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Competence-based risk perception in the project business

n Veres Zolta
Faculty of Economics and Business Administration, Institute of Business Sciences, University of Szeged, Szeged and Budapest Business School, Budapest, Hungary
Abstract Purpose The perceived risk of services is not characterized by being inevitably higher than that of tangible products but rather by the fact that performance risk is bilateral and process-like. The aim of this paper is to explore the nature of this competence-based risk perception during different project transactions. Design/methodology/approach The research approach is a qualitative, exploring one. The elements of the theoretical framework have been explored with the help of parallel supplier and buyer in-depth interviews. In terms of industry coverage the focus of the study was in the traditional engineering areas including some other players of b2b project markets in the participant group. Findings Buyers perceived performance risk can be linked to the presumed weaknesses of the supplier in professional background, personnel, size or technology, and to certain external factors. Risk perception coming from mainly competence asymmetry can be reduced by interactive communication but it must be adjusted to the buyers comprehension level. Intensive two-way communication may be to justify the appropriateness of the buyers decision. Practical implications Understanding the risk perception of buyers can improve the management of purchasing activity and the purchasing process as well as the proactive behaviour of the supplier. Exploring the risk behaviour of the supplier can help to harmonize the selling/procuring activities of the supplier/buyer. Originality/value The originality of the paper lies in the process-like, bilateral modelling of risk perception in the service transaction. Based upon this approach a comparative interviewing has been carried out. Keywords Project management, Competences, Risk management Paper type Research paper

An executive summary for managers and executive readers can be found at the end of this issue.

Problem statement
Perceived risk is evoked by the danger of losing control over events that could have negative consequences (Adams, 1995, Renn, 1992). Risk perception is affected by how much buyers/ suppliers think that they are able to mobilize their skills and knowledge when faced with such danger. Based on services marketing theory the key problem can be best understood from the trap found in the service process. Specically, the perceived risk that a client feels in connection with the purchase is high (there is no product sample) and it remains so during usage as well. The provider of the service perceives a similarly high risk because a desired result, namely the satisfaction of a client, is in a number of industries more difcult to achieve than in the market for tangible goods (e.g. due to difculties in capacity management etc.; let us think of the construction of an infrastructural project and consider how difcult it is to allocate capacities in this area). Thus it is not accidental that so much importance is attached to
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reducing perceived risk in services marketing (Laroche et al., 2004). The perceived risk of service transactions is not characterized by being inevitably higher than that of tangible products but rather by the fact that performance risk is bilateral and process-like (Zeithaml et al., 1988). Performance risk of user and provider of a service is perceptible in the phase prior to and during the entire process of the transaction. This is because the success of a service transaction is uncertain until it is completed. Moreover it is so for the provider of the service, too. That is what is meant by bilateral risk (see Van der Valk and Johnston, 2006). Taking an example, towards the end of the construction of an industry plant uncertainty of actors increases more and more, dramatically even. Namely, whether technology works properly can only be judged during the test run, while almost the entire hardware has already been built in untransferably. From the point-of-view of service technology, the perceived risk connected to attaining a result is a competence-related risk (Van der Valk and Johnston, 2006). Competence means qualication, power, skill and knowledge. From among the different types of competences manifesting themselves in a service we are rst of all interested in the opinion or judgment of the buyer of a service about the competence of the provider of that service. A suppliers competence is confronted with the competence a buyer presumes and then perceives about a supplier in a given transaction as well as with a buyers own competence. The relationship between reputation and perceived risk can also be found in Ali and Birleys (1998) trust model. Managing this risk on both sides is of key importance for satisfaction to develop. One of the 237

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ways to risk management is interactive communication to reduce the risk perceived (see, e.g. Dumoulin and Vignon, 1991). In the rst stages of a service they are more likely to judge risks based on the competences hidden in the communication whereas during (and after) the service transaction, communication plays a less important though not unimportant role. Our research question that can be derived from the above is the following: what is the nature of the competence-based risk perception during the project transaction like? Before the empirical investigation, let us discuss this topic briey.

