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Marita Haas

The Formation Process of SME Networks

Marita Haas

The Formation Process

of SME Networks
A comparative case analysis
of social processes in Austria,
Belgium and Turkey

With a foreword by Prof. Rudolf Vetschera

Deutscher Universitäts-Verlag
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Dissertation Universität Wien, 2006

Gedruckt mit Unterstützung durch die Österreichische Forschungsgemeinschaft

1. Auflage September 2007

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Virtual Organizations (VOs) and other forms of cooperation among firms are gaining
popularity in particular among SMEs as a way to strengthen their position in an era of
global competition. Consequently, public institutions at the regional, national and
supranational level like the European Union are actively promoting and supporting the
formation of networks and virtual organizations.

But despite all the efforts spent on promoting cooperation and the numerous projects
aimed at supporting the development of virtual organizations, our understanding of the
success factors for the development of VOs is still rather limited. While the ultimate
goal of virtual organizations is to improve economic performance, economic factors
alone are not sufficient to explain success or failure in establishing a VO.

In her thesis, Marita Haas has introduced a new perspective on the formation process
of virtual organizations by interpreting the formation of a virtual organization as a
group development process between the key actors in each participating company.
This person-centered approach is particularly valid when considering SMEs, which in
many cases are strongly influenced by the personality of the founder. Applying phase
models from small group research enables Marita Haas to identify critical phases and
transitions in the formation process and develop adequate intervention strategies to
support the VO members in their efforts.

The research presented in this thesis not only offers new insights into the formation of
virtual organizations. It is also an excellent example of methodologically sound case-
based research. By integrating data from various sources, Marita Haas offers deep
insights into the VO formation processes that took place during the EU-funded
research project VERITAS, which enables her to draw conclusions that reach far
beyond the scope of this specific project. Her work therefore provides a solid basis for
the better understanding and successful guidance of virtual organizations during their
critical initial stages.

Prof. Dr. Rudolf Vetschera


Cooperation as a reasonable form to strengthen SME’s business was the main driver
for the research project VERITAS1 that aimed to create stable SME Networks in
Austria, Belgium and Turkey within a 19 months’ research period. As a scientific
member of the University of Vienna, I was part of the consortium that managed the
project. By establishing these networks, we followed a comprehensive time schedule
in order to reach this goal within project time. Soon, we realized that establishing
cooperation is far from being easy: informative workshops were characterized by high
absenteeism and fluctuation; most participants and potential cooperation partners
asked for the concrete benefit of their organization, or seemed to be simply not
interested in working with each other. Well-known explanations of synergy effects in
production, or better market force because of size only led to moderate enthusiasm.
Thus, in particular the first months of the network formation process was characterized
by low interest and low commitment of involved companies.

We looked at other projects and networks for helpful insights in order to find a way to
deal with the situation and to anticipate problems. However, the websites of former
research projects that aimed at establishing networks often did not remain for longer
than a few months after finishing a project and some of the previous networks
disappeared or became part of large corporate groups. This means that those
entrepreneurs that could report on critical success factors, problems and challenges
were to a large extent not available: only successful cooperation survives, cooperation
that failed and reasons for failure are not reported in any literature.

Based on the above mentioned experiences during the first months of the project and
the difficulties to find best-practice examples, I gained the impression that economic
concepts might not be appropriate to explain the difficulties properly. Whenever I
talked to members of successful networks or VOs, including the Virtuelle Fabrik
Nordwestschweiz-Mittelland2 or Swiss Microtech Network3, it was mentioned that the
crucial factor in the networks are people, not technology or resources, but the
commitment and active involvement of all parties. Some explanations went even
further and highlighted the need for friendship between partners. In every successful

VERITAS, IST 2004-511013, Contract for Specific Support Action, Annex 1- Description of
Work. For more information cf., accessed in October, 2006.
2, accessed in October, 2006.
3, accessed on 23rd of October, 2006.
VIII Preface

case involved people mentioned the ”network of heads and hearts“. These informal
talks led me to the conclusion that a network of companies is only able to work if a
stable network of the people behind it is working as well. This insight reflected a
turning point in my research process. First of all, my personal background is very
much related to social structures, teams and human resource aspects, as this was my
main focus during business studies and during three and a half years of professional
experience. Relationships and social structures have ever been important to my work
and me. I finally decided to investigate what happened on a relational level during the
formation process of a network in order to i) have an explanation for the behavior of
potential partners in our research project and ii) provide implications how to deal with
such challenges in the future.

Having explained how I happened to select the area of my research, I would like to put
in words how much motivation was given to me from other people to continuously
work on the topic and to finalize it. This work would not have been possible without
the support of my supervisors and many other people. First of all, I want to thank the
assessors and evaluators of this work. By at the same time appreciating and critically
discussing my work, Univ.-Prof. Dr. Rudolf Vetschera and Ao. Univ.-Prof. Dr. Sabine
Köszegi allowed me to cut my own path in research. Both of them played a decisive
role for my future professional activities. Ao. Univ.-Prof. Dr. Christine Strauss, my
second tutor, pushed me to work when I thought it would take me another couple of
years to finalize this PhD (thank you Christine, it was the right way!), and the working
atmosphere at the University of Vienna as well as at the Research Institute EC3 gave
me enough freedom and time to develop my own ideas. I would also like to thank
Astrid Schmidtchen, M.A., who proofread this work and delivered the new version in
a very short time frame.

Special thanks goes to Michel Pouly from EPFL Lausanne who was the first person
who discussed the concept and problems of networking with me in a very open way.
The same holds for Dr. Adrian Plüss from the University of Applied Sciences
Northwestern Switzerland who introduced me to the whole community of VO-
researchers at the IFIP World Computer Congress in Toulouse in summer 2004, and
who gave me a lot more information than I had asked for or even expected. I
additionally had a lot of interesting discussions with Charles Huber and Guido Besimo
about their work at Virtual Factory Nordwestschweiz-Mittelland. I also want to thank
Prof. Dr. Patrick N. Kenis and Prof. Dr. Leon A.G. Oerlemans from the University of
Preface IX

Tilburg for offering me the participation in the Tilburg Summer School 2005. During
this time I had the possibility to reconsider my research approach and benefited a lot
from the discussions with other students and teachers.

Regarding the VERITAS team, I owe thanks to my project colleagues Sonja and
Nicole who showed a lot of commitment and always brought up interesting and critical
aspects of cooperation. I especially would like to thank Serdar for his helpful
contribution with the project – ranging from simultaneously translating a four-hours-
meeting of Turkish network participants to investigating cultural differences between
Austria and Turkey in his diploma thesis. Furthermore I would like to thank Matthias
who showed me that team work really produces better and more interesting results
than working alone; Leyla, who became a really good friend (I will never forget the
nice breakfast in your house, Leyla); Notis, who always told me that I had “too much
energy” when I asked one of my critical questions or had another idea what we could
do about the lethargic cooperation partners. Dirk, who brought out the best in me –
especially while jogging in Athens; Yavuz, who was the best tour guide ever, and
Thomas, who also supported this work with information after the project had already
been finished. During the project, I have learned a lot from Sylvie’s professionalism
and critical attitude. All of them supported me in my academic but also personal
development during this time, but – most important – the idea to regard the network
process as a group process arose during an intensive talk with Dr. Doris Weyer. Thank
you, Doris!

The message for my parents is simple: I would like to thank them for all their love and
education that gave me the self-confidence I needed in order to reach my ambitious
goal. I especially want to thank my mum for all the talks and reflections during the last
years (and before). Thanks to my husband Max for being with me all the time. Last but
not least I think that writing a PhD thesis is definitely not possible without having
friends who encourage you during the difficult phases. I would like to thank Eva for
her support during the whole PhD process; Lea, who provided me with citation
guidelines and formal hints especially during the last weeks of writing; and Sandrine
for her helpful comments on my work, discussed in night working sessions via Skype.
Enjoy reading.

Marita Haas

1 Introduction ........................................................................................................... 1
1.1 Objectives and Research Contribution............................................................. 1
1.1.1 Background of the VO Concept for SMEs.................................................... 2
1.1.2 Research Approach ...................................................................................... 6
1.2 Structure of Work........................................................................................... 11

2 State of the Art..................................................................................................... 15

2.1 Literature Analysis ......................................................................................... 15
2.1.1 Definition and Main Characteristics of Virtual Organizations ................. 15
2.1.2 Origin of Virtual Organizations ................................................................. 18
2.1.3 Evolution of the Virtual Organization Concept ......................................... 23
2.2 Empirical Investigation in Virtual Organization Practice.............................. 29

3 Framework Development ................................................................................... 41

3.1 Cooperative Network Concept and Implications........................................... 41
3.2 Life Cycle Concepts and Phases of Networks ............................................... 49
3.2.1 Corporate Life Cycle Models ..................................................................... 49
3.2.2 Virtual Life Cycle Models........................................................................... 52
3.3 5-Phases Model .............................................................................................. 54
3.3.1 Background: Groups and Group Formation Process................................ 55
3.3.2 Framework for Cooperative Networks....................................................... 59

4 Design of Analysis................................................................................................ 67
4.1 Sample: Veritas Project.................................................................................. 67
4.2 Research Method: Case Study Research........................................................ 73
4.2.1 General Aspects of Case Study Research................................................... 73
4.2.2 Application of Case Research .................................................................... 76
4.2.3 Instruments of Evaluation .......................................................................... 79
XII Index

5 Empirical Data: Network Formation Processes ............................................... 89

5.1 The Austrian Case .......................................................................................... 89
5.1.1 Initiation ..................................................................................................... 93
5.1.2 Forming .................................................................................................... 103
5.1.3 Storming ................................................................................................... 110
5.1.4 Norming.................................................................................................... 123
5.1.5 Performing................................................................................................ 128

5.2 The Belgian Case ......................................................................................... 131

5.2.1 Initiation ................................................................................................... 133
5.2.2 Forming .................................................................................................... 142
5.2.3 Storming ................................................................................................... 148
5.2.4 Norming.................................................................................................... 149
5.2.5 Performing................................................................................................ 149

5.3 The Turkish Case ......................................................................................... 151

5.3.1 Initiation ................................................................................................... 155
5.3.2 Forming .................................................................................................... 163
5.3.3 Storming ................................................................................................... 171
5.3.4 Norming.................................................................................................... 189
5.3.5 Performing................................................................................................ 190

6 Comparative Analysis ....................................................................................... 193

6.1 Result of Network Formation ...................................................................... 193
6.1.1 Network Description and Visualization ................................................... 193
6.1.2 Planned Activities..................................................................................... 197
6.2 Comparison of Phases.................................................................................. 200
6.3 Country-specific Behavior ........................................................................... 211

7 Conclusions and Outlook on Further Work ................................................... 217

References.................................................................................................................. 225
Appendix.................................................................................................................... 241

Figure 1: Research Framework..................................................................................... 12

Figure 2: Working Definition of Virtual Organizations ............................................... 18
Figure 3: Case Description Puma ................................................................................. 34
Figure 4: Case Description Virtual Factory Nordwestschweiz-Mittelland .................. 35
Figure 5: Definition of Cooperative Networks ............................................................. 42
Figure 6: Tuckman's Group Model............................................................................... 57
Figure 7: Formation Model of a Cooperative Network ................................................ 60
Figure 8: Virtual Factory ............................................................................................. 69
Figure 9: Research Design ............................................................................................ 78
Figure 10: Formation Process Austria ........................................................................ 129
Figure 11: Formation Process Belgium ...................................................................... 150
Figure 12: Turkish Network Initiatives ...................................................................... 172
Figure 13: Formation Process Turkey ........................................................................ 191
Figure 14: Model of the Austrian Network ................................................................ 194
Figure 15: Model of the Turkish Network(s).............................................................. 195
Figure 16: Comparison of Length of Phases .............................................................. 200

Table 1: Development of VO-characteristics ............................................................... 28

Table 2: Virtual Profiles .............................................................................................. 33
Table 3: Comparison VO and Cooperative Network.................................................... 48
Table 4: Comparison of Models ................................................................................... 59
Table 5: Attributes of 5-Phases Model ......................................................................... 62
Table 6: Relevant Situations for Different Research Strategies ................................... 75
Table 7: Data Matrix..................................................................................................... 78
Table 8: Company Description Pre-Questionnaire....................................................... 81
Table 9: Interview Sample ............................................................................................ 82
Table 10: Material for 5-Phases Model ........................................................................ 87
Table 11: Trust Issues in Austrian Interviews ............................................................ 120
Table 12: Austria: Network Project Overview ........................................................... 123
Table 13: SWOT Analysis Network Belgium ............................................................ 146
Table 14: SWOT Analysis of the Turkish Manufacturers.......................................... 163
Table 15: Skill Matrix Super Structure Network........................................................ 173
Table 16: Product-market Matrix Super Structure Cooperators................................. 174
Table 17: CompressorNet Participants' Characteristics.............................................. 176
Table 18: Interview Description Turkey..................................................................... 187
Table 19: Network Description................................................................................... 199
1 Introduction
Coming together is a beginning
Keeping together is a progress
Working together is a success

Henry Ford 1863-1947

Henry Ford revolutionized work in the automotive industry by establishing mass

production through detailed assembly line planning. He motivated his workers with a
concept of high wages so that every employee was able to afford a car produced by the
Ford company.4 Ford's ideas – often referred to as “welfare capitalism” – were
amplified to a global vision on international cooperation which he examplified through
collaboration activities with Agnelli of Fiat in Italy.5 Based on the above quotation, he
was aware of the difficulties of making people and companies work together, which
perfectly describes the topic of this dissertation: Cooperation is challenging. The
reason behind this is the fact that human beings are involved.

1.1 Objectives and Research Contribution

This work is based on the concept of cooperation between small enterprises and
investigates social processes that emerge when people work together in the context of
network formation.

The background of the work was the participation of the 19-month research project
VERITAS (Virtual Enterprises6 for Integrated Industrial Solutions)7, with the goal of
establishing Virtual Industry Clusters (VIC) in Austria, Belgium and Turkey. VICs

However, Henry Ford’s ideas were not restricted to supporting employees; on the contrary, he
established a quite hierarchical, dictatorial corporate culture and for example never allowed
unionization. More information to be found at for example, accessed in October, 2006.
More information to be found at, accessed in October,
In various literature sources the terms Virtual Enterprise and Virtual Organization are used as
synonyms (cf. Bauer/Koeszegi, 2003). In this study, the term Virtual Enterprise will be substituted
by Virtual Organizations when possible.
VERITAS, IST 2004-511013, Contract for Specific Support Action, Annex 1- Description of
Work. For more information cf., accessed in October, 2006.
2 Introduction

correspond to networks of loosely-coupled companies that assure the cooperation

preparedness of their members and enable them to form Virtual Organizations (VOs)
whenever a joint business opportunity arises (Camarinha-Matos et al., 2004). A VO is
described as a “(…) cooperative organization to explore business opportunities that
one enterprise itself would not be able to work out.” (Sieber/Griese, 1998, p. 213) and
regarded as „(…) a temporary network of independent companies – suppliers,
customers, and even rivals – linked by information technology to share skills, costs,
and access to one another’s markets“ (Byrne et al., 1993, p. 36). In the literature, it is
commonly agreed that VOs are able to diminish typical problems of small enterprises.
Cooperation is believed to increase flexibility and to enrich the product portfolio of
specialized corporations.

The author amplifies existing research on networks and VOs by investigating the
network formation process from a social perspective. Small enterprises are in the
author’s view supposed to be driven by risk-averse business-owners and therefore
characterized by the need to establish long-term relationships among cooperation
partners. Based on the model of Tuckman (1965) the group formation process is
extended and applied to VOs.

1.1.1 Background of the VO Concept for SMEs

Today’s economy is characterized by ongoing globalization, fast changing

technologies and a turbulent business environment. These changes affect today’s
enterprises’ production processes as well as their internal structures. Especially for
small and medium enterprises (SMEs) this is not without problems. SMEs often lack
sophisticated know-how or the financial background to respond to new market
requirements and therefore need special consideration or even support to defend their
market position and to survive.

According to the official definition, SMEs occupy a maximum of 250 employees and
their turnover does not exceed an annual amount of 50 million Euros.8 The European
business landscape is a landscape of small enterprises: In the year 2003 the average
European company employed seven people, and 99.8% of all companies situated
within the European Union (EU) are classified as SMEs. These enterprises provide

8, accessed on
23rd of October, 2006.
Objectives and Research Contribution 3

around 70% of the employment and 57.3% of the turnover in the private sector.9 This
means that the performance of SMEs is highly important for the welfare of the society
on a social and economic basis. Therefore the European Commission (EC) has taken
steps to improve the situation of SMEs by strengthening their competitiveness and
support their survival in the market. EU policies shall ensure economic growth and
facilitate job creation for the whole region. Based on the Lisbon Plan of March 2000,10
the objective of the European economy is to become the most competitive and
dynamic knowledge-based economy in the word.

