase products or services (B European Commission, 2016). European Union (EU) have established some ground laws which all countries within EU are obligated to follow when operating public procurement (ibid). These laws are functioning in order to “create a level playing field for all businesses across Europe” (ibid).
In addition to the laws all countries can establish national laws as well, however, the EU law must be respected (B European Commission, 2016). The idea of the laws is to be able to create a transparent, fair and open competition in public procurement across the whole market of EU; the outcome are generated business opportunities, driving the economic growth and to create more jobs (ibid). EU’s tools for public procurement are: improved governance, procedure simplification and increased usage of electronic tools. These are important tools when it comes to fight fraud and corruption as well (ibid).
Limitations
LOU is the document where the laws and regulations are described (B Konkurrensverket, 2016). The laws in LOU are based on the EU directive of public procurement, and also include some national regulations (ibid). In Chapter 1, Article 9 the five fundamental principles are mentioned: non-discrimination, equal treatment, transparency, proportionality and mutual recognition. “Contracting authorities shall treat suppliers in an equal and non- discriminatory manner and shall conduct procurements in a transparent manner.
Furthermore, the principles of mutual recognition and proportionality shall be observed in connection with procurements” (SFS 2007:1091, p.6).
1.1.4 Networking
“A business network is an arena in which interdependent actors relate to each other in unique ways and a business network accommodates a wide diversity of practice and structure within
and between actors” (Ford & Mouzas, 2013, p. 440). Networking is an activity where two or more parties share information, knowledge and resources, the idea is that all parties should gain something from the network. The level of formality within different networks can vary greatly depending on size, actors and industry. Neergaard (2005) claim that networking plays an important role when it comes to growing a business.
Nahapiet and Ghoshal (1998) argue that relationships can be seen as a resource where a company can gain organizational advantages. As mentioned in chapter 1 (Business growth), resources are needed in order to achieve growth. Martinez and Aldrich (2011) presented that theorists of networking literature have argued that networking will increase the chance of resource sharing and transfer. Considering that small firms have a limited access to resources, networking is a strategy that can be applied in order for small firms to overcome that barrier.
Premaratne (2001) argues that businesses are dependent on resources from others, and these resources cannot be controlled by themselves.
When businesses wants to change or develop their interaction process or structure of a relationship, to develop growth or to institute change, networking is said to be a beneficial strategy to undertake (Anderson, Dodd & Jack, 2010; Ford & Mouzas, 2013). Waluszewski (2006) state that the majority of interpretations of network emphasize on that interaction and relationships are the most important characteristics in today's businesses. As widely known, any relationship requires that the parties involved have trust in each other;
networking has the possibility to lead parties to a higher level of trust. Trust becomes more important when it comes to the purchasing of services. When purchasing a product the buyer has the possibility to inspect the product in advance of the actual purchase, which is not possible to do with a service.
1.2 Problem Discussion
Service stand for over 70% of employment and GDP in the European Union (D European Commission, 2016). 62.6% of Swedish companies also operate in this field. These statistics illustrates the importance of how the service industry effect on employment as well as the economy (B Ekonomifakta, 2016). The consultancy services have increased with 5.5%
between 2014 and 2015 and have been predicted to continue in a stable growth curve (Consultancy.uk, 2015).
Earlier it have been argued that the private and public sector purchasing behaviours have become more and more similar throughout the years, for example Marshall and Humby (1998), and Roodhooft (2006) have mentioned it. As mentioned in chapter 1.1.3 (Public sector and procurement) about public sector, the procurement process has to follow strict laws and regulations that are based on EU directives as well as on national directives. The five fundamental principles which all decisions made within public procurement have to be based upon; non-discrimination, equal treatment, transparency, proportionality and mutual recognition were also presented in chapter 1.1.3. These laws and regulations for procurement means that firms needs to have access to resources for doing operating properly and not to violate any laws (B European Commission, 2016). Having these resources in-house can become expensive since not all purchasing goes under the procurement laws. More companies are looking to access these resources and knowledge from consultancy firms that have specialized within this area.
A growing market opens up opportunities for firms to expand. 68% of firms in Sweden stated that they are looking to grow, however, growth can be complicated and riskful for the firm (Tillväxtverket, 2016). Competitive advantages can be considered one of the most important business concepts which is used for decision making (Mooney, 2007). The ability to exploit these competitive advantages provides the companies with a good foundation for growth (ibid). Therefore it is important for firms to gain competitive advantages that can then be utilized in order to help a firm expand. Without competitive advantages a firm might have trouble to expand. However competitive advantages can be found and gained through many different areas.