but is subject to change even in the post-transaction phase until it stabilizes in the end. The funnel shape shows the phenomenon referred to above that towards the completion of the project stakes, i.e. good performance risk can be high. Observed as a process, the perceived risk precedes any transaction; it accompanies the transaction process and remains at work in the phase following the purchase as well. This latter is already a risk that is projected back onto the transaction that might strengthen the developing relationship between a buyer and a service provider, or on the contrary, it may justify a buyers uncertainty felt before the transaction (see the problem of uncertainty at Ford, 2002, Van der Valk and Johnston, 2006; Brashers, 2001). It is to note, however, that many authors make a distinction between the ideas of risk and uncertainty. According to Emblemsvag and Kjolstad (2002) for example uncertainty is the state of not knowing something with certainty that is the source of risk. Extra information (e.g. on technical risks) reduces uncertainty but might as well increase perceived risk. A new product and/or a new situation increase but experience reduces perceived risk (Branscomb and Auerswald, 2001; Hartmann and Myers, 2001). A buyer in a risky situation gives preference to authentic pieces of information that reduce this risk. At the end of this process, the remainder (or strengthening) of the perceived risk may manifest itself in a post-transactional uncertainty that could in the end question the decisions that a client/user previously made. Perceived performance risk is constant in exceptional cases only, and is mostly a rather uctuating function of time. Prior to a transaction perceived risk can be uctuating even if it has been stabilized by former wide experience. Negative word-ofmouth or suppliers crisis (e.g. an environmental catastrophe was caused) increase, positive word-of-mouth and effective crisis management reduce the level of perceived risk. A natural condition of perceived risk would be if it reduced by the time a transaction is begun, yet in many cases this does not necessarily happen. Either a buyer has no other or better choice under these circumstances, or it has a close (maybe even forced) relationship with the supplier. During a project transaction, an experienced service, the suppliers communication and third party inuence (e.g. consultants) can affect the feeling of risk. The least desirable outcome of the transaction is the so-called service catastrophe (Keaveney, 1995) when, due to a mistake made by the supplier, perceived risk rises suddenly and irreversibly (total loss of trust). After a

Competence-based perceived risk

How much are experts able to recognize the limits of their knowledge? Research suggests that, despite their limited amount of information and their possible mistakes, nonprofessionals knowledge of risk reects considerations that are typically not to be found in experts risk perception (Slovic, 1987). With non-professionals the nature of risk perception is greatly affected by the level of their self-esteem, i.e. how much they consider themselves competent and how they estimate their own skills. Those who are uncertain and do not feel competent generally overestimate risk. Those business partners who regard themselves as well-informed, experienced and independent, tend to underestimate risk because they can hardly imagine losing control over a situation. Less competent clients also feel that they ought to be experts and this is what makes the management of transactions more difcult. In the project business actors can be considered as more or less (competent) experts of the technology and buyers are active participants of the transfer (Cova and Salle, 1999; Bettencourt et al., 2002; Mitchell, 1994; Axelsson and Wynstra, 2002). If we are to suppose that a marketing function aims at attaining/enhancing a clients/users satisfaction, the risk perceived by a client/user directly jeopardizes the success of marketing. To understand the risk perceived by actors in a transaction, let us illustrate it in a funnel shape, as seen in Figure 1, where: . A: Ideal case: in the service process the risk perceived drops to nearly zero. . B: Unwanted result: in the service process the perceived risk increases dramatically. . C: The ordinary value of perceived risk is probably uctuating in a range between A and Bs boundary line Figure 1 The risk perception funnel for services


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transaction an abating and a steady state follow. This phenomenon is very much like the difference between the current and permanent state of service quality.