One of the main points discussed in this development plan is the fact that a lot of
disadvantages of SMEs are mainly attributed to their size. While large enterprises can
easily customize their products and services according to their clients’ needs, SMEs
are likely to be more vulnerable in a changing business environment. They do not
dispose of enough resources to assure flexibility and to quickly adopt for example
production procedures in case of new customers’ requirements. In case of strategic
reorganizations or the introduction of new products, the risk is quite high: Failure of
SMEs can lead to insolvency, while larger enterprises are able to compensate losses
with earnings of other parts of the enterprise. A possible solution to this dilemma is to
enhance cooperation between SMEs. Cooperative structures and common production,
selling or marketing processes are able to strengthen the competitive position of SMEs
by giving them virtual size. This means that networks of smaller companies are able to
act like larger ones.

Of course, cooperative structures face also problems for SMEs: the main barriers of
cooperation are seen in the risk to become a dependent supplier of a large company but
also the fear to be forced to reveal secret or protected specific knowledge.11 To
overcome these problems, the European Commission as well as national institutions
invests in Research and Development (R&D) activities that promote new ways of
business.12 Business models are created to face the global challenges and to provide

More details in the Observatory Report “SMEs and cooperation”,
_report5_en.pdf, accessed on 15th of September, 2005.
For more details about the Lisbon Plan cf.,
accessed on 23rd of October, 2006.
ESNR Enterprise Survey 2003, reported in:
_report5_en.pdf, accessed on 15th of September, 2005.
For more information about European Projects, go to, accessed
on 23rd of October, 2006.
4 Introduction

solutions for embedded organizations. One of these business models is the above
defined concept of Virtual Organizations (VOs), i.e. best-of-everything-network,
where different companies or individuals combine their core competencies in order to
explore business opportunities that could not be handled by one single company (e.g.
Sieber/Griese, 1998; Byrne et al., 1993).

Best practice examples of VOs can be found in various literature sources: Wüthrich et
al. (1997) or Goeransson and Schuh (1997) describe Puma13 as a representative VO, as
only brand management and administrative issues are carried out centrally, while all
other services like product development or R&D are outsourced to different partners
and even countries. Airbus14 or Smart Car15 represent examples of VOs in the
transport manufacturing sector where different companies come together in order to
produce one single product or product line (Wüthrich et al., 1997). Rosenbluth
International16, situated in the sector of transport and travel, combines different
subsidiaries all over the world (Mertens/Faisst, 1997) and Amazon17 manages to
transfer most of its business areas to the World Wide Web. Driven by these examples
and business models, VOs like Agile Web18 – a federation of different manufacturing
companies in the US – or IECOS19 – a Mexican Industry Cluster – came into
existence. Sieber and Griese (1998) or Bremer et al. (2001) highlight the example of
VIRTEC, a cooperation platform of Brazilian SME manufacturers as best practice
example (Wüthrich et al., 1997; Müller-Stewens, 1997).

Although the benefits of VOs and networks – like cost sharing, access to new markets
or increased flexibility –- are widely known and discussed (e.g. Davidow/Malone,
1993; Sieber/Griese, 1998; Mertens et al., 1998), the realization of the concept remains
challenging (Haas et al., 2007). Looking behind the scenes, a lot of the above-named
VOs disappeared over time or became more traditional organizations. Today, the
general company information of Puma20 or Airbus21 reflects the structure of mutual

13, accessed in October, 2006.
14, accessed in October, 2006.
15, accessed in October, 2006.
16 accessed in August, 2004.
17, accessed in October, 2006.
Further information on, accessed
on 24th of October, 2006.
19, accessed in October, 2006.
20, accessed in October, 2006.
21, accessed in October, 2006.
Objectives and Research Contribution 5

shareholding.22 Other VO-project’s websites are not updated or maintained: Kiesel23, a

virtual competence center in the environmental sector still provides information of the
idea of bringing partners together, but obviously has no contact point to get in touch
with. Agile Web, VIRTEC and VW Resende (Wüthrich et al., 1997) even no longer
have a proper website. The same holds for Prolion, a best practice example described
by Bultje and van Wijk (1998). Above all, the reader gets lost in general project
information looking for example for the EC-funded project e-mmediate24 that aimed at
establishing a handful of VOs around Europe. Reported failure of VO can be read
about at the Cargo Lifter case, a former showcase of a VO in the air transport

On the other hand, the Virtual Factory Nordwestschweiz-Mittelland26 or Swiss

Microtech Network27 are two representative, often-mentioned examples for well-
established VOs (Goeransson/Schuh, 1997; Pouly et al., 2002). Both networks deal
with the manufacturing sector (Swiss Microtech Network28 especially in micro-
technologies), based on the main ideas of the Virtual Factory concept of Schuh et al.
(1998): partners agreed on a stable platform of partners, forming project teams
according to customers’ needs. Also KFS-Net29, founded on the principle of capacity
sharing, represents a well-working VO that, like the two Swiss networks, seems to
have adopted the concept according to its partners’ needs.

While the concept obviously works in some cases, it does not fulfill participant’s
expectancies in others. Although the best practices do not shed light on the relationship
between size of the involved companies and the successfulness of the cooperation
behind, the (perceived) risk for SMEs seems to be higher: While larger companies are
able to cooperate in less important areas of their business, small corporations enter
network relationships often because of economic reasons or even because of the
Although one of the main characteristics of a VO is the “one-face-to-the-customer” - philosophy
that would not allow insights in internal structures, Airbus is known as one single - fully integrated
- company since 2001 (, accessed
in October, 2006) and Puma has become a large group with preferred partners during the late 90s
(, accessed in
October, 2006).
23, accessed in October, 2006.
24, accessed in August, 2004.
25, accessed in October, 2006, or, accessed in August, 2004.
26, accessed in October, 2006.
27, accessed in October, 2006.
28, accessed on 23rd of October, 2006.
29, accessed on 28th of February, 2006.
6 Introduction

request to survive or being able to compete against larger corporations. Hence, SMEs
might fear to lose their specific, specialized know-how and therefore require more
stable and trustful partners, as they do not want to put themselves at high risk.

The assumed risks for SMEs are on the one hand the problems associated with sharing
know-how, because competitive advantage of small companies are mostly based on
unique production procedures that are not shared with potential competitors. On the
other hand, high flexibility is required from potential partner companies: every
company should be able to quickly react and cooperate with the others and adapt
internal structures as well as production procedures. This means that on the one hand,
VOs are seen as helpful concept for VOs, on the other hand it might be very difficult
for them to overcome SME specific challenges in the context of cooperation. Hence,
the question arises, which aspects might be necessary prerequisites for success.

1.1.2 Research Approach

Critical success factors often mentioned in the context of VOs highlight the necessity
of trustful relationships between partners (e.g. Byrne et al., 1993; Jägers et al., 1998;
Scholz, 1996) or the implementation of collaboration tools and advanced Information
and Communication Technology (ICT) as the most important enabler for success (e.g.
Camarinha-Matos/Afsarmanesh, 2004; Sieber, 1998). Other authors like Krystek et al.
(1997) focus more on the qualification of VO’s employees. Sherer (2003) identifies
the importance of “soft factors” in a study of 159 manufacturing networks and regards
trust, commitment, information technology, the process of partner selection, and the
intermediary support conduciveness of the external environment as the crucial factors.

Despite investigation into critical success factors, there are no indications why in some
cases the VO-concept works and in other cases does not. Although the factors
identified via different studies overlap, they are mostly described in a qualitative way
and do not reveal concrete guidelines how to establish a successful VO. On the one
hand, external factors like the specific industrial or economic situation of a country
may as well influence the establishment of successful cooperation as internal factors
like the level of commitment or trust (e.g. Handy, 1995; Köszegi, 2001). Trust was
introduced as a social amplification of neoclassical models that are based on
opportunistic behavior and is seen as an instrument of coordination (Das/Teng, 1998;
Jägers et al., 1998; Klaus, 2002; Scholz, 1996) next to price and hierarchy (Noteboom,
Objectives and Research Contribution 7

1996; Ring/Van de Ven, 1992; Zaheer/Venkatraman, 1995). It reduces complexity and

opportunistic behavior in relationships and helps to overcome conflict situations
(Granovetter, 1985; Handy, 1995).

The examination of trust in the context of VOs reveals two main problems. First, the
formation process of trust is unclear. Trust is considered to be reciprocate (Das/Teng,
1998; Jarvenpaa et al., 1998) and it takes time and personal contacts (Jarvenpaa et al.,
1998) to establish trustful relationships. Additionally, there are theories that claim
trustful people on the one hand, and mistrusting people on the other hand (Rotter,
1967; Rotter, 1980; Gräff, 1998). The second problem with trust is the question
whether trust is really able to eradicate problems in cooperation. If a VO or a network
fails, people say that there was no trust in each other. Critically spoken, this means that
whenever something goes wrong, the problem can be attributed to the lack of trust.
Although the discussion of trust allows a deeper insight into human attitudes, it is only
partly able to explain problems and behavior in cooperation, since the relation between
trust and performance is still contentious (Zaheer et al., 1998; Smith/Holmes, 1997)
and the discussion and concepts of trust – at the current state of the art – are not able to
overcome the problems of cooperation. Granovetter (1985) analyzed the basis of trust
and as well rejected institutional arrangements as generalized morality, but argued that
all (economic) action is embedded in social structure. He contradicts the theory of
rational actors and ideal conditions for business transactions, and states that whenever
there was trust in the past, there will be trust in the future, because of being embedded
in a certain group where the individual would like to stay a member in the future
(Hosmer, 1995). This social structure and the personal embedded relationships holds
for networks as well: A network of institutions, especially of small and medium-sized
enterprises (SMEs), is, first of all, based on the network of owners or CEOs behind it.

From a social or individual point of view the author therefore states that the underlying
(social) concept of a network is a group, i.e. “(…) two or more persons who are
interacting with one another in such a manner that each person influences and is
influenced by each other person” (Shaw, 1976, p. 11). While the discussion on the
formation of VOs widely neglects the existence of human beings and their emotions
(Sieber, 1998; Katzy/Dissel, 2001), the argumentation of the group model is based on
the fact that the formation of a network of institutions requires the formation of a
network of people, and refers to that fact that in a first step, it is not the organizations
are linked to each other but the managers working in these organizations.
8 Introduction

At first sight, friendships and stable relationships are a new aspect for VOs. No matter
if competitive or institutionalized arguments are considered, or if VOs are simply
regarded as a possible new organizational form, all approaches are based on rational
actors that join forces whenever it is necessary. The concept of VOs is constructed on
the “homo oeconomicus” – an approximation of the homo sapiens that is maximizing
its utility based on given preferences. Although often criticized (e.g. Keynes, 1936;
Simon, 1997), the rational model serves as a basis for diverse organizational and
economic concepts. For SMEs, however, the author assumes that people want to
develop a network of actors where everybody can rely on each other and which
enables a stable and balanced commitment from all cooperation partners. Social
aspects and relationships are therefore concluded to be crucial in the formation process
of a group or a network, respectively. While establishing a network among business
owners it should be thought of as establishing a group or a team.30

In respect to this specific situation for SMEs the author develops a model that i)
focuses on social aspects of networks and ii) concentrates on the very first phase of
network formation.

i) Different to former models, the author states the hypothesis that a network of
companies is fundamentally just a network of people – or a group of people – that
come together and try to form a well working team. Organizations cannot be
formed without human beings and these human beings and their needs in an
organizational context follow emotional processes. Brewer and Kramer (1986) as
well as Dawes and Thaler (1988) argued that the identification with a certain
group, called “group identity”, facilitates cooperation.

The group forming model is also concordant with Granovetter (1985) who rejected
both institutional arrangement and generalized morality as a basis for trust and,
instead, argued that (all) economic behavior is embedded in informal social
relationships. Embeddednes refers to i) historical or cultural aspects, ii) structural
aspects like role behavior, but also iii) individual embeddedness in a social
structure. The first two dimensions are often treated as specific determinants:
cultural scientists (e.g. Hall, 1990; Adler, 1997; Trompenaars, 1995) investigated
In the literature, the difference between group and team is described by interaction with one
another and the self-perception as a group for any social group (e.g. Schein, 1980) and a special
focus on working within the same institution and with each other for teams (e.g. West, 2004). The
author does not distinguish between these two terms as the literature on teams is based on the
group concepts.
Objectives and Research Contribution 9

in behavior and characteristics of people coming from the same region and
institutionalized responsibility is able to explain certain characteristics and attitudes
out of role concepts (Lenk/Maring, 1998; Sichler, 2004). Both aspects are
considered in economic transactions, but Granovetter (1985, p. 487) adds that “(…)
actors do not behave or decide as atoms outside a social context nor do they
adhere slavishly to a script written for them by the particular intersection of social
categories that they happen to occupy. Their attempts at purposive action are
instead embedded in concrete ongoing systems of social relations.”

ii) Except for the attempts to establish simple Virtual Life Cycle models (Sieber,
1998; Katzy/Dissel, 2001) that describe the most important phases of business
transactions in VOs, the process of VO and network formation has been neglected
in the literature. Based on the idea of Life Cycle models,31 every organization
follows a pre-defined process of development over time. Assuming that this also
holds for VOs, the investigation of the different stages of development is a basic
requirement for analyzing VOs. Cooperation between companies does –
additionally – require special concern of social and relational factors in the
beginning of a cooperation: Different stakeholders’ opinions have to be considered
and high risk and dependencies might prevent actors from joint business activities.
Furthermore, the owners of the different organizations generally do not know each
other or have not worked with each other before. Risk-averse cooperation partners
have to get to know each other and establish trustful relationships before they start
working. Although there exist suggestions for Life Cycle models of VOs, including
detailed descriptions about the activities to be carried out in every phase, the
implementations often last longer than anticipated or a planned cooperation fails
before it really can start. The starting phase seems to be crucial for any
organization: Turnover and the number of involved people are still low and sales
channels or customers have to be established (Shahidi, 1997). Comparable to new
industries, in the emergent phase of an organization, the market potential is still
unclear and growth rates cannot yet be predicted. Thus, the stability of market
shares is very low at this stage and customer loyalty has not developed. Greiner
(1972) and later Scott and Bruce (1987) agree that the specific disadvantages of an
early stage of an organization can only be overcome by creativity, depending
mostly on the entrepreneur him or her. The author claims that this also holds for
network organizations and VOs. Although in the beginning, the organization is

For a detailed overview cf. Höft, 1992.
10 Introduction

rather unstructured and cash generation is clearly negative, commitment of the

involved people and creative solution finding will lead to joint growth.
Nevertheless, because of different interests of all parties, this phase is the one to
decide future cooperation activities.

Based on the two presented aspects, the author extends the (Virtual) Life Cycle model
to classic social theories on group development (e.g. Tuckman, 1965; Bion, 1961;
Bradford, 1964; Francis/Young, 1989) and creates a phase concept that includes five
different phases describing how people get to know each other and become a team.
Fundamentally, four of the five phases resemble Tuckman’s group formation model
(Tuckman, 1965), but are applied for a network of companies. Therefore, the model
includes a first phase, called Initiation where potential group members are contacted
and selected. During the Forming phase, the need for leadership and the establishment
of a Network Manager are considered and orientation and testing requirements of
network partners are included. During the Storming phase, when conflicts and
struggles about the power in the Network may arise, the effort of independence of
partners has to be recognized. The establishment of rules and roles is essential during
Norming, which should lead to the agreement of partners. Finally, after all four phases
have been passed; the group starts to work as a team (Performing).

The aim of this work is to gain deeper insights into the social structures of networks in
order to derive hypotheses how to support the establishment of relationships between
cooperation partners. This means that the deductive approach to establish a phase
model is extended to an inductive verification and adoption. The initially descriptive
approach that analyzes how the group and the characteristics of the network developed
over time allows a diagnosis which – in a further step – lead to valuable insights how
to systematically encourage and support the formation of VOs. The idea of the
available research is based on the implication that if one is able to identify those
factors that are responsible for being successful, suggestions for how to systematically
encourage and support the formation of a VO can be derived. This could, in turn,
prevent or at least advise future networks from failure.

The main focus of this dissertation is to give a contribution to the scientific community
and to close the gap between social and economic arguments in the sector of networks
and VOs. In addition, the detailed and demonstrative research report also provides
helpful guidelines for practitioners and industry people while establishing cooperation.
Structure of Work 11

By reading this dissertation, the complexity of a network formation process will be

better understood from economic as well as social preconditions.

1.2 Structure of Work

The remainder of this work is organized as follows: Chapter 2 analyzes the theoretical
background of VOs and discusses the different approaches that have been brought up
by scholars. The literature review contains the accurate definitions of VOs as well as
the origin and evolution of the organizational concept. The adoption of the VO-
concept is related to a timeline in order to observe the evolution over time.