To have networks that can access important actors can aid companies in gaining valuable information and knowledge from both potential customers and fellow actors within the market (Martinez & Aldrich, 2011). The effects of well-organized strategic networking could
therefore help companies to get the most out of their relationships and networks. Which argues for why an investigation of a firm's networks may be of importance when wanting to expand. The different networks available to the firms will have great effect in what type of relevant information that is at their disposal. However, it is important for firms to utilize these effectively and efficiently in order to obtain the full rewards that comes with good networks.
Networking and competitive advantages are well-researched areas when it comes to growth.
Earlier research have also touched the area of the public sector, however, there is a lack of information and research when it comes to how consultancy firms can approach networking to gain competitive advantages when operating towards customers within the public sector.
1.3 Purpose
The purpose of the study is to describe how networking can provide competitive advantage to facilitate growth when offering consultancy services toward the public sector.
1.4 Research Questions
RQ1: What do firms operating within or towards the public sector want to get out of their networking activities?
RQ2: How is knowledge and information transferred within firms?
RQ3: How do firms evaluate the market they are operating in?
RQ4: How will future development of networking within the public sector evolve?
2 Theoretical framework / Literature Review
Most firms have an ambition to expand their business, therefore the wellknown Ansoff’s Growth Matrix (2.1) will be used in the theoretical foundation. This area of the theoretical framework will discuss different areas where firms can gain competitive advantages (2.2) in order to increase a firm’s performance, the classic theory of Porters Five Forces will be presented and discussed. Networking (2.3) and its activites may allow firms to gather new contacts, information and knowledge, this can have a positive affect on a firms growth and performance. One of the ideas of networking activities is to allow firms to overcome the barrier of having limited resources. The relation between resources (2.4) and networking in order to increase a firm’s performance, moving on to introducing the Resource Based View (RBV) and then continuing to presenting social capital that has been widely discussed among theorists to be contributing to a firm’s access to resources and a firm's work toward gaining competitive advantage. Firms that are operating within or towards the Public sector (2.5) have to adapt to laws, directions and regulations which effect how they handle different processes, for example the procurement process which is of focus in this study.
2.1 Ansoff’s Growth Matrix
Macpherson and Holt (2007) as well as Mazzarol et al, (2009) argue that firms having a structured approach for how to achieve growth will have a better chance to grow. In 1957, Igor Ansoff developed a growth matrix (Richardson & Evans, 2007; Ansoff, 1957) with the objective to help organizations to develop their business strategies and to map the growth of markets and products (Dziak, 2016). Through analyzing existing and new products/services with existing and new markets it is possible to identify potential opportunities for growth (Richardson & Evans, 2007; Dziak, 2016).
Figure 1. Ansoff’s Growth Matrix
Existing
product/service
New
product/service
Existing market Market Penetration Product Development
New market Market Development Diversification (Ansoff, 1957, p.; Richardson & Evans, 2007, p. ii)
Market Penetration is about elaborating in the existing market with the existing products in order to increase the sales (Ansoff, 1957; Richardson & Evans, 2007). Either the organization increases the sales volume through their current customers or offering their current products to new customers (Ansoff, 1957). “This may involve persuading existing users to use more, persuading nonusers to use, or attracting users from competitors” (Richardson & Evans, 2007, p. ii). Richardson and Evans (2007) point out that competitive pricing, effective marketing communication, encourage existing customer to increase their usage, should have emphasized in a market penetration strategy; this could be done through using a loyalty- or reward program.
The Market Development refers to a strategy where an organization are looking to identify or create market segments that are new, e.g. a product line with new added characteristics (Ansoff, 1957; Richardson & Evans, 2007). Richardson and Evans (2007) argue that the challenge of Market Development is to find market segments that are both genuine and sustainable.
Product Development refers to a strategy where products are developed and has received new as well as different characteristics (Ansoff, 1957); the new products are offered in the existing market (Richardson & Evans, 2007). Product innovation, extension to product range and enhancement to already existing products are activities that could be appropriate (ibid).
When an organization chose to introducing new products into a new market the strategy is called Diversification, this is the strategic approach of the mentioned four that is most riskful (Richardson & Evans, 2007). The approach has to be built on the organization's core competences (ibid).
2.2 Competitive Advantage
Competitive advantage can be considered one of the most important business concepts which is used for decision making, research and pedagogy (Mooney, 2007). One important aspect of competitive advantage is knowledge and it is transferred both internally and externally (Argote & Ingram, 2000). A key driver for organizational success is employee engagement where high levels of engagement helps promote the retention of talent, customer loyalty, organizational performance and stakeholder value (Lockwood, 2007). The author also states that firms should work with human resources to help attract and retain talent with
skills and competencies which are necessary to for growth. It was also staed by the author that the level of employee engagement can act as a competitive advantage. By having less turnover in staff an organization can achieve increased efficiency which will aide customer loyalty and increase stakeholder value (Lockwood, 2007). Newbert (2008) found that having valuable and rare resource-capabilities correlates with a firm's competitive advantage. The ability to exploit a competitive advantage through a resource-based strategy is important and can improve a firm's performance (ibid). Porter and Millar (1985) argues that information technology has a powerful effect on a firm's competitive advantage, these advantages could either be cost or differentiation. The authors continues by stating that the technology will effets value activities for companies and that these activities can be turned into a competitive advantage by exploiting changes in the competitive scope.