The research model

The crucial question of the research is how presumed competence determines perceived risk. Figure 2 shows, in addition to presumed competence and perceived risk, some further factors that may be interesting from the point of view of our research question. We assume that the passive factors in the box below (control, commitment, trust, involvement, history of relationship, asymmetry of power, competence asymmetry etc.) inuence (moderate) the relationship between presumed competence and perceived risk (see also Ali and Birley, 1998; Fullerton, 2005). Thus, for example, history of a supplierbuyer relationship (transactional episodes) is an important passive moderating factor in risk perception. The project management is impeded by the typically discontinuous relationship in which the interrupted periods (inactive phases of the relationship) can often last several years (Mandjak and Veres, 1998; Cova et al., 2002). The position of the risk-communication arrow presents a more active moderating effect on the perceived risk as compared to the other factors. The independent variable in our research is presumed competence, which can be examined both from a providers and from a clients point of view. In general, providers of services are experts who assess risk using professional criteria. Thanks to their qualications and experience, they have a profound knowledge of their specic area and are able to handle and consider correlations in a complex manner. As a result of their work, they improve their knowledge of their industry and become able to investigate risk from an objective rather than a subjective point of view. This, however, frequently leads to the phenomenon of overcondence. Consequently it can happen that they fail to notice the inuences that are beyond their expert knowledge. In addition to this, these specialists too are inuenced by their own values and the interests of their institutions (Rimal and Real, 2003). In a recent typology our eld of interest can be placed to somewhere between interaction and network marketing (Coviello et al., 2002). Interactive communication can be a tool of risk management provided that the parties in the transaction can take advantage of it. Risk communication is a communication process that is determined by different risk Figure 2 Research model

perception and estimation. The information and the message relative to risk need to be formulated by taking the needs, questions and comprehension of the partners into consideration and linked to their attitude to risk. The timing of risk communication is of particular importance, especially in the case of protracting transactions. Different actors of risk communication have different attitudes and interests, and the dialogue between them cannot be fully controlled from either side, yet it can be altered. All this, of course, is a bilateral phenomenon, so the problems arising from the interactivity of communication have to be explored, too (Leiss, 1989). In any case it is most probable that any attempt at conviction is foredoomed to failure if the recipients reject the partner communicating risk; or they do not believe in it because they do not regard it as competent. Moreover, owing to the abundance of information, the complexity of the decision might as well make it more difcult to come to a decision (Powell, 2004).

Research methodology
We investigate the competence-risk-communication chain in project transactions. The research approach is a qualitative and exploring one (e.g. recognizing risk attitudes and bilateral performance risk etc.) in order to generate depth of understanding. In the qualitative research, the elements (competence, performance, risk communication) of the theoretical framework have been investigated with the help of simultaneous (parallel) supplier and buyer interviews. Not ignoring the role of the passive moderator factors, our interviews focused on the other elements of the research model. The expert in-depth interview guideline of openended questions can be seen in the appendix. While recruiting study sample our starting point was that the distinctive feature (differentia specica) of a project is the unique task under time constraint, i.e. it is independent of its industry. Therefore instead of reducing the project market to construction or high-tech industries projects as usual, we have extended it to other projects that have smaller hardware content. Thus in addition to the players of traditional engineering areas, the participant group of the series of interviews, made up of 30 suppliers and 30 buyers, included other players of business-to-business markets such as market researchers (3 of 30), advertising agencies (2 of 30) as well as planners of business events (1 of 30) and their clients respectively. We used screened lists from different professional sampling frames. The sample size was denitely above theoretical saturation level (Strauss and Corbin, 1990). Concerning the participants of the study sample the following characteristics have to be mentioned: all of them are decision-makers, mid-level managers at contracting or purchasing departments, with 5-10 years working experience in the industry, overwhelmingly male belonging to the age cohort of 30-45. In data collection and analyses we focused on individual perceptions of an organizational phenomenon taking into account usual sharing of knowledge in the project teams. Interviews took place in participants ofces, lasted as an average one hour, audio-recorded and transcribed verbatim. Interviewers were graduated professionals with working experience in different projects in order to be accepted by interviewees. In the content analysis of the 60 expert in-depth interviews while coding the verbatim interview transcripts we 239