A further part of the chapter reports on an empirical analysis of 30 VO examples (Haas

et al., 2007). The analysis is based on cases that have been reported as best practices of
VOs in the literature and includes documented reports but also current interviews and
analysis of existing web sites. The sample includes examples that failed or adopted
other strategies over time as well. Based on this study the author shows that two
different types of VOs exist in today’s business environment: emerged vs. initiated
VOs, clustered according to the drivers that led to network creation. Emerged VOs are
driven by the business idea of one focal company that seeks its partners and organizes
the network by appointing its strategy and formalization mechanisms. While most of
these emerged VOs were founded during the 1990s, today’s VOs are more equalized
and follow a jointly-defined strategy. These networks, initiated and/or funded by a
public institution are the topic of interest during the analysis. Based on an extensive
literature study about the evaluation of the concept of VOs over time, they are called
Cooperative Networks. Based on definition and evolution of theory on the one hand,
and the application of VOs on the other hand, a model of an ideal Cooperative
Network, according to today’s business environment and the requirements of SMEs is
derived in chapter three. Related to the theory of social embeddedness (Granovetter,
1985) the author shows that the formation of an initiated VO or a Cooperative Network
in the context of an SME Network rather follows the concept of a group-building
process (Tuckman, 1965) than the concepts of Virtual Life Cycles (e.g. Katzy/Dissel,
2001; Rabeol et al., 2004).
12 Introduction

The argumentation is based on the following two major propositions:

ƒToday’s VOs adopt a certain form of a Cooperation Network that is based on a
long-term oriented stable platform of cooperation partners, supported via
national or international institutions.
ƒFor the establishment of a Cooperative Network of SMEs a personal network of
the SME-owners has to be established. Group effects and group theory (e.g.
Moreno, 1996; Bion, 1961; Kauffeld, 2001) are used to define requirements of
personal relationship building.

The model is applied to three network formation cases that were set up in order to
strengthen competitiveness of SMEs in the manufacturing sector. All three of them
have been accompanied and analyzed by the author for more than one and a half years.
The research framework is displayed in figure 1.

Literature Analysis Empirical Analysis

(Davidow/Malone, 1992; Bremer et al, 2001; (Agile Web, Behr, Cargo Lifter, e-mmediate, Euregio Bodensee,
Bultje/van Wijk, 1998; Camarinha-Matos/Afsarmanesh, Flexcell, IECOS, IMPRO, KFSNet, Kieel, Konkraft Manufacturen,
2004; Erben/Gersten, 1997) metalnet, mobile solution group, myteq, Nintendo, Prolion, Puma)


Cooperative Networks
“Cooperative Networks are stable and long-term platforms of cooperation.Equalized
partners combine their businesses according to the jointly established strategy of the
network. Cooperation is supported by agreed rules and roles and by trustful relationship
between partners.”

5-Phases Model
Based on models of group-building (Tuckman, 1965), Integration of
(virtual) Life Cycle Models Focus on small enterprises


Case 1 Case 2 Case 3

Austria Belgium Turkey

Figure 1: Research Framework

The study uses a case survey approach in which multiple levels of analysis, including
for example individual interviews, quantitative questionnaires, or process observation
are used to develop a comprehensive picture of single cases. A detailed description of
the methods of analysis as well as the evaluation procedure and the general research
Structure of Work 13

design is explained in Chapter 4. Chapter 5 comprises the empirical observations and

results of the network formation process in three different countries.

The established phase concept is successfully applied to three cases. The attitudes of
the network members can definitely be assigned to group formation behavior. A cross-
case comparison, taking place in section 6, shows that, although developed diversely
in the three countries, the main challenges in the phases resembled each other. Most
similarities in people’s comportment were detected in the Initiation phase,
characterized with a strong need for leadership. Main distinctions among the three
cases were observed during the Storming phase, where particularly Turkish network
participants showed activity and commitment, the Austrian network members behaved
in a skeptical and resistant manner. Nevertheless, both attitudes showed a strong
relationship to typical behavior during the related phase and therefore highlighted the
validity of the model in unequal economic and cultural settings.

The study is completed with conclusions and implications for further research in
section 7. Here, the author concludes that only by jointly overcoming the challenges of
every phase, a network will start to generate efficient results. The aspect of
relationship building was successfully combined with current research in the field of
VO and network theory. By developing a framework that is able to differentiate
between developmental stages of a network formation process, the author managed to
establish a prescriptive instrument for the network formation process. Limitations of
the study and future research possibilities are highlighted at the end of work.
2 State of the Art

In the following section, an extensive literature analysis as well as a comparison of 30

VOs and networks is reported. The discussion of current empirical and theoretical
aspects serves as a basis for the study carried out in the empirical part of this work.

2.1 Literature Analysis

This chapter highlights the theoretical background of VOs and describes how the
concept changed over time. It points out how virtual structures developed over time
and which aspects of virtuality, including for example coordination mechanism or the
reaction on business opportunities changed and which remained.

2.1.1 Definition and Main Characteristics of Virtual Organizations

Davidow and Malone (1992) were among the first authors to discuss the concept of
Virtual Organizations. They argued that future companies would assume different
organizational forms than before and developed the vision of a dynamic network of
organizations, suppliers and customers that work together. Their ideas were based on,
for example, Toffler (1987), who introduced a concept where the customer plays an
important role in the design of a product – s/he decides how a product should look and
which features it should display. This means that the supply chain was extended to the
customer. In the view of Davidow and Malone (1992) work groups, departments and
specialists should be combined as required by the current market demand, forming a
VO. The term “virtual” is related to an artificial world, based on cyber technology.
“Virtual” means “not real”, but at the same time describes something that is
“apparent” or “could-be” reflecting an “as-if”-scenario.32 Therefore, no real building
or office would hold the actors together but the network would consist of links in
information and relationships. Davidow and Malone (1992) talk about a “virtual
revolution”33, based on developments of ICT. At the same time they highlight the
difficulties for companies that would have to change internal structures, and invest
more in high skilled and self-organized workers.

For a definition cf. “(…)for the most part; almost wholly; just about.” in, accessed in October, 2006.
They compare the “virtual revolution” the technical revolution in 1770, pointing out the power of
change on behalf of technology.
16 State of the Art

The concept does not follow a generally accepted definition. After Davidow and
Malone (1992), several other authors picked up the idea and drafted definitions. Byrne
et al. (1993, p.36) define a VO as ”(…) a temporary network of independent
companies – suppliers, customers, and even rivals – linked by information technology
to share skills, costs, and access to one another’s markets.“ Sieber and Griese (1998,
p.213) similarly describe VOs as “(…) an appropriate kind of cooperative
organization to explore business opportunities that one enterprise itself would not be
able to work out.” Bultje and van Wijk (1998, p.9) also point out that in VOs „(…)
companies quickly unite to exploit a specific opportunity and will disperse
afterwards.” and Erben and Gersten (1997) add that “(…) each company contributes
only what it regards as its core competencies.” It is commonly agreed that the aim of
VOs is to explore business opportunities that could not be handled as a single company
(e.g. Krystek et al., 1997; Bultje/van Wijk, 1998). Nevertheless, it is more common to
describe a VO by a list of its specific characteristics. The main organizational features
are the following:

i) Focus on core competencies: Collaborating companies focus on their individual

core competencies. These resources and know-how are pooled in order to form a
best-of-everything network (Balint/Kourouklis, 1998). Differentiation from
competitors is the main source of competitive advantage, because today’s markets
require a high-competence portfolio (Erben/Gersten, 1997). If a company decides
to focus on only a few products or services, the need for cooperation partners
emerges immediately. Several authors argue that the focus on and the dynamic
combination of core competencies enable VOs to meet the customers’ requirements
in a very efficient way, and to react faster and more flexibly (e.g. Sieber, 1998;
Bauer/Koeszegi, 2003).

ii) One face to the customer: Services or products of a VO are offered from one
contact point. This can either be a brand name of the VO or a focal company acting
in the name of the whole organization. For the customer, a full-service supplier is
always more attractive than several small companies that have to be coordinated.
As long as the contact point ensures quality issues and liability, for the customer
there is no need to know suppliers or partners of the main company.

iii) Internationality: Due to the fact that VOs do not have a common shop or office
where all employees are located, the network can non-restrictively expand to
Literature Analysis 17

several foreign countries. This characteristic also highlights one of the main
advantages of virtual corporations: in a global environment, international presence
of a company becomes more and more important.

iv) Independency: Regardless of the joint activities, partners remain legally and
economically independent (Bultje/van Wijk, 1998; Mertens et al., 1998). The idea
of a VO is to combine resources and know-how whenever a business opportunity
arises, but not to merge internal structures. This allows flexible recombining of
resources. Although legally separated, companies are mutually dependent on each
other. Based on the cooperation, a co-destiny relationship arises: all partners
depend on the other partners’ success and performance (Davidow/Malone, 1992;
Mertens/Faisst, 1997)

v) Low formalization: To be able to react quickly, the companies refrain from

hierarchical integration and high formalization. Instead, the cooperation between
partners is based on self-organization. It is characterized by value-orientated
relationships and most of the time equal rights of all partners (Wüthrich et al.,
1997). This means that VOs are supposed to act with a minimum of rules or
contracts and are rather coordinated on the basis of informal contracts.
Additionally, mutual trust is seen as an instrument to reduce opportunistic behavior
(Handy, 1995; Köszegi, 2001), informally supporting the relationship between

vi) Application of ICT systems: Sophisticated ICT-support facilitates coordination

among partners and reduces communication costs (Sieber, 1998; Wüthrich, 1997).
ICT is often seen as the “driver” of VOs that enable the organization to exploit
business ideas. The main advantage of ICT support is seen in process acceleration
through quick communication and collaboration facilities (Camarinha-
Matos/Afsarmanesh, 2004).

vii) Temporariness: VOs are temporary networks. Bultje and van Wijk (1998, p.9)
point out that in VOs „(…) companies quickly unite to exploit a specific
opportunity and will disperse afterwards.” The collaboration takes place to explore
short-term market-opportunities. This flexibility enables companies to quickly
form a corporation that is able to react to the current market requirements and
dissolve after the requirement is fulfilled.
18 State of the Art

The above-mentioned features reflect the most important characteristics of a VO.

Although the term VO lacks clarity, the author uses the following combination of the
above mentioned characteristics. as a working definition (see figure 2):

“Virtual Organizations are short-term networks of legally independent companies or

individuals that come together in order to fulfill a certain market requirement. Based on low
formalization, trustful relationships and ICT-linkages, partners bring in their core
competencies and satisfy the clients need(s) with one solution. After the project has been
fulfilled, cooperation partners dissolve.”
Figure 2: Working Definition of Virtual Organizations

2.1.2 Origin of Virtual Organizations

According to classical economic theory, the emergence of organizational forms is

discussed in the context of efficiency: How can transactions in the market be
organized efficiently? Two normative concepts – i) market coordination and ii)
hierarchical organization – have long been regarded as two mutually exclusive
models, each with advantages and disadvantages (Picot et al., 2003).

i) Coordination in a market requires the agreement of two or more partners for a

transaction. Perfect competition is assumed, so that price is the appropriate
regulatory mechanism. According to the specific situation, services and
instructions for all partners are agreed upon. Disadvantages of the market are high
transaction costs caused by the need to select the right transaction partner and to set
up coordination between actors. Additionally, single transactions may lead to
opportunistic behavior that can only be coped with by contracts or control. The
market is a form of decentralized coordination mechanism.

ii) Coordination through a hierarchy describes the internalization of transaction

partners. Organizations based on routines and directions emerge and specific forms
of (working) contracts between actors arrange the activities. This leads to lower
costs in coordination, motivation and control. Based on the institutional approach,
communication and contracts between actors are used to coordinate activities.

Scholars stated that hierarchical coordination outperforms market coordination as long

as organizational costs and the probability for wrong decisions can be kept low (Coase,
1937). When transaction-cost theory was further developed, Williamson (1975; 1985)
Literature Analysis 19

included motivation and behavior of human beings in the concept and argued that the
selection of market or hierarchy was based on the amount of transaction partners, the
frequency of transaction as well as on uncertainty about current and future outcomes
and the necessity for financial investment (Picot et al., 2003). It is argued that the
higher the specificity of a product or service, the more necessary are control and
incentive mechanisms and the more efficient is a vertical integration in a hierarchy.

Influenced by the changing environment of today’s business, the need for a third
possibility to coordinate business activities arises. The need to change internal
structure can be found in the changing environment and in the required reaction of
companies. The overall reason for improving internal structure is the need to stay

Four reasons can be identified why organizations might need more flexible and
cooperative structures (Siebert, 2003):

1) Innovation: Already Schumpeter (1964) mentioned that technical innovations or

changes in the production process are more able to influence the long-term
competitiveness of an organization. Innovative products generally emerge of a
company’s core competencies: specialized products or processes. Nevertheless,
today’s innovations need a multi-technological background and interdisciplinary
development of products (Siebert, 1990). Therefore high specialization in core
competencies requires highly specialized partners in adjacent fields.

2) Time: On the one hand, companies need to have the ability to quickly fulfill
existing market demands by disposing over short delivery times and, on the other
hand, shorter cycles of new product development are required (Siebert, 2003).
While the first one requires dependent supplier structures, the latter focus on
trustful relationships, where the exchange of know-how is facilitated.

3) Quality: Especially in business relationships where a commercial buyer and one or

more supplier(s) are involved, quality and quality control is an important issue: The
company selling in the B2C34 market is finally made responsible for the entire
product. Instead of cost-intensive quality control systems, the need for reliable
cooperation partners arises. Network structures are seen as a possibility to deal

Business to Consumer
20 State of the Art

with the problem of hidden information between the two actors.35 Fair and long-
term relationships might be the aim of networks in order to enhance quality of the
whole supply chain. (Siebert, 2003)

4) Costs and Prices: Regardless of the first three important points, price is still one of
the driving factors for competition. Division of labor between network partners
increases the possibility to react faster and to outsource for example those parts of
production to countries with lower labor costs.

Network organizations and – according to the definition of Sydow (2003) – also VOs
can therefore be classified as a third possibility to coordinate business activities. Due
to loose combination of organizations, a hybrid organization emerges. This
organizational form disposes of fewer obligations and linkages between the entities
than in hierarchical organizations, but at the same time has stronger ties between the
actors than in markets. Therefore, the major disadvantages of the other concepts can be
reduced: Costs for selecting partners and set-up costs decrease because of repeated
collaboration. Control costs also diminish because of growingly trustful relationships
between partners. Transaction in networks follow reciprocal trading principles: no
payments are fixed or agreed to, no directions are imposed, but the coordination
follows social models with interdependencies and the fulfillment of mutual
expectancies (Semlinger, 2003). Stable relationships of actors as well as reliable
feedback processes and the commitment to jointly take over risks make actors
implicitly learn and establish rules and regulations.

Networks are furthermore regarded as a stable platform of companies with fixed

cooperation interests and linkages (Erben/Gersten, 1997) and are “(…) conceived as
an institutional arrangement among distinct but related for-profit organizations which
is characterized by (…) a special kind of (network) relationship, (…) a certain degree
of reflexivity, and (…) a logic of exchange that operates differently from that of
markets and hierarchies.” (Sydow/Windeler 1998, p. 266).

VOs are seen as a special form of network, provided with the coordination and
collaboration possibilities of the newest ICT (Sydow, 2003). The second difference
The buyer-supplier relationship can classically be interpreted as a Principal-Agent Relationship.
The supplier disposes over more and more detailed information of his products, including error
ratios or qualitative homogeneity of products. In a worst-case scenario this might lead to
opportunistic behavior: The Agent (=supplier) does not tell the Principal (=buyer) about quality
problems, hoping that no major errors will be detected.
Literature Analysis 21

can be seen in the market appearance of VOs. The “one-face-to-the-customer”

philosophy lets the partners in the VO-network appear as if there was only one
company, while instead, a project network is built up. Additionally, dynamic aspects
of formation and dissolving characterize the VO (Picot et al., 2003): modular,
heterogeneous and geographically dispersed entities with different core competencies
can be combined at any time. In addition to the above-mentioned network
characteristics, VOs enable small companies to grow and – according to this virtual
size – to be present on the market. Centralization and decentralization vary according
to the specific implementation of the concept.

Besides the explanation of networks that is based on Transaction Cost Theory,

alternative approaches try to explain the emergence of VOs (Picot et al., 2003):

From a competitive point of view, VOs are an appropriate answer in markets with
highly complex, fast-changing problems (Reichwald et al., 2000). Complex products
require modular organizations, because single enterprises are no longer able to satisfy
customers’ demands only by means of their own competencies. At the same time,
markets become uncertain because of fast-changing needs. Temporary, business-
driven cooperative structures based on complementary core competencies of the
partners are an appropriate answer to this situation. Every partner brings in what s/he
is doing best and the exact framework of cooperation is driven by the available
business (Picot et al., 2003).