Figure 2. Porter's Five Forces
(Porter, 2008, p. 80)
Porter (2008; 1979) provides five forces which are used to analyze the competition within a market. The threat of new entries will affect the competitive environment since the new firms brings new capacity and a will to gain market share (Porter, 2008; Porter, 1979). The power of suppliers will affect the competitive environment by the prices they charge, limiting quality or service and by shifting costs to the industry respondents (ibid). The power of buyers will affect the competitive environment within an industry by demanding lower prices, better quality or more services and this can be done by playing the different firms off against each
other (ibid). The threat of a substitute will affect the competitive advantage by offering products or services that performs the same or similar roles as the industry does (ibid). The last of the five forces is the rivalry among the existing competitors within an industry (ibid).
This show in different ways such as discounts, new products, marketing campaigns and service improvements (ibid). Porter (2008; 1979) states that competition extends beyond the current rivals and understanding the competitive forces can help a firm address future competitive threats. Thinking about and understanding these competitive forces and industry structure can uncover opportunities which could help provide competitive advantages (Porter, 2008). Porter (1979) argues that a key aspect to growth and survival is to find a position that is less vulnerable to attack. The author further argue that this can be done by forming relationships with key customers, differentiating the offerings, integrating systems or gaining technological leadership.
2.3 Networking
Harrison et al (2010) Stated that the IMP perspective argues that networks which firms are actively involved in have of the same importance as managers in a firm when it comes to the ability to take action. Ford and Mouzas (2013) concludes that a large number of small firms are dominated by a few important relationships. Ford and Mouzas (2013) state that successful small firm networking is dependent on how aware the firms are to changes within their networks. Networks can have the ability to help firms get tightly connected to other businesses (Anderson et al., 2010).
Chell and Baines (2000) states that there is a close correlation between networking activities and business performance. The authors found that active networking activities are associated with business growth. The interactions between companies will be characterized depending on what is being exchanged (products/services, information, social and financial content) as well as what is prioritized by each of the involved parties (Axelsson, 2010). How businesses chose to approach networking activities will be based on each party’s own terms and policies (Ford & Mouzas, 2013). Networks will differ from one another with areas like complexity, power balance, environmental diversity and network development (Harland et al, 2001). The authors also stated products, processes, volume, market environment and network structure will influence a firm's networking activities. Networking is well-understood to be vital importance to the early stages of entrepreneurship (Arenius & De Clercq 2005).
Entrepreneurial growth is co-created through a company’s strategic networking practices
(Arenius & De Clercq, 2005). The authors also found that more densely populated areas like bigger cities could offer more opportunities to discover and exchange new information.
2.4 Resources
According to the results of Liming and Aram’s (1995) research the breadth and strength of a network relationship can be connected with faster growth. To have a networking strategy will help especially younger firms to acquire access resources which they do not own (ibid).
Neergaard (2005) conclude that with variety and complementary skills throughout a team in the organization are of significance in correlation to amount of resources that are available.
Premaratne (2001) found that through networking, organizations have the best chance to overcome barriers caused by resources. Ford and Mouzas (2013) are arguing the same as Premaratne (2001), that businesses are dependant on resources from others which they cannot control on their own. Organizations that are utilizing the help with resources from the external sources are more likely to increase their performance (Parida et al. 2016; Anokhin et al. 2016; Premaratne, 2001; Anderson et al., 2010; Ford & Mouzas, 2013), for example profitability growth (Premaratne, 2001).
2.4.1 Resource Based View (RBV)
The RBV perspective regards an organization as a bundle of resources; resources can be for example assets, capabilities, organizational processes, information and knowledge (Hessels
& Parker, 2013). Street and Cameron (2007) state that RBV is a theory that is used in order to see how resource ownership influences the competitive advantage and organizational performance. RBV preaches the importance of resources whether or not they are owned by the own organization or if the resources are accessed through external relationships with other organization (Philipson & Oghazi, 2013; Hessels & Parker, 2013). According to Hessels and Parker (2013) RBV theorists have found that “access to superior resources generates competitive advantage and so promote growth” (p. 139). The resources found within a firm are potential sources in the task of gaining competitive advantage (Jensen, Cobbs & Turner, 2016; Hessels & Parker, 2013; Qin & Shanxing, 2011; Hatch & Dyer, 2004).