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focused on readiness to cooperate, judging the importance of cooperation, long-term considerations in a relationship, understanding a partner company as well as the appearance and role of relationship, satisfaction, trust and loyalty in projects. In the preparatory phase a QSR NUDIST software was applied to classify the texts by the coded categories. Then we followed a sequential interpretative technique in order to continuously improve the efciency of the content analysis. Some ndings are presented in the next part. Certain details of the answers given by participants have been completed with explanatory ndings and literary references. Concerning the trustworthiness of the study and ndings based on criteria at Flint et al. (2002) we could assure credibility (sequential interpretation involving also participants); transferability (by sampling); dependability (based on a long history of the company); conrmability (by research consultants); integrity (by anonymous, professional interviews); t (by independent expert supervision); understanding (by presenting an imaginary minicase when introducing the interview presented at research forum); and generality (by IDI guideline). Control, however, was limited.

buyer to consider what to expect from a supplier and what consequences the fullment of particular expectations may have. But does the lack of competence really make it more difcult for the supplier to cooperate with a buyer? According to our participants, a lack of the buyers competence requires additional energy from the supplier. Speaking about competence, we have to mention the importance of the knowledge pertaining to a buyers own area of expertise. It is important that the investment made by the buyer is well founded. In the case of a buyer launching an advertising campaign, knowledge of its own area of expertise is demonstrated, for example, if the buyer knows which factors of its product or service should be highlighted in marketing communication and what really serves the companys interests. In sum presumption of competence on supplier side is based upon suppliers proactive communication and independent information while on buyers side upon the level of need uncertainty. Perceived performance risk When determining the success of a project, most suppliers mentioned the mutual satisfaction of both parties. On the part of the supplier, protability and appropriate output, whereas on the part of the buyer the attainment of the project objective are required to achieve this. With some project types (e.g. event planning), it is more difcult to determine success. In such cases it may happen that although a buyers expectations are exceeded, from the clients point of view, the event is not very successful. The same contradiction is observable in an advertising campaign that, despite the efforts of the parties, results in no increased earnings for the client. Buyers contrary to suppliers are better at perceiving the long-term effects of the results of a project. When considering success, clients also take into account the effects of the building they had constructed on its surroundings and economy in general. For buyers, however, a suppliers satisfaction does not seem to be a relevant component of success. Although they judge long-term relationships important, they are less eager to put themselves in the suppliers position. Risks perceived by suppliers are judged based on anticipation rather than systematic risk analysis (see also Van der Valk and Johnston, 2006). The client not paying for the job or paying less than agreed is a natural source of risk. The more unique the end product of a project, the higher the risk of non-payment, because in such cases it is difcult to judge a good solution afterwards. Also, difculties in meeting deadlines entail risks. Time pressure is a major source of performance risk since in most delayed projects the only way out is to attack as the best form of defence even at a loss. Cooperation between a supplier and a buyer as well as with subcontractors can involve a great deal of risk. The effect that the jobs of various suppliers working on the same project exert on each others jobs is well illustrated by the fact that, for instance in building industry, mistakes made by a building contractor may leave their marks on the planners image. For a supplier one of the risks involved in its cooperation with the client may be whether the client really would like to make the investment and if it would really like to do so with that particular supplier because a signicant per cent of projects are interrupted before they are completed. A supplier may fear that a project could fail to be completed or that a job might be cancelled if it has already invested considerable 240

Selected ndings
Presumed competencies When describing a good supplier, buyers value the fact that even though the supplier can read the investors mind, it still does not full the buyers expectations slavishly, but has some ideas for improvement much more than just performing the job as laid down in the contract (see also Veres and Buzas, 2007). Thus as a result the supplier helps the buyer in a number of ways. It can use its offer and competence, demonstrated during the negotiations, to prove as well as its references to suggest that it is a supplier that deserves to be called good. In addition to experience, external information seemingly also plays a role in forming a view of the supplier: it is important what second hand information the buyer has about a particular supplier. External information and references are means of competency communication independent of the supplier (see also Backhaus, 1990, pp. 378-379). The majority of interviewees nd it possible that some suppliers overestimate their own competences. By overvaluing its skills and capacity, a supplier may take on too many jobs, thus lose control of individual jobs that in normal conditions it would be able to perform with success. Nevertheless, overloading may result from the fact that the supplier sends out its offers to an excessive number of potential clients and it wins all of them in the end as a consequence of capacity uncertainty (see Ford, 2002). The participants agreed that it is important to dene the good buyer because buyers play an increasingly important role in large and complex projects (Kometa et al., 1994, p. 433) based upon a coordinated value creation process (Handeld and Nichols, 2002). Fundamentally, buyers are expected to know exactly what result they would like to achieve with an investment and to be capable of expressing their needs. For most suppliers, it is also of great importance whether a buyer accepts a suppliers opinion and prociency. The buyer should be able to see all the consequences and the incurring costs as well as to judge which expectations can be met and which cannot. Therefore, competence helps the