From an institutionalized point of view, economists point out that that efficiency in any
organization depends on the motivation of the agent who fulfills a certain task. A firm
is seen as a nexus of contracts between factor owners and is viewed as the outcome of
a complex equilibrium process. The formative principle of this theory is the
relationship between a principal, who orders a product or service, and an agent, who
carries out the task. This relationship is characterized by the problem of asymmetric
information (e.g. Jensen/Meckling, 1976; Ross, 1973) and the related difficulties of
opportunistic behavior of the agent. The Principal-Agent relationship in VOs becomes
even more complex because of weaker control mechanisms and the fact that principles
of employee orientation or relationship building are difficult in geographically-
dispersed organizations. Nevertheless, scholars point out the efficiency of VOs
whenever a certain task is highly specific and only occurs time by time and can either
not be fulfilled by the principal because of lack of know-how or can not be efficiently
22 State of the Art

handled inside an organization (Picot/Neuburger, 1998; Kreis-Engelhardt, 1999). In

this context, the importance of trustful relationships and cooperative behavior of all
partners is also highlighted (Heskett et al., 1997; Picot/Neuburger, 1998).

Third, virtualization is motivated by communication theory: While in traditional

enterprises delegation, decision making and planning processes require the presence of
the management and employees, the coordination in VOs is done via ICT which
enables higher flexibility and faster reaction (Reichwald et al., 2000; Picot et al.,
2003). The ICT-linkage of loosely-coupled entities in virtual structures enables the
partners to quickly communicate and coordinate themselves.

The reasons for the emergence of VOs can be combined to two distinct meta-
approaches (Bauer/Koeszegi, 2003; Krystek et al., 1997): On the one hand, the
evolutionary perspective describes the necessity to adopt virtual structures in today’s
business environment and emphasizes the vision of VOs as the ideal organization for
the 21st century. VOs are considered to be a consequence of the development of
organizations in a global, more and more technical environment. Product innovations
and new technologies in the ICT sector (Venkatraman/Henderson, 1996) drive
organizations to adopt virtual structures The argumentation of this approach is based
on practical experience and best practice case studies. It concludes that the features of
VOs should be adopted by today’s corporations and therefore stresses the VO concept
as a normative approach. On the other hand, a management perspective emerged.
Companies change internal structures according to a specific management decision.
Such a decision can be based on i) the contingency-approach, highlighting the
necessity to face environmental changes and to establish the best “fit” between
external conditions and internal structure (e.g. Picot et al., 2003; Scholz, 1996; Krystek
et al., 1997), ii) the resource-based view, focusing on the growing importance of
specialization and the coordination of different partners’ core competencies (Müller-
Stewens, 1997; Peteraf, 1993; Pümpin, 1992), or iii) transaction-cost theory (for
example Mertens/Faisst, 1997). This concept therefore focuses on the internal
organizations’ perspective, making decisions according to the current business

In summary, different triggers for the emergence of VOs can be identified, mostly
related to environmental and technical conditions.
Literature Analysis 23

2.1.3 Evolution of the Virtual Organization Concept

When the first ideas on VOs arose, the academics themselves admitted that the
realization of a VO, which combines the production of different (competitive)
companies and is linked by technology would not be immediately realized by a large
number of companies (Davidow/Malone 1992, p.14). Nevertheless, it can be assumed
that the authors at that time would have expected an application after about 10 years.
In this chapter the author shows how the concept developed over time and which
theories supported the evolvement of VOs since 1990.

1990 - 1992: At the beginning of the nineties, the organizational concept of virtuality
arose. The VO can be somehow seen as a western reaction to many existing Japanese
practices (Kaizen, Total Quality Management (TQM), Just In Time) in order to be
competitive. In this phase, Xerox36 reorganized internal structures; Ford37 and Volvo38
commonly took a stake in Hertz39 and airlines joined together for alliances. New roles
for suppliers and producers arose, because “co-destiny” of producer and supplier
(Davidow/Malone, 1992) became a major point of interest. Important aspects of
information sharing and trust were highlighted for the first time.

Supplier relationships developed into partnerships and the leading company restricted
its business contacts to only a few reliable partners. Co-destiny required dependency
between both actors (Davidow/Malone, 1992). Nevertheless, a VO was started from
one company that selects its suppliers. The suppliers were subjected to quality controls
and high time pressure, but nevertheless they become partners or even allies in the
fight for customers. For the focal companies in those network structures, the
advantages were numerous: Quality was enhanced, turnaround accelerated and
partnerships with suppliers became stronger, more intense and more efficient. For the
suppliers, the situation was different: Time pressure was high and quality controls
occurred frequently. However, since internal structures were improved, the
competitive advantages increased and the market position of the suppliers improved as
well. Through long-term partnerships, know-how and strategies were exchanged
which led to mutual understanding and trust (Sheridan, 1990).

36, accessed in October, 2006.
37, accessed in October, 2006.
38, accessed in October, 2006.
39, accessed in October, 2006.
24 State of the Art

Two major situations can be observed in this period: One, the customer became a
central point of interest in any production line and two, focal enterprises entered
relationships of mutual dependence with their suppliers. Xerox40 introduced a “sole-
source” policy, reducing its suppliers from 5000 to 325 (Sheridan, 1990). They
eliminated competitive bidding and established quality trainings for their suppliers.
Dell41 followed more or less the same concept and called it “Virtual Integration – the
idea of interweaving distinct business so that our partners are treated as if they’re
inside our company (…)” (Dell/Fredman, 1999, p.185). The original discussion on
VOs started from a practical point of view: Companies that adopted new strategies
were observed.

1992 - 1995: After the concept had been recognized, a lot of fundamental research on
definitions and characterizations of VOs was done. This phase was characterized by
different attempts to explain the emergence of VOs. According to the trend of
outsourcing and high specialization, VOs were seen as a function of reintegrating the
outsourced business aspects via network structures. During these years, the
modularization and reintegration of business units played a major role. The concept
discussed was characterized by quick combination and dissolution of organizations,
departments or experts in order to fulfill short-term market opportunities. The best-of-
everything organization remained, including even competitors in one organization.

1996 - 1998: The first ideas for the Virtual Factory were established. Upton and
McAfee (1996, p.123) described a factory of “(…) dozens, if not hundreds, of
factories, each focused on what it does best, all linked by an electronic network that
would enable them to operate as one – flexibly and inexpensively – regardless of their
location.” The Virtual Factory therefore described a manufacturing entity consisting
of different manufacturing teams. Famous examples are VW Resende42 in Brazil,
where companies rented one plant to work and develop cars together, or Euregio
Bodensee43 in Switzerland, where various manufacturing components were
manufactured in individual subsidiaries and assembled later. Role systems like the
Broker were established, representing an entity that looks out for business
opportunities, searches for partners and assembles the core competencies of partners
(Schuh et al., 1998). Additionally, the importance of ICT as a coordination mechanism

40, accessed in October, 2006.
41, accessed in October, 2006.
42, accessed in May, 2007.
43, accessed in October, 2006.
Literature Analysis 25

rose. After outsourcing those competencies that are not relevant in a competitive sense,
the company was able to concentrate on its core competencies. Nevertheless, the
competencies produced by different partners had to be linked and coordinated, which
was done by communication and collaboration technologies. ICT was regarded as the
key enabler of VOs (e.g. Sieber, 1998; Scholz, 1996). The Internet and virtuality were
coming to be focal interests to the business world. Amazon44 became a very famous
example of how a bookshop was able to deal in a worldwide context.

The current period was characterized by high enthusiasm because of the worldwide
connection possibilities due to ICT. The integration of direct competitors was
declining, since experts around the whole world could be included in a network and
cost efficiency seemed to increase because of easier linkages to companies in low-
labor-cost countries.

1998 - 1999: During the next few years, attempts to classify VOs emerged. Different
approaches became apparent (compare for Bultje/van Wijk 1998 who identified 27
different characteristics analyzing only six case studies) and authors tried to combine
and establish typologies (e.g. Wüthrich et al., 1997; Krystek et al., 1997).

At the same time, first critics (e.g. Weibler/Deeg, 1998) recognized certain
disadvantages as for example the risk in sharing core competencies. In order to cope
with these problems, additional models and concepts for VOs and Virtual Projects
emerged. First, the Virtual Industry Cluster (VIC) was created. It can be seen as an
extension of the generally known cluster concept: a homogenous, regional industry
network of producers and/or suppliers that have a common business interest.45 The
VIC serves as a platform for companies interested in forming short-term VOs where
cooperation rules for member companies are defined.46 Second, the role of the
enterprise Broker became a fixed element of the concept (e.g. Bremer et al., 2001).
These attempts turned a strong focus on managerial competencies in networks and the
VOs became more formalized than before. During this period, the discussion on VOs
became more structural, and scholars tried to detect advantages and disadvantages of
the concept in order to further develop it.

44, accessed in October, 2006.
45, accessed in October, 2006.
46, accessed on
24th of October, 2004.
26 State of the Art

2000 – 2001: By way of empirical testing, experience reports, mainly based on best
practice research emerged. Critics mentioned restrictions of self-organization and
highlighted the need for an integrator or a coach for the network (Gerpott/Böhm,
2000). During this phase, toolkits and guidelines on how to build VOs were
developed: For example Katzy and Dissel (2001) talked about how to support the
different phases in a VO.

Additionally, strategic management, human resource management and leadership in

VOs became a major point of interest. Although Handy (1995) had already pointed out
the main trust issues in 1994 by mentioning the problematic issue of trusting people
one is not able to see neither to know, most of the research on trust or social aspects of
VOs started not before 1999. For example Köszegi (2001) investigated trusted
relationships in VOs. In this period, the discussion became more practical-oriented and
less methodological. The main question addressed was: What helps companies to
become VOs or to adopt virtual structures? Accordingly, attempts such as the
establishment of a management structure in VOs or the stable platform behind partners
that combine core competencies according to business needs seemed to have been
established. An example is the small Swiss Microtech Network47 in Switzerland,
founded with companies in the micro technology sector (Pouly et al., 2002).

2002 and later: Now, the systematic implementation of VOs began. Funding policies
started to focus on VOs, highlighting the long-term benefits of VOs especially for
SMEs. Most of the time, the concept of Schuh et al. (1998) and the model of the
Virtual Factory served as basic guidelines. One of the most comprehensive European
Projects - called Ecolead48 - followed the vision that ”(…) in ten years, in response to
fast changing market conditions, most enterprises and specially the SMEs will be part
of some sustainable collaborative networks that will act as breeding environments for
the formation of dynamic virtual organizations.” Through the formation of VOs
regional disadvantages or the low competitiveness of SMEs partners were tried to be
overcome. Nevertheless, potential network partners assessed the model according to its
cost effectiveness and have difficulties in detecting short-term advantages (Reichwald
et al., 2000). During this phase, direct competitors in networks disappeared and the
establishment of VOs followed the goals that business partners had formulated

47, accessed in October, 2006.
48, accessed in October, 2006.
Literature Analysis 27

together. Power was equally distributed among partners and role concepts as well as
stable platforms like VICs were seen as useful supporting structures in VOs.

Due to recent research, a collaborative network was regarded as indispensable for a

successful and long-term cooperation between the partners (Camarinha-Matos et al.,
2004). It reflects a source network of VOs that wants to assure the preparedness of the
companies to form Virtual Projects quickly whenever there is the market need for it.
This source network was often called “breeding environment” and provides services
like common data bases, role concepts and common rules regarding the handling of
order and projects.

Since 2004, new business terms like Smart Business Networks (SBN) (Vervest et al.,
2005) or Collaborative Network (Camarinha-Matos/Afsarmanesh, 2004) emerged.
Smart stands for “quick” and “flexible”, as the concept assumes a group of
participating business-organizational entities that are linked together via a
communication network. Partners build a sustainable network over time, but at the
same time are able to connect and disconnect in a spontaneous way using self-
organization as a coordination mechanism (Vervest et al. 2005). New expressions like
Collaborative Networks (Camarinha-Matos/Afsarmanesh, 2004) or Smart Business
Networks (Vervest et al., 2005) also showed the need to re-launch the expression
“virtual”. Using more tangible expressions was believed to allow the successful
establishment of the organizational concept as a well-known application for research
as well as for the industry (Camarinha-Matos/Afsarmanesh, 2004). However, these
terms described the same concepts of cooperation.

At the same time, collaboration tools underwent advanced improvements and started to
reach a sophisticated technical level. At the University of Munich, a Virtual Enterprise
Lab49 was created in order to combine different communication media and test their
ability to communicate with each other. The aim was to establish collaboration tools
that integrate mobile and online communication and were “intelligent” enough to
switch from one medium to another, in case the receiver is not available (Katzy et al.,
2005)50. In the whole European Union, research activities related to the VO area were

In various literature sources the terms Virtual Enterprise and Virtual Organization are used as
synonyms (cf. Bauer/Koeszegi, 2003). In this part of work, the term Virtual Enterprise will be
substituted by Virtual Organizations when possible.
Further information to be found at, accessed
in October, 2006 or, accessed on
3rd of April, 2006.
28 State of the Art

centralized via the AMI@Work Community.51 Free software tools like Skype52 or
Google Talk53 Communicator could be seen as competitors to network software like
Arel Communications,54 all of them easily coordinating partners from different places
all over the world. Those technical tools reflected solutions for the coordination
problem in VOs. However, their application was still limited at this point of time. In
many cases collaboration software in practice is limited to standard databases and/or
email and intranet as the central communication media (Haas et al., 2007)

The attempts from 2002 until 2006 show that there is still the need for networking, for
cooperative structures and that the advantages of pooling resources and know-how
have survived. On the other hand the new expressions that have come into existence
seem to reveal the fact that academic research turns away from the term and concept of
VOs for the purposes of establishing new and/or additional concepts.

1990- 1992- 1996- 1998- 2000- 2002-

1992 1995 1998 1999 2001 2006
Core competence High High High High High High
One face to the High High High High Medium Medium
Internationality Medium High Medium Medium Low
Independency Low Medium High Medium
Low formalization Low Medium High Low Low Low
Application of ICT Medium Medium High High Medium Medium
Temporariness High High Medium Low Low

Focal High ICT as Broker, VIC Breeding Stable

Additional enterprises speciali- enabler environment networks
aspects zation

Co-destiny Modularity/ Virtual Web- Trust, social Funding

Integration factory companies aspects policies

Table 1: Development of VO-characteristics

The concept of VOs developed over time and adopted different shapes. Table 1
represents the predominant focus oft the VO characteristics related to the respective
time slots. The overview shows the occurrence of the characteristics, but also describes
the level of its values.
51, accessed in October,
52, accessed in October, 2006.
53, accessed in October, 2006.
54, accessed in October, 2006.
Empirical Investigation in Virtual Organization Practice 29

The following conclusions can be derived from the comparison:

i) The greatest attention to theoretical characteristics and to the definition was paid
during 1996-98. During this period, Internet and ICT were seen as the main drivers
for VOs and all other characteristics were considered in the relevant literature.

ii) After the general detection of the VO-model, the concept underwent a research
period with controversial opinions and different attempts of typologies. Later, the
academic discussion declined and VO-literature changed into management
guidelines or implementation tools for organizations that want to adopt virtual
structures. In the European area, this can be related to the fact that the European
Commission wants to strengthen the competitiveness of the European industry55 by
providing new concepts for European enterprises.

iii) Concerning the characteristics, it has to be noted that the very first approaches did
not focus on an international application, nor on independency of partners. On the
contrary, the integration of partners was a step towards supplier dependence.
Internationality became more important during the same phase when ICT was
highly recommended, but over time, regional development concept took a relevant
role, instead. In parallel, formalization was reduced from intensive contractual
activities between Original Equipment Manufacturers (OEM) and suppliers, but
obviously it was recognized that structure and regulations are necessary for any
form of cooperation. Over time, managerial components and formalization in VOs
became more important.

iv) Today, long-term cooperation and high formalization play a major role in the
concept; and ICT is applied on a medium level. The focus on core competences,
and therefore the need to specialize remained the same over the last 15 years.

2.2 Empirical Investigation in Virtual Organization Practice

Analyzing the results of the theoretical aspects, the concept of VO discusses different
aspects at different points of time. Although characterized by factors like ICT usage,

For more details cf., accessed in October, 2006.
30 State of the Art

low formalization or a focus on core competencies, the specification of these items has
varied over the years.

In comparison to the existing organizational models, virtual concepts are able to

disband the boundaries of organizations in various aspects (Picot et al. 2003): First,
VOs are not restricted to geographical or national boundaries, but are extended
globally. Second, legal restrictions and owner-ship rights are mitigated to informal,
trustful agreements. Third, VOs are dynamic and can take place anytime. Forth, there
are no structured and pre-defined processes and the implementation of the concept is
purely problem-oriented. The boundless and unlimited organization reflects a vision of
an organizational concept that could help to deal with typical problems of today’s
organizations (Picot et al. 2003), but – according to literature analysis – the concept
was rebuilt several times. What we still do not know at this point is: What do VOs
really look like? Is there a typical blueprint or are there structural patterns that all VOs
adopt in the same way?