“RBV still provides a useful perspective for exploring how small businesses can develop competitive advantage and enhance organizational performance through leveraging external relationships” (Hessels & Parker, 2013 p.139). The resources can be used by a firm in order to arrange activities that are including internationalization and inter-firm collaborations (Hessels & Parker, 2013).
External networks are regarded as resources through the RBV (Hessels & Parker, 2013). The lack of resources that an organization has, together with what resources a partner organization can offer makes up the base for the decision of entering a network relationship (ibid). An organization can gain access to resources that have the potential to enhance the resource base which in turn may influence the performance, in a positive manner, of the organization, this is what is suggested by RBV (ibid).
2.4.2 Social Capital Theory
Nahapiet and Ghoshal (1998) defined social capital as “the sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or social unit. Social capital thus comprises both the network and the assets that may be mobilized through that network" (p. 243). Adler and Kwon (2002) stated a definition of social capital which they based upon several known names within social capital research, such as Nahapiet and Ghoshal, Baker, Bourdieu, Portes; “Social capital is the goodwill available to individuals or groups. Its source lies in the structure and content of the actor's social relations. Its effects flow from the information, influence, and solidarity it makes available to the actor” (Adler & Kwon, 2002, p. 23).
In the late 90’s, Nahapiet and Ghoshal (1998) found that organizations can use social capital theory to gain access to resources through networking. Erridge and Greer (2002) claim that social capital are able to be beneficial due to that it helps to increase an organization access to resources as well as information. The authors also found that social capital can help to
“reducing transaction costs, improving contract specifications, facilitating shared risks, and improving co-operative action” (p. 518).
Anderson et al. (2010) discussed social capital as being a resource that is derived from networking and in turn is linked with business growth. The authors further stated that social capital is created through networks, networks in turn are connected with business growth.
Machuca (2012) argues that networking significantly contribute to a company's social capital.
Social capital is an important resource that has the potential to help firms gain competitive advantages and to grow. The access to social capital will help firms gather knowledge which can help when adapting to changes associated with growth (Macpherson & Holt, 2007;
Mazzarol et al., 2009; Denicolai, Cotta Ramusino & Sotti., 2015).
2.5 Public sector
As mentioned in chapter 1 (Business growth), European Commission have established laws and regulations that has to be followed by all EU countries (European Commission, 2016).
Roodhooft and Van den Abbeele (2006) mention that businesses operating in the public sector are found in an environment which has become more characterized by marketing principles that are driven by business forces. The authors explain that businesses within the public sector have a struggle of turning the best practices of the private sector into the practice within the public sector; this is what have driven many businesses operating in the public sector have started to outsource to consultants (Roodhooft & Van den Abbeele, 2006). It has been argued that consultants have been a significant influence for how public sector has been transformed through the last decades (Lapsley & Oldfield, 2001; Roodhooft
& Van den Abbeele, 2006).
As any B2B relationship it is important that both parties feels that they have gotten the best possible deal, a win-win situation is needed in order to prevent any party to feel that they have been cheated (Lindskog et al. 2012). Nowadays the business processes of public and private sectors is believed to become more and more similar, however, there are researches that are arguing that there are several important differences between how the procurement processes are formed (Roodhooft & Van den Abbeele, 2006). They continue arguing the demand for receiving external special and expertise help have increased. The procurement of specifically consultant services for businesses operating on the public sector have become more common than it have been earlier years (Roodhooft & Van den Abbeele, 2006). Roodhooft and Van den Abbele (2006) argue that businesses should be aware to questions that regards if they actually do have a need for consultant services as well as looking into what they want to achieve from the relationship with the consultant. Businesses operating in the public sector should spend more effort in defining their needs of consultant services, this is something that businesses in the private sector tend to put more effort in (Roodhooft & Van den Abbeele, 2006).
Within procurement in the public sector a Competitive Tendering and Contracting (CTC) procedure is held (Steane and Walker, 2000). The idea of the CTC is to find the supplier that match the requirements the most, the CTC can be carried out in different ways (ibid). To establish networks and developing long-term relations can be a way of moving away CTC
procedures that is the traditional strategy (Steane & Walker, 2000; Erridge & Greer, 2002).
The authors continue to explain that by doing so, a business may have the potential to actually succeed with building social capital through the establishment of relationships within the private sector. It is proven to be a more difficult task when it comes to implement relationships within the public sector due to the laws and also culture that lies within (Erridge
& Greer, 2000). Due to the existing laws and regulations regarding public procurement, the traditional CTC procedure have been hampering the establishment of social relationships within the area (ibid). The procedures are bureaucratic and stiff and have been factors for creating a culture within the public sector that have become resistant to change and reluctant towards risks (Erridge & Greer, 2002). They also conclude that “In order to optimize the benefits of social capital developed through partnership, rules and regulations need to be simplified and standardized” (p. 519). The authors believe that this will lead to a business environment that are more flexible which will in turn lead to that partnerships will be able to function in the public sector.