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resources in performing a certain task. Besides these, the buyers non-competence can also pose risks in co-operation. The buyer may for example wish to have a solution that is undesirable for the supplier. But the supplier may need to implement the plan even though it is aware that the result might damage its prestige consider a planner who is well known by the industry for designing a particular type of buildings, but who is now forced to make plans that are completely different. Thus there is no clear correlation between a buyers competence and a suppliers feeling of risk. Maybe also because as one of the interviewees noted a buyer may use its knowledge for negative purposes as well. Elements that reduce supplier risks include experience from former work relationships, information about the buyer from a third party, buyers nancial data and nancial situation, etc. But how can buyers exert direct inuence on a suppliers feeling of risk, or how much do they make real efforts to this end? A suppliers feeling of risk can be reduced if the task and the result to be attained are carefully specied, but also readiness for compromise and exibility can have the same effect. What can cause a supplier to lose trust in a buyer? Loss of trust may take place as early as the offer phase if a supplier feels that it has been deceived in the bidding process. According to suppliers, if a buyer loses credibility, it may also undermine trust. Risks perceived by buyers may include the case when a supplier still does not have the previously presumed and appropriate professional background, personnel or technology. It is unable to solve the task. A client commissioning a market research company may also fear that the employees making the analyses for the supplier do not have the right expertise, or do not know the buyers market. Less expert are rather afraid of not getting what they expected. Or maybe it is unable to use the output of the project as previously intended (see Mitchell, 1994, pp. 326328). Delays may be due to the suppliers resource problems or various external factors. The involvement of subcontractors in the fullment of a project may be a source of risk for a buyer as well. In some cases, suppliers perform jobs for buyers that they themselves could do easily, but are still forced to have others to perform them because of a lack of resources or for any other reasons. In this case it is easy for the buyer being an expert itself to judge the suppliers work. In other cases, however, it can happen that the service provided by a supplier is so complex and technical that the buyer is unable to judge its appropriateness. Thus a buyer may fear that it does not possess the right information to evaluate the required solution (see also Veres and Buzas, 2007). The question came up during the interviews how much fears expressed by buyers reect actual risks. Through time and by experience gained in identical projects, a buyer may develop a feel for risks. These organizations are more sensitive to risks they have personal experience with and whose overwhelmingly negative effects they have learned to their own costs (Schwanfelder, 1989, pp. 72-73). Buyer-perceived risk varies with different suppliers. Those that have recommendations or good references suggest less risky cooperation. Research studies show that although smaller suppliers are typically more exible and focus more on the buyer, a supplier companys large size rather suggests that cooperation would be safer (Belz and Kopp, 1994, p. 13). 241