In this chapter the most important aspects of an empirical study carried out at the
beginning of this research are reported. The empirical investigation in current and
previous examples of VOs was seen as a necessary starting point at the beginning of
the research activities in order to complete the theoretical picture with actual
applications of today’s enterprises.

In the literature, we find a great many examples of successful VOs. Mertens and Faisst
(1997) discussed the world group of Puma56, which consists of a small head office in
Germany, but has completely outsourced its production and logistics to partners
around the world. Additionally the authors mentioned Seitz, an IT-specialist that bases
its relationships on long-term partners and freelancers. Prolion57, a producer of
biomechatronical machines was regarded as a VO by Jeagers et al. (1998) and by
Bultje and van Wijk (1998), because of its participation in development projects for
new machines. Based on the concept of Schuh et al. (1998) the Virtuelle Fabrik
Euregio Bodensee58 became generally known as a best practice example of a
manufacturing network where enterprises of the same business sector pool their
resources together. VIRTEC, investigated by Bremer et al. (2001), was seen as one of
the South-American pioneers in the sector of VOs and Wüthrich and al. (1997)

56, accessed in October, 2006.
57, accessed in August, 2004.
58, accessed in October, 2006.
Empirical Investigation in Virtual Organization Practice 31

analyzed among others VW Resende, where a huge plant unites the competencies of
eight suppliers from different countries in order to establish trucks and buses. The
differences of those best practice examples are sometimes quite extensive: While
Dell59 is a huge supplier network with partner companies distributed all over the world,
the Virtual Factory Nordwestschweiz-Mittelland60 is a regional network of SMEs
founded to explore joint innovation and production. Nevertheless, both of them are
mentioned as successful VOs.

Several authors criticized that every researcher used his or her own way to define VOs
and or name their own best practice examples and therefore established VO-typologies
(Bultje/van Wijk, 1998; Wüthrich et. al, 1997). Typologies generally aim to classify
different examples: Objects are combined to categories according to their different
characteristics. The classification into groups shall help to accomplish the diffuse
picture of VOs by better understanding why different forms of VOs exist, but also by
systematically analyzing the differences. Furthermore, typologies follow the goal to
detect those structural patterns that lead to success by comparing the application of
different forms and successful development on the market.

According to Wüthrich et al. (1997), VOs can be clustered according to their duration
(short-term vs. long-term cooperation), but also according to the purpose of the
collaboration (specific market need, project, interest platform). Alternatively, Müller-
Stewens (1997) differentiated VOs with regard to duration, the range of value creation,
and the degree of centralization and integration. Bultje and van Wijk (1998) identified
four different types, namely internal, stable and dynamic VOs or Web-companies.
From an empirical point of view, Franke (2001) differentiated Virtual Teams from
Virtual Projects and temporary from permanent VOs. Additionally Specht and
Kahmann (2000) established a four-field matrix with one dimension of central vs.
decentralized structures and second dimension of loosely coupled vs. fixed network
partners. Sieber (1998) developed a model based on the frequency of substitution of
the partners and defined Project Organizations, vertical and horizontal networks.

Contrary to other authors, Haas et al. (2007) used a multi-dimensional model, called
the Virtual Profile, in order to classify different cases of VOs mentioned and discussed
in research literature. The need for a multi-dimensional model was on the one hand

59, accessed in October, 2006.
60, accessed in October, 2006.
32 State of the Art

derived by the way how VOs are defined: The typical characteristics generally
represent the most important factors how to organize such a network. Second, the
Virtual Profile is based on the assumptions of the gradual virtualization
(Bauer/Koeszegi, 2003; Scholz, 1996), which assume that an organization represents a
specific degree of virtualization on a continuum between non-virtual and virtual. The
Virtual Profile contradicts the idea of a VO as a normative concept for the 21st century.
Haas et al. (2007) believe that companies take strategic decision and adopt those
aspects of virtuality that they consider as useful for their current business. In practice,
no perfect VO can be detected (Bauer/Koeszegi, 2003), but a lot of organizations for
example adopt a strong application of ICT to facilitate coordination between network
partners. The characteristics in the Virtual Profile therefore describe the extent of
virtuality an organization has adopted.

Based on the profile, Haas et al. (2007) carried out an in-depth study of 30 different
best practice examples mentioned in the VO-literature (Haas et al., 2007). Two
research questions were formulated: 1) How are today’s Virtual Organizations
structured? Are there dominant structural patterns?, and 2) If yes, do these structural
patterns determine or influence the success of Virtual Organizations?

The ten items of the profile61 were selected to compare the VO examples according to
i) the Set-up environment and the general cooperation preparedness of the industry, ii)
the Purpose of the VO, iii) the Organizational framework and iv) the Time horizon.
The second part of the profile consisted of four items to quantify the success of VOs62.
This was the most critical part of the empirical study. Research on success in VOs is
mainly based on case studies on best practice examples (e.g. Wüthrich et al., 1997;
Sieber/Griese, 1998), which means that scholars did not adopt methodologies to
measure or quantify success in VOs. Success in VOs is, however, not easily evaluated.
Since VOs do not jointly organize their finance and administrative departments,
traditional evaluation of financial figures is not possible. Evaluating the companies
participating in a VO on behalf of their own finance systems is equally difficult
because the revenues gained directly with network business and revenues resulting
from relationships established through the network or even successive business are
difficult to distinguish.
The 10 typical characteristics of a VO included in the profile were: Evolution, General Industry
Ties, Ties between Partners, Aim / Vision, Focus on Core Competences, Standardization of
Governance Structure, Dispersion of Power, Use of ICT, and Duration.
Survival, Value Creation, Improved Flexibility and Improved Collaboration. Cf. Haas et al., 2006
for a detailed explanation of measurement.
Empirical Investigation in Virtual Organization Practice 33

Other measures of success could be shorter turnaround times or the ability to compete
against consolidated companies or the ability to cooperate quickly. Success in the context
of VOs does not only refer to revenue but also includes the enhancement of know-how,
improved organizational learning, and increased competitiveness in the long run. Weibler
and Deeg (1998) state that the success of VOs could be more related to restructuring or
technological changes that took place at the same time than to the participation in a VO.
However, these aspects are even more difficult to analyze.

In the study of Haas et al. (2007) two independent expert coders rated the selected
cases according to the established scheme. 63 Information about the 30 VO examples
was gained from previous literature as well as from personal or telephone talks with
network members and managers. Additionally, websites and academic as well as
newspaper articles were included in the information collection process. Coding results
were compared and discussed to establish consistency between the two analysts.
Following Grounded Theory (Glaser/Strauss, 1967; Douglas, 2003) cases were
clustered and grouped cases in an iterative process according to different external (e.g.
country of origin, industry) and internal (e.g. coordination processes, distribution of
power) dimensions to compare them to each other. This was done to derive
conclusions about similarity or variety of cases. Quantitative analyses were carried out
including frequency analysis;64 and statistical significance was further improved via
Exploratory Factor Analysis and Cluster Analysis. Success indicators were related to
items and dimensions and to the different clusters detected.

Virtual Profiles Emerged VOs Initiated VOs

Evolution (emerged - initiated)

Scope (international - local)

Dispersion of Power (reversed) (focal - equal)
Standardization of GS (reversed) (high - low)

Aim / Vision (reversed) (not defined - well defined)

General Industry Ties (strong – weak)

Ties between Partners (strong - weak)

Focus on Core Competencies (high - low)
Use of ICT (extensive - limited)
Duration (temporary - long-term)
Table 2: Virtual Profiles (Haas et al., 2007, p.17)

30 cases were selected out of 65 according to the focus of the VERITAS project. The following
criteria were decisive for being selected for the sample: a) concentration on VOs in the
manufacturing sector, b) integration of examples of different countries, c) focus on SME-networks.
A list of the thirty cases can be found in the appendix.
Descriptive results are not explained in detail due to space restriction. An extensive analysis of the
dimensions and items can be found in Haas et al. (2006).
34 State of the Art

Although the VOs looked very different in the beginning, the investigation revealed
two different types of VOs: emerged vs. initiated VOs, clustered according to the
drivers that led to network creation (see table 2). The discriminating dimensions of the
two clusters in the study were i) the manner in which the VO was created, ii) the
geographical scope of the network, and iii) the dispersion of power within the network.
These three items also loaded on one factor in the factor analysis that was labeled
“Drivers” since the items determine whether a network is strategically driven by a
business opportunity or externally initiated by a public institution65. Beyond this, the
study showed that all analyzed cases exhibit very similar patterns in some
characteristics: A generally high focus on core competences was detected, ICT was
averagely used and all investigated VOs were long-term orientated.

The group of emerged VOs was characterized by a formalized governance structure

and an unbalanced power distribution. They tended to appear in industries where a
high degree of cooperation is common, but were controlled by one focal company that
also dominates the strategy for the cooperation partners. This type of network was
mainly applied in the 1990s with famous examples like Airbus66 or Dell67. A
representative example in the investigation is Puma68 (see short description in figure

Puma ( is a German Public Limited Company that disposes of a virtual structure
with subsidiaries in different countries. The organization is structured into competence centers in
25 countries. Different contract concepts like Joint Ventures, Licences, or individual supplier
contracts are used for coordination between partners.
The need for such a loosely – coupled organization stem from the high competition in the sports
articles industry. The original vision was to be the first real virtual sport enterprise in the world

A small headquarter (180 employees) concentrates its activities on marketing, design and
strategic product development. All other services are outsourced to different partners and even
countries. Partner companies are based on long-term oriented partnerships with mutual
agreements on financial and contractual issues. Puma, as the central player prescribes strategy,
vision and goals of collaborations. Common rules, principles but also believes are adopted by all
partners.Coordination is done via production planning systems, via email and Intranet.

Due to the virtual organization concept, Puma realized the highest benefits in the year 1993, which
was at the same time the first positive result since they went public. Today, 3100 in 33 countries
are working for Puma and the company has 80 partners in different regions.

Figure 3: Case Description Puma

The factor explained 35.36% of the variance. Cronbach Alpha was 0.831. For detailed information
cf. Haas et al. (2006).
66, accessed in October, 2006.
67, accessed in October, 2006.
68, accessed in October, 2006.
Empirical Investigation in Virtual Organization Practice 35

The second group of VOs was initiated or at least supported by public institutions.
Most of them were founded after 2000 in various kinds of industries. Equalized power
distribution and joint formulated goals differentiate the initiated from the emerged
group. Hence, the model of the Virtuelle Fabrik Nordwestschweiz-Mittelland69 is
representing this group of VOs (see short description in figure 4).

The Virtual Factory in Switzerland ( was founded in 1997 as a result of a

research project, and has grown from 7 to 21 (intermediate 40) partner companies that cover the
whole value chain (design to commissioning) for complex parts, components and systems in the
area of mechanical engineering, electronics and plastics. Companies participating in the network
do generally not manufacture final products but produce manufacturing solutions. The Virtuelle
Fabrik Nordwestschweiz-Mittelland consists of a stable network platform, where companies form
smaller, temporary production networks in order to realize joint orders. The network jointly
presents its solutions under one brand name at trade fairs.

Strategies and goals are defined and reviewed every year. Besides a financial contribution, every
partner in the network has to bring in time and know-how. Every company acts as a broker,
meaning that every single company is responsible for creating business for the network and to
actively acquire orders through its sales department. This is coordinated via a customized IT-
Members of the network have reported a significant increase of business with network partners
(internal) and an increase in the size of projects carried out. An example was a light windmill that
was designed, engineered and manufactured by 5 members of the network a small plant for
electronic component assembly for about EUR 125.000 or garbage bins for the city of Zurich for a
serial order of about EUR 750.000. Cooperation in the network enables the SMEs to focus on core
competencies while at the same time to offer complete solutions, thereby being specialists and
generalists at the same time. Companies also benefit from the learning arena provided by the
network to improve cooperation and communication abilities and to initiate joint training initiatives.

Figure 4: Case Description Virtual Factory Nordwestschweiz-Mittelland70

While the first group is rather driven by strategic decision processes and the concrete
business idea of one company, the latter are externally initiated. The two different
forms of VOs are also related to time aspects: While in the 1990s the establishment of
VOs was based on internal decisions of predominately large companies, today
increasingly public programs intend to strengthen local and regional SMEs by funding
various forms of collaborating initiatives. This new, initiated type of VOs is created in
various kinds of industries, irrespective of the degree of prior cooperation. These VOs
are different from the previous group as they exhibit equal power distribution and all
member companies formulate a joint vision. Another difference is that the initiated VO
lacks concrete business cases at the time it is built.

69, accessed in October, 2006.
Case description has originally been written by Matthias Nöster, SFC.
36 State of the Art

Regarding the success measurement, the quantitative analysis did not reveal significant
correlations between success and network structure, neither were their correlations
between contextual factors like size or sector and the performance.71 On the one hand,
this might be due to the fact that the measurement model used was not appropriate and
that the survival bias72 influenced the results. On the other hand, there may be no
relationship between the structure of a VO and its success at all, highlighting the fact
that any organization is to adopt that structure that is needed in the specific
organizational context (cf. Kieser, 2002). This could be an explanation why mainly
“best practices” are used in literature, reporting very diverse successful VOs from
different industries, of different size, and of diverse structures.

Alternatively, quantitative measures might not have been able to encompass those
success factors that the individual companies regarded as highly relevant for their
persistence. After the analysis described in Haas et al. (2007), the authors carried out
personal interviews with managers and/or participants of seven selected networks. In
total, eleven interviews were carried out, recorded on tape and transcribed. All of them
focused on the second form of VOs, the externally initiated networks and aimed at
detecting critical success factors in connection with how the network was structured,
how joint projects were carried out and how member companies coordinated each
other. The interview was half-structured and suggested 20 questions73 on i) structure
and composition of the network, ii) the role of the Network Manager, iii) the detailed
cooperation in business projects, and iv) the commercial benefits of the VO.

Based on this analysis, the following five factors could be identified as being crucial
for network success by the managers or involved participants:

1) Business Opportunities: All Network Managers contended that in the first place, an
appealing business case is the most important prerequisite for network success. The
need for a concrete business case is extremely important for initiated networks that
are not built on a concrete idea of future business. Only after a successful Initiation
phase, where the partners jointly formulate a vision and business areas, can the
VOs start to realize joint projects. Question 18 in the questionnaire refers to the
fact that every partner judges the benefit of a network on behalf of the value
increase of his company. Only three out of eleven interview partners confirmed an
This might also be related to the small sample size and the dispersed industry sample.
Due to the fact that only those Virtual Organizations that have been successful survive in the
market, no bad examples or failures can be found.
For the questionnaire cf. appendix.
Empirical Investigation in Virtual Organization Practice 37

increase in turnover and/or benefit related to network activities, but ten out of
eleven stated that success is more related to sharing capacities or keeping the
customers instead of loosing them. It was mentioned by most of the Network
Managers that companies have high expectancies in a network in the beginning,
but at the same time reject to put more effort in network activities, which leads to
an unnecessary disappointment. This is why all interview partners confirmed the
importance of the first phase of network establishment, when partners agree upon
common needs and objectives. As stated before, most of the initiated networks are
funded or supported by public entities. However, this funding declines or expires at
some point of time so that every VO should be able to pay for it. The objectives of
the interviewed networks can be either seen in the improvement of a sector or
region in the international market and related market access or the possibility to
compete against bigger companies by offering full-supply-chain services. The
interviewed network participants argued that goals are always revenue-driven.
Nevertheless, only one of the interviewed cases established yearly business plans
and strategic annual goals with all partners.

2) Trust: Trust has been recognized as a major factor for success in any type of
cooperation (e.g. Byrne et al., 1993; Jägers et al., 1998; Scholz, 1996). The study of
Haas et al. (2007) confirmed this: previous joint business experience led to a longer
duration of cooperation. In every interviewed case except one network, regular
meetings with all network partners took place. As far as trust building is concerned,
Network Managers suggested to start with small projects so that companies
experienced joint success stories. Three interview partners mentioned that mutual
company visits take place and in four cases, trade fairs and conferences have been
organized jointly. It was commonly agreed that trust takes time and that it depends
on the personality and individual trust-levels of the involved people. The
importance of trust was also confirmed by a study of Sherer (2003), who found out
that honesty and reliability of network participants were more important than
technical capabilities. Nevertheless, companies do not only rely on personal trust
but also focus on Service Level Agreements or Quality Assurance to
institutionalize trust.

3) Commitment to Cooperation: Active involvements of all participants, the sufficient

allocation of resources (in time and personnel) as well as the alignment of the
network strategy with the strategic interests of the participating enterprises are
basic requirements for networks. This point goes along with the two former: On the
38 State of the Art

one hand, commitment of CEO and the management of the different network
partners is essential (see also Sherer, 2003), and on the other hand the linkage
between every company’s strategy and the strategy of the network is necessary.