The way a business operate with public procurement are similar to the buying process of a company (Lindeskog et al, 2012). The difference is that the public procurement process has stricter laws and regulations (Lindeskog et al, 2012). One main difference is that when the Request for Proposal have been published in a public procurement process there are no longer allowed to make changes (Lindeskog et al, 2012). Firms that have lost the tender are allowed to appeal to court if they believe that they have been mistreated by the Buying firm;
the mistreatment can be to national laws, EU laws or the five fundamental principles: non- discrimination, equal treatment, transparency, proportionality, mutual recognition (Lindeskog, et al. 2012).
3 Methodology
When conducting research it is important to concider how the data is going to be collected and analysed This chapter will discuss the different definitons and explanation of the approaches that has been used when writing this study, in order to provide an understanding for the reader of how the study was conducted.
3.1 Research Approach
There are different methods of how a research can be conducted. This subchapter will describe what approach the research will have in the manner of inductive or deductive and quantitative or qualitative.
3.1.1 Deductive approach
An inductive approach looks at the relationship between theory and research where the research generates a theory (Saunders et al. 2009; Bryman & Bell, 2011). The theory is mainly developed through the empirical data from observations from specific situations from which theories and models are developed through (Bryman & Bell, 2011). The deductive approach on the other hand looks at the relationship between theory and research, where the research can be based on hypotheses that have been generated from previous theory (ibid). The approach start by reviewing already established theories or concepts and through that aims to investigate whether or not the theory is applied to specific situations (Saunders et al. 2009;
Bryman & Bell, 2011).
The choice of which approach to adapt was that the study is based on chosen theories and concepts that was used are already existing thus collected in advance of collecting the empirical data. The aim of the study is in line with comparing and investigate if the collected theories and concepts are possible to apply to the specific cases of the study. With this in consideration the authors made the choice to exclude the inductive approach and follow the deductive approach which was in line with what the authors had done in their study.
3.1.2 Qualitative approach
It was necessary to choose an appropriate method of how data was collected and analyzed in order to give the research group the support needed to reach the purpose of the study.
Quantitative research has a focus on quantification and numbers rather than words both in the collection and analysis of data (Bryman & Bell, 2011). In order to find an answer to a
research question, theories are often tested to find an explanation (Creswell, 2009). The objective of a quantitative research is to have a theory tested and verified instead of having the theory developed (ibid). Qualitative research usually has a focus on vast amounts of words and images rather than numbers both in the collection and analysis of data (Bryman
& Bell, 2011; Saunders et al. 2009; Creswell, 2009). The qualitative approach gives broadly explains different behaviors and attitudes (Creswell, 2009). Mixed methods are when the researchers decide to use both qualitative and quantitative research approaches to conduct their research (Bryman & Bell, 2011). However mixed methods should be equally focused and not just used in tandem (Bryman & Bell, 2011)
The quantitative approach was excluded due to that the study did not test theories in order to find a related explanation. The use of mixed methods was also excluded since the authors placed different weights on the different approaches used in this study. This thesis have utilized a qualitative approach, which was adopted considering that the purpose takes on an in depth investigation of the field. The tools for the data collection (presented in chapter 3.5, Data collection method and 3.6, Data collection instruments) was undertaken in order to collect data with the purpose to explain behaviours and attitudes.
3.2 Research Design
The research design function as a plan of how the research should be conducted, how the data are analyzed and collected. The research design may be built upon a research purpose, according to Saunders et al. (2009) a research purpose can be exploratory, descriptive or explanatory.
The exploratory designs are when a researcher is seeking new insights and knowledge in what have happened (Saunders et al. 2009). The exploratory research is appropriate to use when a problem needs to be truly understood and even more clarified, this due to that the exploratory design helps to realize the actual nature of a problem (ibid). According to Adams and Schvaneveldt (1991; in Saunders et al. 2009) an exploratory design is flexible due to that the focus goes from broad and becomes more narrow along with the research process. A descriptive research has the purpose to show an accurate picture of events, situations or persons, this design emphasize on the importance of having “a clear picture of the phenomena on which you wish to collect data prior to the collection of the data” (Saunders et al. 2012, p. 140). The descriptive research can be used as a ‘forerunner’ or as a piece of the
exploratory research, however, most often the descriptive research is used as a piece of explanatory research (ibid). Explanatory research is where the researcher studies a situation and/or a problem in order to get knowledge and being able to explain relationships that occur between variables (ibid).