When gathering information, buyer organizations typically rely on second-hand information (Wind, 1978, p. 661). As for information reducing the feelings of risk with a supplier, most interviewees mentioned information about suppliers, a suppliers good reputation and favourable brand image. Buyers who have no precise idea of their needs, i.e. whose need uncertainty is high, have been shown to rely more on a suppliers brand and good reputation rather than on any other information. Trade papers can be valuable sources of information because suppliers are almost unable to inuence these, thus the reliability of such information is extremely high (Backhaus, 1990, p. 379). A similar tool for reducing risks is references also a means of tangibilization. A good performance guarantee if extending for the warranty period increases supplier interest in long-term successful operation of the project output, thus it directly reduces the feeling of risk. The question concerning the elements that reduce a buyers perceived risks stemming from competence asymmetry is the following: what can a supplier do to reduce the risk that a buyer feels because the supplier understands the project output much better than the buyer? As for the question whether the level of risks felt by interviewees is constant through time, we expected to nd that, over time, perceived risks would increase considering that their expenses are higher, but the successful outcome of the project remains doubtful until the last moment. Some of the responses we received do support this assumption. Yet a signicant proportion of buyers think that they are faced with the greatest risks at the beginning of a project. Normally, the risk of long-term investments is much higher than that of short term ones. Many say that as the length of a project increases, the investment becomes riskier, because this makes the job less transparent. In general, suppliers thought that they had to take greater risks. According to them, this stems from the fact that buyers can decide who they wish to cooperate with, but suppliers are not in a position to choose from among their clients. In addition, suppliers mostly have to pre-nance, thereby running great risks. In sum determinants of perceived risk on both sides are the judgment of project success, contractual terms, cooperation, opportunism, third parties, past experience, reputation, time factor. The enumerated factors are partially linked to presumed competence, as it was expressed by participants. Communication Above, we have discussed the efforts made by a supplier to understand a buyers needs rst. It is generally accepted that a good supplier seeks to understand buyer needs. According to another explanation, only the buyers can dene what they really need. A conict between the contrary opinions of the parties may occur if a buyers stated needs do not coincide with the suppliers beliefs. As a rule, suppliers say that if they do not agree with a buyers ideas but consider them feasible, then they will make every effort to accomplish it. Informing buyers about risks is called risk communication. Some nd this important and it can reduce supplier responsibility in case of damage. Especially information on risks can be important which a buyer may not be aware of by itself. Risk communication must be adjusted to buyer needs and risks leading to unwanted worries should not necessarily be revealed. Further, communication should be made in line

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with a buyers comprehensive faculty. If communication is excessively technical, which the buyer cannot understand, it may very often create chaos inside the buyers head. As far as the understanding of risks is concerned, if a buyer knows the suppliers profession, it is more likely to accept the risks. Risk communication has a double impact on the feeling of risk. It is not necessarily reassuring; it may even shake the buyers condence. Moreover, it might also enhance its feelings of risk. An important issue is intensive two-way communication and its relationship with perceived risk. A means of eliminating post-project uncertainty may be to justify the appropriateness of the buyers decision. Intensive two-way communication can reduce the buyers feeling of risk but, more importantly, a lack of continuous communication will denitely increase it. In sum risk-communication has to be proactive, comprehensible and adjusted to the partner.

Practical implications
The practical usefulness of our paper is ensured by the fact that perceived bilateral risk can be reduced through riskreducing communication. The actors of the project transactions can obtain strategic and operative ammunition if they manage to understand the nature of the performance risk, perceived during a business service, better. Understanding the risk perception of buyers can improve the management of purchasing behaviour and the purchasing process as well as the proactive approach of the supplier. Exploring the risk behaviour of the supplier can help the suppliers self-management and to harmonize the selling/ procuring activities of the supplier/buyer. Not saying that the least costly way to dampen the procuring process is through risk communication. In this article, we tried to give some useful handles to promote this.

Let us consider the results that serve a better understanding of the purchasing behaviour in project transactions. We need to note that the picture is heterogeneous. Based on our indepth interviews we can posit that: 1 The main characteristics of competence-based perceived performance risk are the following: . In the interpretation of project success the buyer and the supplier are not on the same wavelength (things unequally judged on the two sides). Buyers contrary to suppliers are better at perceiving the long-term effects. When describing a good supplier, a buyer prefers exibility in fullling the contractual terms while buyers are expected to know exactly what result they would like to achieve with an investment and to be capable of expressing their needs. Buyers perceived performance risk can be linked to the presumed weaknesses of the supplier in professional background, personnel, size or technology, and to certain external factors as for example subcontractors, negative word-of-mouth. Risk perception coming from competence asymmetry can be reduced by interactive communication but it must be adjusted to the buyers comprehension level. Intensive two-way communication may be to justify the appropriateness of the buyers decision and it can reduce even the projected-back risk perception. 2 In addition to taking the above general characteristics into consideration industry-specic and actor-specic factors of risk behaviour cannot be ignored. In the business service process and within the area marked off by the risk funnel, the risk communication of business actors can inuence actual risk perception as a facilitator. The effectiveness of communication however depends on the interaction between real and presumed competences. Suppliers have a short-run but more client-oriented perspective, buyers, on the contrary, a long-term but less partner-oriented one. 3 As for the moderating variables all of them could be detected in the content analysis of the texts, however, with different emphasis. Competence asymmetry, trust and history of relationship seem to be more signicant (or more conscious) among them. 242