4) Exchange of Information: Open communication is a basic factor for trustful

relationships. Transparency of core competencies, quality issues and production
procedures belong to that information that is easily shared. Additionally, the
Network Managers talked about the need to share internal prices and problematic
issues as well. Interestingly, ICT tools were only mentioned in one case. This
correlates with the analysis of Haas et al. (2007) that revealed that only half of the
networks extensively used ICT for their coordination activities. One of the seven
interviewed cases used collaboration software for network activities, two explicitly
mentioned a joint database or intranet, but the rest relied on rather traditional media
like telephone, fax and email.

5) Network Management: A common understanding of how to handle business as

well as conflict situations is seen as crucial for success. Although the original VO
concept refrained from hierarchy and formalization (Byrne et al., 1993;
Mertens/Faisst, 1995; Wüthrich et al., 1997), initiated networks dispose of
established rules and role concepts. General cooperation agreements in a written
form, signed by every participant have been reported on by five out of seven cases,
the rest possessed at least a declaration of intent. In case of joint projects and
businesses, informal, trustful cooperation on a face-to-face basis were very
common; only two VOs reported a bidding system for business cases they want to
realize. It can be said that the better general cooperation agreements are formulated
and agreed upon, the easier and faster the establishment and accomplishment of
joint business projects. This confirms the theory of Camarinha-Matos et al. (2004)
or Schuh et al. (1998) who insist on the importance of a stable platform as a
prerequisite for VOs or Projects. All of the seven interviewed networks installed a
Network Manager, who was responsible for the coordination of the partners. The
manager organized, for instance, meetings on a regular basis, supports partners,
distributes information, etc. Additionally, six of the seven networks installed the
role of a network Broker, who seeks actively for business cases, markets the
network, and acts as a boundary person. The scope of activities and invested time,
however, was very diverse. In some networks of the sample, the members
themselves or the Network Manager act as Brokers and only one network
additionally employed a full-time network Broker. Six interviewed cases agreed
Empirical Investigation in Virtual Organization Practice 39

that for every project one partner should take over the role of the one responsible
for a project and decides upon his coordination partners, the way how they are
going to distribute resources, capacities and money, and representing the network
to the customer.

The empirical investigation of VOs reveals two important aspects: First, the way how
a VO arises, the power distribution in the network, as well as the degree of
internationality seem to influence the internal structure and the degree of
formalization: in emerged VOs rules and roles are more common than in a initiated
one, whereas in a initiated VO, the aims are more clearly defined. Haas et al. (2007)
attribute this to the fact that in an initiated VO cooperation can only start after the joint
discussion and development of the VOs strategy. The emerged form of VOs is more
attributed to the traditional concept of VOs, while the latest VOs highly adopted the
characteristics of the initiated group. This can be explained by increased research and
funding policies. Second, according to the network participant’s opinion, the
successfulness of a VO depends on a good mix of innovative business idea, an
established set of management rules and the relationships between cooperation
partners, expressed in the amount of trust, open information exchange and
3 Framework Development

The intensive investigation in literature and practice shows that the concept and the
application of VOs has been modified overtime. Although the reason for establishing
cooperation is still the intention to form a best-of-everything network and to create
business, the composition is different. Today, VOs are based on long-term
relationships between mostly SME partners (see examples of analysis: Swiss
Microtech Network74, IMPRO75, KFSNet76).

In this chapter the specific characteristics of these networks are highlighted and a
model of the ideal network formation process is developed. Based on this concept, a
framework to analyze the formation process of today’s VOs is developed. After
comparing (Virtual) Life Cycle models with the implications on the set-up process of
the new cooperative form of networks, it becomes clear that SME Networks focus
more on social aspects and that especially the first phase of network formation is of
high relevance for its maintenance. The final framework for setting up networks is
therefore based on group processes and extends the well-known group formation
model of Tuckman (1965) with a first phase, called Initiation.

3.1 Cooperative Network Concept and Implications

The temporal composition of companies, each bringing in special competences, to

jointly carry out a business opportunity is seen as a successful concept for SMEs to
strengthen competitiveness and growth (Katzy, 1998). Although the VO-model was
derived from practical cases studies (Davidow/Malone, 1992), the realization of a
virtual concept appears to be quite challenging. On the one hand, the risk associated
with sharing know-how with potential competitors is considered to be problematic:
Competitive advantages of SMEs are often based on tacit production procedures
(Sherer, 2003) and SME-owners are therefore not willing to share know-how with
partners. On the other hand, the rejection of hierarchical formalization in the VO
concept may lead to difficulties. The immediate coordination of a number of actors
requires some predefined rules and agreements before the advantage of flexibility can
be claimed. Recent research (e.g. Loeh et al., 2003) shows that pre-existing
74, accessed in October, 2006.
75, accessed in October, 2006.
76, accessed in October, 2006.
42 Framework Development

relationships – which could be private but also related to former joint business – are a
precondition for quickly establishing interorganizational teams. Formalized
cooperation becomes more and more important and most current networks (cf.
Virtuelle Fabrik Nordwestschweiz-Mittelland77, IMPRO78, Aufmöbler79) are
characterized by established decision and cooperation rights and dispose of rules and
roles that adjust cooperation between partners. In practice the advantages of high-
sophisticated ICT seems not as easily applicable as discussed in the literature (Hoffner
et al., 2004; Guevara-Masis et al., 2004; Mejía et al., 2004). Especially for SMEs, the
financial burden of ICT-investment is very high.

As derived from the study and the literature analysis in chapter 2, the new cooperation
model is based on long-term and stable, mostly regional partnerships between SMEs
that aim to mutually support their survival and competitive position in the market. VOs
today look like networks of equal partners with a jointly formulated vision and
strategy as a starting point for cooperation. The economic situation for those SMEs is
often qualified as risky, which leads to support via national or international
institutions. This new form of organization can be defined as a Cooperative Network
(Huber et al., 2005). For a definition, see figure 5:

Cooperative Networks are stable and long-term platforms of cooperation. Equalized

partners combine their businesses according to the jointly established strategy of the
network. Cooperation is supported by agreed rules and roles and by trustful relationship
between partners.

Figure 5: Definition of Cooperative Networks

The reasons why those networks came into existence can still be seen in the need to
survive in a turbulent environment, to react faster and at the same time to specialize in
a few products in order to become an expert. In a Cooperative Network,80 collaborative
production is one of the major aspects, but equally important for stable partnerships is
trust between participants and the preparedness to mutually accept risks. Compared to
the original VO, these risks are more related to social and relational aspects than
before. While members of a classical VO agreed to carry out certain business together
and dissolve afterwards, Cooperative Networks aim at establishing stable relationships
77, accessed in October, 2006.
78, accessed in October, 2006.
79, accessed in November,, 2006
Further examples of Cooperative Networks can be found in Huber et al., 2005.
Cooperative Network Concept and Implications 43

between partners. Based on the development of the concept and the appropriate
application for SMEs, the model of a Cooperative Network serves as a guideline
throughout the VERITAS project and this study. In the following, the most important
differences of the two concepts (economically and socially) are highlighted.

Economic factors: The concept of Cooperative Networks has been established

especially for the group of SMEs with a maximum of 250 employees and an annual
turnover that does not exceed the amount of 50 million Euros.81 The concept of VOs
was started by large enterprises like Xerox82 or Dell83 that wanted to find a solution
how to deal with ever-changing customer requirements (Davidow/Malone, 1992). For
a small enterprise, the need to find partners is not only based on this immediate
environment of customers, but also on the current economic situation such as the
increased global competition and the adoption of new production technologies by
competitors. The reasons for cooperation in the case of SMEs therefore derive from
the need to survive in a competitive market.84 Generally speaking, SMEs are in a
difficult situation because of low financial power and suffer much more from
insolvencies than larger enterprises that are able to balance financial problems along
different departments.85 The desire to form a network with other companies is
therefore a strategic decision how to stay in the market and not being replaced by
national or international competitors.

To overcome the challenges for SMEs, various funding policies on an international

and national level support their business and enhance cooperation between smaller
corporations. Based on the Lisbon Plan86, the reasons for funding cooperation between
SMEs can be seen in a general attempt to strengthen the European countries in their
competitiveness, which is both an issue in the 6th framework program as well as in the
7th framework program of the European Commission.87 These programs do not only
aim to strengthen competencies of European enterprises but also want to enhance

81, accessed in
October, 2006.
82, accessed in October, 2006.
83, accessed in October, 2006.
“Survival guides” for SMEs are to be found for example at, accessed in October, 2006.
Compare for the Report on Insolvencies in Europe (2002/03) by the Creditreform Economic
Research Unit,, accessed in October, 2006.
For more details about the Lisbon Plan cf.,
accessed in October, 2006.
More information at, accessed in October, 2006.
44 Framework Development

collaboration and cooperation between companies and even countries.88 SMEs often
lack research facilities and resources on their own, therefore approximately 15% of
research funding through the European Commission is especially allocated to the
smaller enterprises in the European economy.89 EC commissioner Guenther
Verheugen even suggests generally improving financing policies for the
underprivileged group of small enterprises.90 Additionally, national funding policies
are often set up to strengthen low-income regions and promote mutual support of
companies and institutions. This especially holds for cluster policies strengthening
innovation activities through cooperation,91 but also for the INTERREG programs that
aimed at transnational and cross-border regional development92 or EUREKA, a
European program for market-oriented R&D activities.93

While in classic VOs, dispersed structures and internationality play a major role;
regional concepts have gained in importance recently. Wiendahl et al. (2005) describe
several regional examples, awarded as best cooperation examples in Germany, and
Huber et al. (2005) highlight various cooperations of the D-A-CH94 region, always
exhibiting a regional focus. Regional production networks are seen as a major impetus
for regional development at the research institute Non-hierarchical regional
production Networks at the University of Chemnitz.95 Going back to local competitive
advantages and Porter (1998), a favorable competitive position is not only dependent
on the industry but also on local conditions. Proximity of cooperation partners in this
context is seen as an advantage that facilitates flexible coordination among partners.
Scholars on the one hand argue that proximity might not be necessary because of high-
sophisticated ICT applications (Browne et al., 1995), but on the other hand, ICT usage

Further information can be found at, accessed in October, 2006.
89, accessed in October, 2006.
Compare for article on
cgi/srchidadb?CALLER=NEWS_INNO_DE&SESSION=&ACTION=D&RCN=24226, accessed
in October, 2006.
91, accessed in October, 2006.
Further information at
or, both accessed in October, 2006.
93, accessed in October, 2006.
D-A-CH describes the German-speaking region of Europe, based on the capital letters D for
“Deutschland” (German word for Germany), A for “Austria” (Latin word for Austria), and CH for
“Confoederatio Helvetica” (Latin word for Switzerland).
95, accessed in October, 2006.
Cooperative Network Concept and Implications 45

in the sector of SMEs is still very low.96 Proximity might therefore be necessary in the
case of cooperating SMEs in order to facilitate coordination and communication
activities among partners.

SMEs have to carry out a balancing act in their daily work – on the one hand restricted
resources in time, finance and personnel work force them to concentrate on accurate,
daily business. On the other hand, the changing markets require long-term plans and
strategic considerations of how to survive in the future. The balance between tactical
and strategic approaches forces the CEOs of small companies to concentrate on daily
issues and to plan future activities at the same time.97 Cooperation helps surviving in
the market by carrying out projects that one small enterprise would not be able to carry
out alone, but on the other hand; internal structures are compensated in order to avoid
the risk of complete structural change. However, in any business relationship, a certain
degree of dependence is unavoidable (Sydow, 2003). For SMEs, this means that a
severe mistake in cooperation activities could jeopardize their existence. The required
stability of the Cooperative Network – in terms of stable partnerships but also in terms
of time – therefore prevents from losing core competencies or know-how, and the
aligned risk to loose autonomy (Sydow, 2003).

According to Grandori and Soda (1995) every network requires linkage of

communication and decision-making. Sydow and Windeler (1994) suggest i) the
selection of network partners, ii) the allocation of tasks and resources, iii) the
regulation of how to work together and iv) the evaluation of relationships in the
network as the main central management functions in a network. The argument of
Grandori and Soda (1995) who relate the intensity of coordination mechanism to the
intensity of cooperation can be amplified to the specific cooperation of SMEs: Any
cooperation activity affects a bigger part of the small business and therefore requires a
maximum of attention. The higher associated risk causes a higher need for regulation
between partners. This goes back to classical hierarchical coordination principles:
While in classic organizations, internal contracts or the dependence of employee from
the employer ensure accurate comportment of organizational members, the participants
of a Cooperative Network have to ensure that no partner acts opportunistically
(Siebert, 2003).
Cf. Pennoni et al. (2005): The 2005 European e-Business Readiness Index, EUROPEAN
COMMISSION, DG Joint Research Centre,
11-07.pdf,, in October, 2006.
Compare for “The Small Business Survival Guide”,, accessed in October, 2006.
46 Framework Development

A certain code of conduct in SME Networks is promoted by Freitag and Winkler

(2000). Wiendahl et al. (2005) investigated best practice examples of German
cooperation and found ideal collaborations to be organized as heterarchic, stable
organizations that base their decisions on a cooperation agreement. Within predefined
rules and an organizational framework, flexibility in the system is ensured through
better coordination (Picot et al., 1998): Only with a concrete agreement on the
allocation of orders and resources, quick decisions are possible and disadvantages
because of specialization can be coped with by elaborate know-how bundling.

Based on these arguments it becomes clear that Cooperative Networks are

economically characterized by i) a strategic decision of the several institutions in order
to ensure survival in a global market, ii) the support of national or international
institutions and the funding policies behind, which lead to iii) long-term and
sustainable programs, which is iv) based on a stable, formalized structure (see table 3).

Social factors: In Cooperative Networks the main actors are the owners of the SMEs.
Mintzberg (1999) highlights that the owner’s personality is to be differentiated from
the company itself and Wincent (2006) showed that among important factors of
network effectiveness, CEO personality is essential for success in SME Networks. The
general idea of a strong influence of personal traits of CEOs on a firm’s behavior and
practices goes back to House et al., (1996), Shane (2003) or Gartner (1985) and is to
be influenced with i) the characteristics of the person and ii) the situation or context in
which the person operates (Gartner, 1989). In the context of SMEs, this might often
correlate, especially if the CEO is the owner and founder of a company. In this case,
business and self-actualization go along with each other.

Related to the CEO’s attributes, Wincent and Westerberg (2005) found CEO self-
efficacy and his or her tolerance for ambiguity most crucial for SME Networks. Katzy
and Horodyskiy (2002) highlight entrepreneurship instead of project management
issues as the criterion most relevant for the industry. This confirms the findings of the
author’s pre-study where commitment was mentioned as one of the most important
factors in cooperation (see section 2.2)

On the other hand, the involvement of owners of small businesses reveals difficult
situations: CEOs are used to take their own, personal decisions without the need to
cooperate with anyone or to take part in a compromise (Mintzberg, 1999). Power is
Cooperative Network Concept and Implications 47

concentrated in the person of the CEO who intuitively decides what to do. Such a
behavior is hardly appreciated in Cooperative Networks. Owners of SMEs are used to
quick decisions and uncomplicated (because self-driven) management structures and
might be afraid of difficult hierarchical concepts and delegation. A heterarchical
concept that equally involves all partners in decision taking is very uncommon for
SME-owners. This means that CEO personality is not only crucial for network success
but also complicates coordination. In this context, the relevance of trust as an
additional coordination mechanism becomes apparent. In theory as well as in practice,
trustful relationships between actors are considered as highly relevant for the success
of cooperation (Klaus, 2002; Köszegi, 2001; Wiendahl et al., 2005). Working together
often leads to high interdependence of different actors – organizations and people –
that raises the need for confident relationships to overcome risk (Mayer et al., 1995).
The lack of trust between partners is often cited as the reason for the high rate of
failure of cooperation (Das/Teng, 1998). Although trust had been recognized as
important aspect of coordination in the classic VO concept (Handy, 1995), the
solutions to overcome related problems were more based on institutionalized
coordination mechanism like contracts and/or ICT systems. People in a Cooperative
Network therefore have to be regarded as more “socialized” actors than in the classic
VO concept, that bases its argumentation on ideal actors.

A further aspect of Cooperative Networks based on social actors in small enterprises

might be the lack of cooperation know-how. Schwinger and Wäscher (2006) found a
significant correlation between the size of an enterprise and its preparedness to
implement new systems98. In SME Networks these implementation problems are not
restricted to high set up costs of new IT-systems in terms of money. Instead, the lack
of flexibility to change internal structures might also come from low preparedness to
adopt new systems because of the lack of skills of the personnel.

On the whole, social factors that influence Cooperative Networks are related to i) low
cooperation know-how of employees, ii) the influence of the CEO’s personality, and
iii) bounded rationality of all (social) actors involved (see table 3).