The purpose of the study (chapter 1.3) was not to explain relationships between variables, therefore the explanatory research design was excluded. The descriptive and exploratory research designs was chosen due to that the purpose of the study was to describe and where the problem had to be truly understood. The reason why both descriptive and exploratory designs were chosen was that neither of them was considered as appropriate to apply in relation to the purpose and problem, however, together they provide a better opportunity to truly understand the research outcomes.
3.3 Data Sources
One can either collect data from primary- or secondary data sources (Hultman et al., 2008;
Saunders et al. 2009). Primary data refers to when researchers collect new data, could be through surveys or interviews (Saunders et al. 2009). Secondary data refers to data which have already been collected by someone, this could be for example published summaries as well as raw data (ibid). This study was based on primary data sources collected through interviews with the selected sample.
3.4 Research Strategy
There are several research strategies that can be employed, each of the strategies can be utilized to either research design, exploratory, descriptive and explanatory (Oghazi 2014;
Saunders et al. 2009). Some of the strategies are more suited to a deductive approach and some more suited when using an inductive approach (Saunders et al. 2009). Creswell (2009) state that the survey- and experimental researches are most suited for quantitative researches and that narrative-, phenomenology-, ethnography research, case study or grounded theory are appropriate to use when using a qualitative approach. The choice of which strategy to use is dependent on what the purpose and intention of the study are.
For this thesis the narrative-, phenomenological- and ethnography research strategies was excluded due to that the thesis did not aim to study the lives or experience cultures of
individuals and neither cultural groups. Grounded theory was also excluded considering that the aim is not to generate a theory.
Case study is a research design where the researchers explore a program, event, process or one individual in depth. However this might be extended to two or three cases/individuals in order to compare the results (Bryman & Bell, 2011; Saunders et al, 2009; Creswell, 2009).
A case study can generate answers to questions starting with why?, what?, and how?; and this type of research design is often used in both explanatory and exploratory research (Saunders et al. 2012). The characteristics of a case study was considered and the choice of adapting a case study research was made. As mentioned a case study approach is appropriate when the study should generate an answer to a question that starts with how, what and why.
3.5 Data Collection Method
In order to reach the purpose it was required to collect in-depth data, for doing so qualitative data collection methods was appropriate to use. In order to receive data from another perspective, not only from sellingfirms, a self-completion questionnaire was conducted. The questionnaire was sent out to individuals working at the procurement unit at publicly-owned agencies and companies. Therefore this section was divided into two subchapters, 3.5.1 Qualitative data collection method and 3.5.2 Quantitative data collection method to make it more clear for the reader.
3.5.1 Qualitative Data Collection Method
The methods that were used to collect relevant data for qualitative researches are involving unstructured or semi structured interviews (and/or observations), documents and audio- visual material (Creswell, 2009).
During observations within a qualitative research the researchers are observing behaviors and activities of individuals on the site while documenting notes (Creswell, 2009). The qualitative interviews can be held in person (face-to-face), by telephone, through an e-mail or as a group interview (Creswell, 2009). Documents that can be collected can be of two different types, public documents which refers to official reports and newspapers etc., and private documents referring to for example, diaries, letters and e-mails (Creswell, 2009). The audio-visual material category are referring to data that can be for example photographs, videos, arts (Creswell, 2009).
The method used collect data was a qualitative interview with the two companies of focus for the study. A qualitative interview are not as structured as the quantitative interview (Bryman & Bell, 2011). A non-standardized interview has the purpose to gather data and to analyze the found data in a qualitative perspective (Saunders et al. 2009). The data found through a non-standardized interview reveals and creates an understanding of what and how as well as exploring why (ibid). Unstructured and semi-structured interviews are the two types non-standardized interviews (qualitative interviewing) (ibid). The unstructured interview are informal and used in order to gain in-depth data regarding the area of interest (ibid). The interview method is similar to a conversation, the interviewer asks a question that can be answered by the interviewee freely and in turn the interviewer may ask a follow-up question if it seem to be necessary (Bryman & Bell, 2011). When conducting a semi-structured interview the interviewer has a list of questions of a specific topic that should be asked during the interview - an interview guide (ibid). According to the authors the interviewer has ability to ask follow-up questions to the interviewees answers. The author state that due to that the interviewee is given a great leeway, the interviewee has the opportunity to answer the questions quite freely in the semi-structured interview as well.
Two semi-structured interviews were held, one was via telephone and one interview was via e-mail due to time restrictions. Even though it would be preferred to have had the interviews face-to-face due to the chance of the interviewer has the possibility to observe the body language of the interviewee, there had to be a compromise due to the interviewees time schedule. The interview held over telephone still allowed the interviewer to ask follow-up question as well as for the interviewee to still have freedom in how to answer the questions.
When it came to the interview over e-mail, the interviewer sent the questions with clear instructions to the interviewee asking for in-depth answers to the questions. If there was a need for follow-up questions it was agreed that the interviewers should send these back to the interviewee as soon as possible, however, there was no need to send follow-up questions immediately.