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Appendix. IDI guideline

1. 1.1 1.2 2. 2.1 2.2 A description of the research goal. Bilateral and process-like nature of performance risk (real time risk). Successful performance. What makes a project successful? Competence. What is a good supplier/buyer like? To what extent does it inuence a buyer how much it considers a supplier competent when making the decision on cooperation? What are those components of competence that reduce buyers fear of unwanted events occurring? Is it possible that a supplier thinks to be better and more competent than it really is? How can this affect the successfulness of the service provided? To what extent is it important for the success of the service that the buyer is competent? How much does the suppliers opinion of the buyer affect the decision on cooperation? What can cause loss of trust in a suppliers competence? Is a supplier interested in communicating these to the buyers? Does it consider this important? If suppliers nd that trust in their competence is shaky, how do they handle this situation and how do they communicate? What do they do to make a client satised? Is this important at all? What do they do so that a client buys the service again with no hesitation? How do they manage situations in which a buyer has a strikingly different idea of the service than the provider of the service does? (e.g. a patient would like to have a birthmark on his (or her) face removed and to look more attractive but the doctor thinks it is too risky and unnecessary to do). Performance risk. What risks are entailed in a given project-service? What can strengthen or weaken the feeling of uncertainty when choosing the supplier of a service? What factors inuence the buyers opinion of the service later on? Which party assumes greater risk when providing a service, the supplier or the buyer? What risks does cooperation with a supplier/buyer entail? Are the same risks perceived with every potential supplier/buyer? How much are buyers aware of actual risks? Does cooperation with a non-competent buyer require additional energy? What problems may arise if a buyer thinks to be more competent than it really is? How can a buyers feeling of uncertainty be reduced which is caused by the fact that the supplier inevitably understands the project better? What tools can help to reduce risk? Do suppliers/ buyers make efforts to be perceived as less risky buyers? How can a supplier help to reduce a buyers concerns? Do suppliers have a stake in encouraging this?

2.3 2.4


2.6 2.7


3. 3.1

3.2 3.3 3.4 3.5 3.6



Competence-based risk perception in the project business n Veres Zolta

Journal of Business & Industrial Marketing Volume 24 Number 3/4 2009 237 244

3.9 3.10 3.11 3.12

4. 4.1


4.3 4.4

How does it affect a buyers feeling of risk if it trusts a supplier? What factors can cause a suppliers faith in a buyer to be shaken and vice versa? What factors, independent from supplier competence, inuence the result? Are perceived risks constant throughout the provision of the service, or does their level increase through time? What is the suppliers and the buyers opinion of this in the course of the service transaction? Communication. How much does a supplier seek to gain information on a buyers needs and ideas? How can those situations be handled where a buyer and a supplier have different ideas of a service? To what extent does a supplier try to inform a buyer on risks entailed with a service? What means can help to communicate the risk-decreasing components of competence to them? Do the differences in the expertise of the parties make the communication of risks more difcult? When does communication of risks need to commence?



5. 5.1 5.2 5.3

Which form of communication is most effective: oneway, directing, or two-way empathetic, supporting communication? Can this inuence the factors linked with success? Does intensive and mutual communication with a buyer have an effect on a buyers feeling of risk or uncertainty? Is it possible that additional information increases the buyers feeling of risk? Final module. Which services involve more risk: standardized or customized ones? How much does the length of a service process affect the level of risks perceived by a supplier/buyer? How does the type of the relationship (formalinformal, personal-impersonal) affect the perceived risk? Does the frequency of encounters play a role in reducing perceived risk?

Corresponding author
n Veres can be contacted at: Zolta

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