Spearman-Rho = 0,254; p = 0,014, cf. Schwinger/Wäscher, 2006, p.11.
48 Framework Development

Virtual Organization Cooperative Network

(original concept) (present application concept)
ƒ Large enterprises ƒ SMEs
(OEMs,1st tier supplier) ƒ Micro enterprises
Target Group
ƒ Specialized people or
(virtual team members)

ƒ Fast-changing ƒ Economic situation of SMEs

customers’ needs (disadvantages attributed to their
ƒ Turbulent environment size; need for strong
ƒ Efficiency specialization)
considerations ƒ Competitiveness considerations
(improvement of ƒ Survival

ƒ Focal enterprise ƒ Regional institutions

Initiator ƒ International orientation ƒ European Commission

Time Aspect ƒ Short term ƒ Long term

ƒ Low formalization ƒ Rules, Code of Conduct

Formalization ƒ Role concepts

ƒ High cooperation know- ƒ Low cooperation know-how

how ƒ Based on personal
Cooperation Experience
ƒ Based on traditional competencies of employees
transaction cost

ƒ Institutional owners ƒ Personal, often charismatic

ƒ Homo oeconomicus, owners
ƒ Rational Actors ƒ Human beings, socially
(personal relationships embedded
Actors Characteristics
are negligible) ƒ Bounded rationality
ƒ High importance of personal

Table 3: Comparison VO and Cooperative Network

After having highlighted the main differences of a Cooperative Network to a classical

VO, it becomes clear that that a network of companies can only work if a stable
network of the people behind is working well. This especially holds for SMEs. On the
one hand, SMEs might fear to lose specific know-how and therefore might require
more stable and trustful partners, as they do not want to put themselves in high risk.
On the other hand, owners of small businesses are used to taking their own, personal
decisions without the need to cooperate with anyone or to take part in a compromise.
Therefore, a well-developed relationship between actors plays a major role for SME-
owners. While larger companies are able to cooperate in less-important areas of their
business, small corporations enter network relationships often because of economic
reasons or even because of the request to survive or being able to compete against
Life Cycle Concepts and Phases of Networks 49

larger corporations. Therefore, they might commit themselves much more to

cooperation partners and expect the same level of commitment from the other side. As
the cooperative concept is often introduced from an external institution, potential
cooperation partners might not know each other or even have not seen each other
before. The need to become friends and establish a long-term, trustful relationship is
on the one hand derived from economic factors, on the other hand from social factors.
Based on higher social and economic risk, people want to develop a network of actors
that is stable and where everybody can rely on each other.

3.2 Life Cycle Concepts and Phases of Networks

As the concept has developed over time, the formation of a Cooperative Network
might require a different process than the formation of a classic VO. Every
organization follows a certain formation and evolution process that is also called Life
Cycle. In this chapter, Life Cycle models of organizations and Virtual Life Cycle
models are discussed and a corresponding Life Cycle model for Cooperative Networks
is established.

3.2.1 Corporate Life Cycle Models

Like any other organization, a VO evolves over time and follows a certain life cycle.
Life Cycle models are described in correspondence to biology or human ageing: The
basic assumption behind Corporate Life Cycles is the idea that – like human beings or
plants – every company only exits for a finite time (Shahidi, 1997). Organizational
theory claims that companies develop from an entrepreneur-driven small business to a
bureaucratic system (Höft, 1992) because whilst growing, the need of delegation and
dividing of functions arises and is followed by the need to coordinate internal divisions
as the organizations becomes more diverse and complex.

The breakdown of an organization’s existence into several phases mainly serves as a

planning instrument. For diagnosing the phase, growth rate and growth potential as
well as the competitive situation, the loyalty of customers and the stability of the
market are analyzed. The determined phase, in turn, influences i) the strategy to be
followed by the company or by certain departments, ii) the expected financial outcome
in the near future, and iii) the required management system to implement certain
50 Framework Development

products (Laukam/Steinthal, 1986). There is a need for different organizational

structures, management systems and leadership in the individual phases (Becker, 1988;
Höft, 1992). For example new corporations need more entrepreneur-orientated
management, flexibility and informal systems while later phases need formal systems
for controlling costs, production and sales. By understanding and interpreting internal
and environmental signals, organizations are able to apply different management
systems and internal structures in order to effectively handle the current life cycle
phase. Therefore Life Cycles are seen as a helpful instrument for planning and
organizing (Schreyögg, 1996).

According to the classical Product Life Cycle (Kotler/Bliemel, 1995), the majority of
authors consider the four phases Emergence, Growth, Maturity, Regeneration or
Declining (cf. Höft, 1992). The Corporate Life Cycle (CLC) concepts include not only
financial figures but also the number of employees or the annual turnover but also
qualitative aspects like innovation or flexibility.

1) The Emergent Phase of the CLC is characterized by using new technologies based
on innovative concepts. The turnover of such young organizations generally is very
low in the beginning; customers and sales channels have to be established. On the
other hand, the owner of this organization involves ambitiously and personally in
all activities. There is high flexibility but also high improvisation as far as the
internal structures are concerned, which Becker (1988) refers to as the
“Childhood” of organizations. Low formalization leads to daily communication
between all the actors. During this phase, the organization is highly dependent on
the leading people and on the innovation of its products. James (1973) adds that
organizations in the Emergent Phase concentrate on market innovative and
improved products as well in existing as in new markets.

2) During the Growth Phase, turnover and business activities increase. New target
markets and customers are accessed and affiliates are established. According to
James (1973), restructuring internal processes (as well on a strategic as on an
operative level) characterize the Growth Phase. The whole development of the
organization depends on the requirements of the market and on product technology
but also on the specific news of know-how and commitment of the people working
there. Most organizations are organized functionally during this phase, but
establish first staff divisions. Increased complexity leads to decentralization. As far
Life Cycle Concepts and Phases of Networks 51

as the market is concerned, the first imitators enter the market, competitors and
sales quantity increase. The proportion between marketing effort and turnover
improves and higher total revenues go along with decreased costs per item
produced. This phase is referred to “Youth” by Becker (1988), or “Adolescence”
by Adizes (1979).

3) In the Maturity Phase, the growth rates of turnover start to decline (James, 1973).
Internal formalization is high and processes are carried out in an experienced
manner. The markets are accessed and the best product technology as well as the
best production process prevailed. Market demand and costs are calculable and the
organization offers diverse products based on a distributed risk situation and job
security (see also “Grown-up” – phase by Becker (1988). Nevertheless,
bureaucratic structures can lead to a decline of innovation processes and high
competition may result in declining sales figures. Price is the most important factor
for controlling products and markets during this phase and expenses for marketing
and R&D even rise.

4) The last phase is called Declining Phase. Turnover significantly declines and due
to a lack of capital appropriations product innovations go back. Intensive
competition may even lead to the necessity for restructuring, which deteriorates the
internal situation of an organization. Fluctuation is high and finally, the company
retires from the market (Shahidi, 1997). This phase can result in Regeneration,
Shrinkage or Liquidation (Höft, 1992). James (1973) diversifies between external
(subventional) and internal (restructural) Regeneration in order to enhance another
phase of growth. The organization declines, when no improvement can be gained.

A number of authors used the four principles as a basis for their life-cycle models and
further adapted and amplified it: While Kimberly and Miles (1980) distinguish
between three phases of organizational development over time, Adizes (1979)
develops a model with ten phases, characterized by specific traits of the leading people
that have to be adopted in the corresponding life-cycle situation. An additional well-
known model in the organization literature is the concept of Greiner (1972) who He
describes five phases and presumes linear growth of organizations. He explicitly
mentions difficult phases or conflict situations that have to be overcome and postulates
that the critical phases are followed by an evolutionary stage.
52 Framework Development

To summarize, organizations have to apply different management systems and internal

structures in order to respond to the current life cycle phase. Therefore phase models
are seen as helpful instruments for planning and organizing.

Nevertheless, critics point out the low empirical validity as well as the lack of clearly
defined variables to restrict one phase from another (Höft, 1992). On the other hand,
Quinn and Cameron (1983) who investigated in the relationship between Corporate
Life Cycles and a firm’s effectiveness were able to classify the phases from each other
and finally state that “(…) a consistent pattern of development seems to occur in
organizations over time, and organizational activities and structures in one stage are
not the same as the activities and structures present in another stage.”
(Quinn/Cameron, 1983, p.40)

Another critical point mentioned in the literature is neglecting the phase before an
organization is established; this is neglected by most authors. Preparation activities
like idea finding, market observation, or the selection of market and partners are not
included in the majority of the concepts.99

3.2.2 Virtual Life Cycle Models

The general disregard of preparation phases differentiates CLCs from Virtual Life
Cycles (VLCs). VOs also follow different cycles but in addition to Corporate Life
Cycles they explicitly mention the phase when the companies come together and when
the network is established. Principally, most authors refer to four or five phases,
including Set-up, Formation, Operation and Dissolution (e.g. Sieber, 1998;
Gerpott/Böhm, 2000).

1) The Set-up phase concentrates on the establishment of contacts and on identifying

and selecting partners. This phase is for example further divided by Katzy and
Dissel (2001) who distinguish between Pre-Phase and Design. During the Pre-
Phase the business concept of the future network is defined, whereas Design refers
to the selection of the right partners and the creation of cooperation. Mertens and
Faisst (1997) speak of Identification for the idea and partner finding process and
introduce an Initiation phase that describes the concrete selection of partners and

Baaken (1989), however, explicitly introduces an observation phase, including the unsystematic
analysis of markets and technologies, unstructured contacts and first ideas, and the preparation
phase which actually starts with the decision to start a corporation.
Life Cycle Concepts and Phases of Networks 53

the establishment of first personal contacts. Plüss (2005) highlights the formation
of a core team and the formulation on a joint vision and joint goals as the most
important aspects of the Starting phase. Rabelo et al. (2004) who concentrate more
on the technical aspects of VOs’ Life Cycles nevertheless refer to a Creation phase,
where preparation activities are carried out (VO Environment Setup), partners are
identified, selected and the organization is created (VO Formation).

2) During Formation partners come together and form the type of organization they
need. Agreements or eventually contracts are established and different rules and
roles are applied. Mertens and Faisst (1997) call the establishment of the
organization and its underlying agreements Declaration. At that point of time, roles
and rules are distributed and organizational tools (if necessary) are introduced
(Rabelo et al., 2004). Plüss (2005) additionally mentions the agreement of partners
how to integrate new companies. Gerpott and Böhm (2000) divide the Formation
into Configuration and Declaration, separating the collocation of partners from the
establishment of formal agreements.

3) Both phases, Set-up and Formation are necessary requirements for the Operation
phase when the VO start to act on the market (Mertens/Faisst, 1997;
Gerpott/Böhm, 2000; Sieber, 1998). Joint products are created and joint services
are carried out.

4) Dissolution marks the end of a cooperation project. By definition all VOs are
generally regarded as temporary networks (e.g. Davidow/Malone, 1993; Bultje/van
Wijk, 1998) so that the last phase treats the dissolution and de-briefing of the
companies that formed the network (Sieber, 1998; Gerpott/Böhm, 2000;
Katzy/Dissel, 2001).

Plüss (2005) further developed these concepts by introducing a model of long-term

cooperation and Stahl-Rolf (2004), who investigated in competence networks,
integrates potential support activities from public entities and external partners that
continuously reduce their work until the point where the network is able to work
without support is reached.

Although Life Cycle models of VOs do include a preparation phase and recent
research even includes long-term aspects (Plüss, 2005; Stahl-Rolf, 2004), the concept
54 Framework Development

is strongly based on rational actors. With the exception of Greiner (1972), who
presumes phases of crisis that trigger evolutionary steps of an organization and who
describes different attitudes and conflicts from actors involved, neither CLCs nor
VLCs highlight difficult phases of the formation phases. From an interpersonal point
of view, these conflicts exist whenever a new group forms: The set-up of rules or the
establishment of a team goes along with some difficulties: Struggling for power,
assuring one’s benefits or taking care of decision processes are just a few examples for
the importance of individuals in order to take over a position in an organization.

3.3 5-Phases Model

Considering the dominant model of Cooperative Networks in today’s business

environment, the VLC models give a basic overview of how organizations may
evolve, but neglect two specific aspects of that are relevant for Cooperative Networks.
First, Cooperative Networks are often initiated by an external institution and therefore
require a set-up phase that is different from those phases described in the Virtual Life
Cycles, as external actors are involved and push the participants to start their business.
Second, the conceptual model of Cooperative Networks presents the idea to establish
long-term, stable partnerships, which is only partly reconsidered in the VLCs (Plüss,

In the following, the process of network formation is regarded from a different point of
view. As discussed in section 3.1, the suboptimal situation of SMEs and the fear of
losing competitive advantage combined with the prerequisites of cooperation
mentioned above lead to the need for establishing trustful partnerships. This means
that before a network of companies can be built, a network of people has to be formed.
This is easily explained: Not the organizations are linked to each other in the first step
but the people working there, the managers and their ideas of cooperation. In order to
carry out business together, the participants in a network must form a strong and stable

The author states the hypothesis that a network of companies is fundamentally a

network of people or a group of people that come together and try to form a well
working team. Therefore, the author claims that the formation process of a
Cooperative Network rather follows a teambuilding process than an organizational
5-Phases Model 55

constitution. Organizations cannot be formed without human beings and these human
beings and their needs in an organizational context follow emotional processes.

The network formation process is therefore a process of people coming together and
getting to know each other. Based on Group Theory (e.g. Bion, 1961; Hofstaetter;
1957; Kuhn, 1973) a group-building model is developed. This model serves as the
basis for analyzing the network formation process.

3.3.1 Background: Groups and Group Formation Process

If people start acting together and follow the same goal – as should be the case in a
Cooperative Network, they become a team, a group. What does it mean to be a group?
A group is defined as “(…) two or more individuals who share a common social
identification of themselves or (…) perceive themselves to be members of the same
social category.” (Taifel/Turner, 1986, p.15). Shaw (1976, p.11) adds that the group
members “(…) are interacting with one another in such a manner that each person
influences and is influenced by each other person.”

Concerning the number of actors, researchers agree that at least two members are
necessary to be perceived as a group (Froschauer/Titscher, 1984; Olmsted, 1974).
Generally, the number of group members is not restricted to a certain amount of
individuals, but goes up to thirty people. Dyads reflect two people, micro-groups two
to six individuals and the term “large” is attributed to groups with more than 25
people. Small group research (Olmsted, 1974; Schneider, 1975) highlights that not
more than eight to ten members form a coherent group.

More important than size is that the members of a group perceive themselves as one
entity and explicitly define themselves as belonging together (Sader, 1998). Related to
Cooperative Networks this means that cooperation partners would talk of the network
as one entity but would also present themselves as a group. Famous examples would
be the Austrian carpenter network Aufmöbler100, who established a joint design and
joint rules for their market appearance on, or the Virtuelle
Fabrik Nordwestschweiz-Mittelland101, where every company member of the network

100, accessed in November, 2006
101, accessed in October, 2006.
56 Framework Development

puts an additional slogan on his business card, saying “partner (of the)”.

Sader (1998 who refers to Lindgren, 1973) further highlights that the mutual
interaction in the group is stronger than the interaction to the outside, which goes in
parallel with the local and temporal discrimination from the environment. Interaction
means on the one hand established and continuing contacts between individuals, on the
other hand mutual reaction and influence (Olmsted, 1974; Hofstaetter, 1957). To
render more precisely, Lewin (1953) explains that the nature of a group is not
attributed to similarity or differences of group members, but to their dependence on
each other. The interaction process leads to the development of a certain (social) group
structure (Taifel/Turner, 1986). This can be ascribed to the group belongingness and
the group members’ attraction to each other, which is the identification with a certain
group. Only after establishing joint norms and rules, a joint goal of the group can be
reached. While in several types of groups, these norms might arise implicitly; in
Cooperative Networks one of the most critical success factors discussed is the
establishment of rules and roles (section 2.2). A considerable basis for a group is the
fact that the group members have something in common that they think is important
(Olmsted, 1974). A group’s orientation on a joint goal in case of the Cooperative
Network is the joint business idea.

In order to become a well-performing group, several social researchers established

group-forming models, trying to explain which relational interactions have to be
carried out before a group of people is able to work well (Tuckman, 1965; Mills, 1967;
Mills, 1970; Tucker, 1973).

Tuckman’s (1965) group development model can be seen as a starting point for
formation processes in non-directive groups. He states that every group follows a
typical process, starting from Forming (people come together) via Storming (fighting
for the best place) and Norming (finding rules how to coordinate and communicate
with each other) to Performing, which describes a finally well-established group.102
Figure 6 shows the main stages of the group formation process.

Cf., accessed in
October, 2006.
5-Phases Model 57

Performing Forming

Norming Storming

Figure 6: Tuckman's Group Model

1) Forming refers to the first phase in a new established team. During this stage, there
is a high need for leadership and direction, but also for structure. Roles and
responsibilities have not been distributed yet and there is little agreement on any
topics and activities by the participants. A completely new situation has been
established which leads to the need for orientation and interpersonal testing
(Tuckman, 1965). Relationships and boundaries of the group have to be tested and
work is mainly task-orientated, although not very effective, at this stage.