3.5.2 Quantitative Data Collection Method
The choice of method of collecting quantitative data was made based on that the authors from the beginning chose to construct an interview that could be answered through e-mail.
The authors wanted the interview to be short and concise with a focus on general questions that also was asked to the two case companies. The idea of the self-completion questionnaire
is that the respondent will complete the questionnaire on their own (Hultman et al., 2015;
Bryman & Bell, 2011). Due to that the respondent will read and answer the questions by themselves, it is necessary that the questionnaire is easy to follow and understand (ibid).
Mangione (1995, p. 60-61 in Bryman & Bell, 2011) stated that a response rate on over 85%
is excellent, 70-85% is very good, 60-70% is acceptable, 50-60% is barely acceptable and below 50% is not acceptable.
3.6 Data Collection Instruments
This chapter will present a discussion of the data collection methods that was chosen and presented in the previous chapter. Considering that the approach of the study is qualitative, the authors considered interviews as being the most appropriate way to collect primary data, in order to gain in-depth data that is needed to fulfill the purpose. According to Bryman and Bell (2011) interviews is the most common way of gathering data within qualitative research.
Saunders et al. (2009) claim that interviews are a way of gather qualitative data that is valid and reliable. As mentioned in 3.5 (Data collection method) the self-completion questionnaire was chosen as a complement, and was will therefore be described more in this chapter as well.
Unstructured and semi-structured interviews are the two main types within qualitative research (Bryman & Bell, 2011), for this study the semi-structured interview method was chosen. The semi-structured interview is a mix of the structured interview within quantitative research and the unstructured interview within qualitative research (ibid). The structured interview refers to when all interviewees are asked exactly the same questions in the exactly same order while the interview atmosphere is considered formal (ibid). While the unstructured interview is built upon an interview guide of topics and issues that should be covered through the interview (ibid).
The authors held two interviews with the two companies in focus, one of the interviews was held via telephone due to time constraints and the second interview was held via e-mail. Both interviews covered the same topics that are identified in the operationalization and the table of the interview guide overview. However, some differences in the sequence of the questions occurred, for example, some follow-up questions were asked in the first interview that was not asked in the second interview and vice versa.
The self-completion questionnaire was sent out per e-mail, which according to Saunders et al. (2009) is a common way. A self-completion questionnaire is most often designed to consist of more closed questions due to that open questions tend to be more difficult to answer (ibid). The authors also describe the design of a self-completion questionnaire to be easy-to-follow, this result in that the risk of confusion is minimized. It is also by the authors said that the self-completion questionnaire is most often shorter than for example a structured interview. The self-completion is also said to be a benefical tool to use when the sample group is widley spread (ibid), which was the situation when conducting the questionnaire. Considering that the self-completion questionnaire is sent out and given a timeframe of when the questionnaire should be completed, the respondent can fill the questionnaire based on when it better suits them in time.
As for the secondary data, the authors mainly used Linnaeus University’s internet library and Google Scholar in order to access necessary data. When searching for appropriate literature in keywords were used, these include: Competitive Advantage, Networking, Networking in Public Sector, Barriers Networking in Public Sector, Resources, Overcoming Lack of Resources and so on. Literature in the shape of books has mainly been collected from previous course literature and from research method literature. The authors also used published documents for purpose to collect current and relevant data about the Swedish market, documents such as the Swedish Public Procurement Act were used.
3.6.1 Operationalization
Operationalization is the process where the researchers describes how the different concepts will be measured. The reason for this is to distinguish and differentiate the different concepts from one another by both its meaning and their definitions (Bryman & Bell, 2011). The different concepts will get two definitions which are theoretical definition and operational definition. Bryman and Bell (2011) state that the operational definition was derived from the idea of operationalization and describes it as the definition of a concepts in regards to how the operations are going to be carried out when measuring it. The major concepts will be highlighted and the authors will provide the reader with an understanding of each of the concepts. This includes both a theoretical and operational definition used for this research.
Table 2 shows the operationalization process of the most important concepts in this study.
Table 1. Operationalization for Interview Guide
Concepts/
Theories Conceptual definition Operational defintion Interview questions
Growth (chapter 2.1)
Growth is a complex process that can
undertake different paths (Anderson et al. 2010).
This study focus on growth in profitability and employment.
A measure to examine if consultancy companies working towards the public sector has a growth strategy and if they are growing or not.
Questions 1-2b (see Appendix B)
Competitive Advantage (chapter 2.2)
Competitive Advantage is defined as organizational factors which help a firm to be able to outperform its competitors (Mooney, 2007).
A measure to examine how the consultancy companies work with competitive advantages and their perceived competitive advantage.
Questions 3-7 (see Appendix B)
Networking (chapter 2.3)
Networking is the activity when interdependent actors communicate and relate to each other (Ford
& Mouzas, 2013).
A measure to examine attitudes towards networking and how they are working with networks.
Questions 8-22 (see Appendix B)
Resources (chapter 2.4)
Resources are defined as assets, capabilities, processes, information and knowledge (Hessels
& Parker, 2013)
A measurement to examine how the consultancy companies work with resources and networkings effect on resources.
Questions 23-24 (see Appendix B)
Public Sector (chapter 2.5)
The public sector is mainly financed by taxpayers money. The main areas within the public sector are the government, authorities, municipalities and counties (C
Ekonomifakta, 2016).
A measure to examine attitudes towards networking in the public sector.
Questions 10-11 (see Appendix B)
Table 2. Operationalization for Self-Completion Questionnaire Concepts/
Theories Conceptual definition Operational defintion Interview questions
Networking (chapter 2.3)
Networking is the activity when interdependent actors communicate and relate to each other (Ford
& Mouzas, 2013).
A measure to examine attitudes towards
networking, the importance, involvement and
development of networking within the field.
Questions 2, 4a (see Appendix C)
Resources (chapter 2.4)
Resources are defined as assets, capabilities, processes, information and knowledge (Hessels
& Parker, 2013)
A measurement to examine what the respondents consider that the own firm gains from involvement with networks.
Question 4b (see Appendix C)
Public Sector (chapter 2.5)
Competitive Advantage is defined as organizational factors which help a firm to be able to outperform its competitors (Mooney, 2007).
A measure to examine attitudes towards the networking opportunities within the public sector.
Questions 1, 3, 5a, 5b, 6 (see Appendix C)
3.6.2 Interview Guide
As mentioned in chapter 3.5 (Data collection method), interviews can be held in different forms; structured, semi-structured and unstructured. However, for this thesis the non- standardized interview forms were chosen when interviewing the two companies of focus, the purpose of a non-standardized interview is to collect in-depth data (Bryman & Bell, 2011). Non-standardized interviews could be either semi-structured or unstructured (ibid), the authors chose to apply a semi-structured interview; where the latter was chosen. A semi- structured interview allow the interviewer to improvise by asking follow-up questions during the interview if it is considered as necessary to gain needed data. Likewise for the interviewee which is allowed to answer the questions more freely.
Table 3. Interview Guide
Main Concepts Interview Questions Interviewee Growth
(chapter 2.1) Question 1 – 2a (see Appendix B and C)
Key Account Manager
CEO Competitive Advantage
(chapter 2.2) Question 3 – 7
(see Appendix B and C) Networking
(chapter 2.3) Question 8 – 22 (see Appendix B and C) Resources
(chapter 2.4) Questions 23 – 24 (see Appendix B and C) Public Sector
(chapter 2.5) Question 10, 11 (see Appendix B and C)
3.6.3 Pretesting of interview guide
The interview was pretested with two individuals, where one had several years of experience of services ad one whith. Both of the individuals were working within the area of the study and was therefore considered as having the possibility to contribute with reliable, relevant feedback and response for the interview guide.
3.6.4 Self-Completion Questionnaire
The self-completion questionnaire (Appendix C) was divided into two parts. The first part consist of three statements in a five-point likert scale where the answers was, (1) Strongly Agree, (2) Agree, (3) Undecided, (4) Disagree or (5) Strongly Disagree.
Table 4. Likert scale questions, part I of self-completion questionnaire
1. I believe that the usage of consultancyservices within the public sector and procurement will have a positive development during the coming five years.
1 Strongly Agree 2 Agree 3 Undecided 4 Disagree 5 Strongly Disagree
2. I consider networks important for performance and growth
1 Strongly Agree 2 Agree 3 Undecided 4 Disagree 5 Strongly Disagree
3. I believe that networking within the public sector will have a positive development during the coming five years.
1 Strongly Agree 2 Agree 3 Undecided 4 Disagree 5 Strongly Disagree
Question 4a “Are you currently involved in any network or networks?” was asked in order to receive a yes or no answer to complement question two, designed as a likert scale can be seen in Table 3. The connection between involvement of networks and if networking are considered as importat was considered as an interesting finding in order to fulfuill the purpose of the study. Question 5a “Do you see any constraints for being involved with networks within the public sector” was asked with a yes or no answer, had the purpose to support question two in the likert scale (Table 3). Question 6 was shaped so that the respondent could describe with own words and without any length-restriction of how the own vision is of the development of public procurement. This question was linked to the likert scale questions one och three (Table 3), all three questions provided an important base for the understand of future development in the area.
The second part of the self-completion questionnaire (available in Appendix C) consisted of two yes and no questions where the respondent were given the chance to motivate and explain their answer if they considered it as important. Question 4a therefore had the