2) Storming starts right after the first questions have been answered. Although the
clarity of purposes increases, uncertainty increases as well. The individuals are
struggling for their positions, aiming at improving their own position and
benefiting from as much advantages as possible. This phase is characterized by
competition and high emotionality, sometimes even hostility. In contrary to the
dependence in the first stage, independence and resistance to group influence play
an important role at this point of time.

3) During the Norming phase, agreement is formed among the team. Roles and
responsibilities are distributed and become clearer and more accepted for all parts.
The group is now able to discuss and develop its processes, its working styles, and
its general rules. Information exchange is open, personal opinions are expressed
and an in-group feeling develops. Group members are open to each other and new
standards, common goals and a common group spirit are able to evolve. This
means that the stage of conflict (Storming) is followed by mutual acceptance and

4) Performing is the starting point for common activities: The team is now able to
work in an autonomous way according to the previously established rules. It has
developed its own culture and its own way to deal with conflict situations. Roles
58 Framework Development

become flexible and functional. Solutions can be found in a democratic manner and
processes are driven constructively. The structure that had been established is now
able to support the task performance.

The stages of group development over time were concluded for this model in 1965 by
Tuckman who carried out a meta-analysis on 50 articles in the area of small group
research including therapy-group studies, T-group studies, “natural” and laboratory
group studies103. The study (which included among others studies of. Bach (1954),
Bion (1961), Abrahams (1949) in the sector of therapy groups; Bradford (1964), Miles
(1953) who wrote about training groups; and Modlin and Faris (1956), Bales and
Strodtbeck (1951) with the investigation of natural and laboratory groups) aimed at
investigating the relational and task behavior in small groups (Tuckman, 1965). In the
sample therapy groups were over-represented, which led to Tuckman expressing
doubts on the possibility of generalizing on his findings in the discussion section of his

As the model was discussed and tested several times (e.g. Runkel et al., 1971),
Tuckman continuously reviewed and reconfirmed his findings. He published a new
article together with Jensen (1977), where the two authors introduced a fifth stage for
the dissolution of a group, which they called “Adjournment”. Although (management)
research often relied on the model or further developed it, for example Schneider
(1975) – referring to Shaw and Constanzo (1970) or Tucker (1973) – criticized the
non-consideration of external factors like the personal experience and development
status of group members that might influence the efficiency of the development
progress. Ardelt-Gattinger and Gattinger (1998) published an empirical analysis where
they state that insecurity, role behavior or mutual acceptance cannot be attributed to a
certain stage or point of time. In their view, the mature group is nothing more than an
academic artifact (Ardelt-Gattinger/Gattinger, 1998, p.9). It was agreed among
different researchers that group development phases are restarted whenever a new
member enters a group and that – on the long run – every group is changing
continuously (e.g. Kauffeld, 2001). The dependence of the duration of the phases
related to group type, composition and leadership is also widely recognized. This

Therapy groups are groups in which individuals learn how to better deal with their personal
problems. T-groups are established to understand and analyze group dynamics with the goal to
establish interpersonal sensitivity. While laboratory-task groups are brought together to study group
phenomena, natural groups refer to individuals that are brought together in order to do a job
(Explanation from Tuckman (1965)).
5-Phases Model 59

means that the process can sometimes be carried out more quickly; sometimes the one
or other phase lasts a considerably long time.

On the other hand, the proponents of sequential group models (e.g. Bennis/Shepard,
1956; Mills, 1967; Mills, 1970; Schein, 1980; Francis/Young, 1989; West, 2004)
highlight the benefits of such a classification in terms of intervention and leadership
policies. It is commonly accepted that in a group, different stages of development are
passed through and – although optimal conditions of performing groups might remain
an illusion – the foundations for joint working have to be constituted before.

Thus, the author states that the different stages also hold for the process of bringing
together possible network partners. Tuckman’s model is the one that penetrates
discussions about groups and therefore serves as a well-investigated, valid basis for
this research.

3.3.2 Framework for Cooperative Networks

Comparing the models of Corporate Life Cycles, Virtual Life Cycles and the group
development process, the related time periods can be associated (see table 4).
Although the focus of the models is different, the same proceedings are assumed.
While for example in a typical CLC an organization comes into existence through
innovative ideas or technologies (Emergence), VLCs highlight the idea-finding
process among potential identified partners (Set-up). Tuckman (1965) speaks of a
Forming phase, where people come together and meet for the first time. While
Storming is only reconsidered in the model of Tuckman (1965), all three processes
include a development phase, called Growth, Formation or Norming, a phase of
salience (Maturity, Operation, Performing) and the dissolution of the organization via
Declining, Dissolution or Adjourning.

Corporate Life Cycle Virtual Life Cycle Group Development

1 Emergence Set-up Forming
2 Storming
3 Growth Formation Norming
4 Maturity Operation Performing
5 Declining Dissolution Adjourning
Table 4: Comparison of Models
60 Framework Development

The author combines the models by taking the group process as the leading concept.
While in classic VOs the main actors are considered to be economically rational
agents, the members of a Cooperative Network are seen as social characters that do not
only base their decisions on efficiency criteria. Additionally, the author includes a first
phase, called Initiation, where potential group members are contacted and selected
(Mertens/Faisst, 1997; Sieber, 1998). As Cooperative Networks aim to survive on the
long run, the declining or dissolution phase is neglected in this study.

The resulting 5-phases model (see figure 7) serves as an ideal phase concept for the
establishment of Cooperative Networks and is thought to give helpful insights in the
formation process.


Performing Forming

Norming Storming

Figure 7: Formation Model of a Cooperative Network

Based on this model, the aim of the empirical part of this dissertation is to apply the
model to three practice cases in order to identify the implications group processes have
on the business concept of cooperation.

Although it is not easy to determine the different phases and decide on the point of
time when the next phase is entered (Alleman, 2004), several indicators can determine
and separate the phases from each other. Applying the 5-phases model to existing
networks, several factors in every phase should be regarded. Based on the main
aspects discussed in this chapter, table 5 presents the final framework on which the
empirical analysis is based.
5-Phases Model 61

Phase Important aspects Related questions

Initiation Attitude towards cooperation (of Is it common to cooperate in the industry?
industry) and cooperation history Are there examples to be investigated? How
is the first reaction of the potential target

Identification of target group Why and how is the target group selected?

Way of contacting target group How is the target group addressed and
invited to the cooperation?

Informative workshops Are there any informative workshops

organized? How, when and where do these
workshops take place?

Specific situation of target group of How is the specific’s target (or interest)
the project (Learning) group’s situation at the end of the Initiation
phase? How is their current position and
know-how with cooperation activities?

Forming Getting to know each other How do cooperation partners get to know
each other?

Cooperation atmosphere How do cooperation partners behave during

the first phase? Are there any leaders or
critical people? Who takes over which roles?

Reach commitment (agreement to How do cooperation partners agree to the

stay) / Strategy formulation task of collaboration? Is commitment
(agreement where to go) reached among them? How is the general
strategy of the network being agreed?

Identification of the market Which – if any – target market is agreed?

How can the decision finding process be

Storming Working together Are there first projects carried out? Do

project groups form? How does the general
process of network formation proceed?

Discussion of rules and roles How do the regulations of working together

arise? Are there any roles or formally
established agreements? How is the
information process among participants?

Handling conflicts Which difficult situations arise? What about

hierarchies, power distribution? How is the
general atmosphere among partners? How
do network participants deal with the
62 Framework Development

Norming Establishing rules or regulations how How is the agreement among partners?
to work together Does communication style change (including
discussion, feedback, democratic
decisions)? Are decisions taken in a certain

Establishing roles Do partners take over responsibility about

their actions? Which roles are in place and

Finalizing first projects Do cooperation partners work with each

other? Are joint results observable?

Performing Strategy alliance between network Is the group acting as one entity? Are they
and companies able to represent each other? Does a joint
web site exist? How does the network look
like? How are duties and rights distributed
among partners?
Systems (ICT, Controlling) Are internal processes adjusted to partners’

Results of joint cooperation Is there market recognition of joint results

(prototype, service…)? Is the platform stable
and do partners trust each other?

Table 5: Attributes of 5-Phases Model

In the following, the five phases are highlighted and most important challenges in
every phase are discussed in detail. The illustration does not only include propositions
for typical behavior in the phases of Cooperative Network formation, but also proposes
course of action how to successfully complete each phase.

ƒ Initiation: At the end of the Initiation phase, potential companies for networking
should be identified. The phase therefore concentrates on i) the selection of
potential partner companies as the target group of the Cooperative Network and ii)
the information of the target group.

Selection criteria may be based on the general experience and cooperation history
of companies and industry, and the related attitude towards cooperation, but also on
the industry’s characteristics and possible pre-defined aspects of the Cooperative
Network (industry sector, maximal or minimal size of SMEs, cooperation area,
etc,). The identification of the target group, however, is not only based on
evaluation criteria, but also on the interest of potential partners. Thinking of how to
attract people to become a member, guidance can be derived from group theory and
the reasons for individuals to enter a group or a team. Schein (1980) describes the
5-Phases Model 63

most important functions why people want to be a member of a group. Generally,

affiliation needs, like the need for friendship or support, is a necessary condition
for entering a group. Second, the need to maintain self-esteem highlights the group
as a source of confirming the individual status and development. Third, through
discussions with others, uncertainties and anxieties are reduced and fourth,
participants feel stronger in the context of a group by jointly facing threats. Finally,
group benefits are related to mutual support and help with tasks that would have to
be carried out alone.104

Except the second reason, those aspects that are responsible for a group member to
take part in any form of group (for example a sports group or a leisure club) can
also be applied to Cooperative Networks. Besides the personal interest of becoming
a member of a certain association, CEOs are supposed to have allied reasons that
are more business-related. The need to participate in cooperation is then more
based on the actual business situation or the need to look for partners. The
similarity with a group, that should give identity to the participants, in this case
shall also serve as an identity for the business related topics. Of course personal
uncertainties and weaknesses are overcome by groups as Cooperative Networks
provide a platform to gain a better position in the market. Benefits of supporting
each other do not only count on a personal, but also on an institutional level.

Having the reasons for entering a group in mind, the way of contacting the
potential target group at the starting phase of a Cooperative Network might be
crucial for future success or failure. After having garnered the interest of the target
group, informative workshops are organized in order to inform potential partners
about possible cooperation concepts, as well as the potential for success and
challenges of networking. At the end of Initiation, potential member companies
should have an idea what Cooperative Networks are about and they should have a
feeling whether it fits their company or not.

ƒ Forming: During the formation process of Cooperative Network, the Forming

phase describes the network establishment: After informative meetings took place,
corporations that expressed their interest in a network are cobbled together.

For a more detailed description, compare for Schein, 1980, p. 150ff.
64 Framework Development

The emphasis is laid on a joint starting point of the network initiative. Partners are
going to get to know each other, and companies have to agree on a (first) joint goal
of the network and formulate a joint vision. Ideally, principal customers and
markets are identified. This means that the participants reach commitment or
express their agreement to stay in the cooperation in a first step and then agree on
where to go in a second step. Only after this formation process can tasks be

During the Forming phase, the need for leadership and the establishment of a
Network Manager is expected to arise. West (2004) states that the Forming phase
is mostly characterized by anxiety and a lot of questions that should be answered
by “somebody”. Team members ask testing questions about roles and resources.
Participants of newly established groups tend to ask about the backgrounds and
experience of others to which possible cooperation partners may try to orientate
themselves. The cooperation atmosphere is illuminated with politeness and low
sympathy among actors (Tuckman, 1965). Interaction is only carried out tensely
and cautiously (Francis/Young, 1989). The lack of structure (Braaten, 1974) has to
be overcome by an agreement on joint goals (West, 2004).

ƒ Storming: After the general development has been initiated, a period of mistrust
may arise (Tuckman, 1965). As the first steps of joint work are carried out, partner
companies realize that from now on they have to give more detailed information of
their companies’ processes and might feel danger about revealing information.
Therefore, the individuals start to resist the attempts to control the team processes
by the leader (West, 2004), and even question the value and feasibility of the team
task, that is the cooperation itself. This phase is generally characterized by low
performance of group members.

Additionally, this period is characterized by the attempts of positioning. High

rivalry and changing lead members of the group (Tuckman, 1965) can even lead to
the establishment of sub-groups (Braaten, 1974) or the dissolution of the network.
Francis and Young (1989) describe conflicts and confrontations between group
members that are often the basis for a slow-going, troublesome progress in
activities. Cliques are formed and the atmosphere is characterized with
hopelessness. Conflicts might be subliminal but coordination and communication
takes place in an environment of hostility (Braaten, 1974).
5-Phases Model 65

According to Tuckman (1965), the Storming phase has to be overcome before next
steps can be taken. At the end of this period, companies should know each other
better and should trust in the jointly formulated goals (West, 2004). Regular
meetings and working groups might enhance the cooperation preparedness or speed
up the process as people get to know each other.

ƒ Norming: After the difficult phase of Storming had been accomplished, the
necessity for establishing role concepts, power distributions and structural settings
rises. Norming corresponds to the phase when group members start to take the
responsibility for certain tasks and agree rules and roles among them. For
Cooperative Networks this means that the main organizational procedures have to
be settled. Managers start to establish stronger links between the original company
and the network. Tuckman (1965) attributes this to the increasing mutual
acceptance and Francis and Young (1989) speak of new attitudes and manners
among group members. One important point is enhanced communication concepts:
group members are able to discuss different positions and give each other feedback
(Francis/Young, 1989). The need to establish agreement among each other might
also be related to higher (perceived) interdependence (Braaten, 1974) as plans and
working standards are established (West, 2004). From this moment, joint project
ideas and business opportunities for the Cooperative Network are to arise from the
members themselves. The establishment of rules and roles is essential during
Norming, as it leads to the final agreement of partners that – while overcoming the
Storming phase – committed to work with each other. This might therefore be the
optimal point in time for appointing a person or institution for taking over the
responsibility for all further action, if necessary. ICT interventions are to be
performed at the end of the Norming phase, as information technology is not easily
established within a diffuse group of companies, which means that roles and power
distribution, as well as the procedures of work have to be clarified before ICT will
be used properly.

At the end of this phase, rules and roles are introduced and mutual acceptance and
trust is established. Common activities start and develop and daily cooperation

ƒ Performing: There is a point during the formation process phase, where the
network itself takes over the responsibility for its activities. This corresponds to the
66 Framework Development

Performing phase: Finally, after all four phases have been passed; the group starts
to work as a team.

The Performing phase is characterized by jointly produced results of a stable

technical level (Tuckman, 1965). Collaboration activities are carried out by a
stable, cohesive team and mutual appreciation is recognized (Tuckman, 1965).
Mutual feedback and communication has grown and the former established
structure proves to be effective, so that successful outcomes are possible (West,
2004). People start to act in an open and flexible way and their behavior shows
solidarity and helpfulness (Francis/Young, 1989).

All cooperation activities work smoothly and the participating companies can
identify first financial results. The need for better cooperation support emerges and
new business ideas and markets are continuously developed. The group becomes
an instrument for dealing with the task (Tuckman, 1965). The dependence on an
outside institution like the initiators declines so that the network can be run on its
own. Support activities continuously diminish and might only be necessary in
situations where conflicts arise or whenever change management is required.
Performing is also characterized by inventiveness and creativity (Francis/Young,
1989). In Cooperative Networks, the alliance of the companies’ strategies or the
assembly of IT-systems might be recognized. Clear results of joint cooperation are
revealed at this point of time.

Summing up, the author introduced the Cooperative Network formation model,
consisting on five phases. The model follows the Group Formation Process of
Tuckman (1965) but has been combined with elements on cooperation research and
research on VOs.
4 Design of Analysis

The basic objective of empirical research is to find out how the establishment of social
relationships influences the formation of a network. The framework, developed in
section 3 was tested in three life cases to find out whether it fits to the establishment of
Cooperative Networks and whether the 5-phases model can explain the behavior in the
different phases.

The empirical research of this dissertation is based on three case studies, focusing on
the VERITAS project and the three involved countries Austria, Belgium, and Turkey.
Based on the active involvement and the evaluation of the 19 months of research
between July 2004 and January 2006, the author carries out a comparative case
analysis between the processes of network formation in the three countries. The author
integrates both, quantitative and qualitative methods in the analysis in order to get a
broad general idea of the development of the networks over time. Case study method
is then combined with Qualitative Comparative Analysis (Ragin, 1987) to detect cross-
case patterns between the three different examples. In the following the research
sample (i.e. the network formation processes in the VERITAS project) as well as
methods and instruments are explained.

4.1 Sample: Veritas Project

As highlighted in the introduction of this study, the establishment of three networks in

the research project VERITAS (Virtual Enterprises for Integrated Industrial Solutions)
serves as the basis for the empirical part of this dissertation.105 Over a period of 19
months, VERITAS was funded in the EU 6th framework program106 and was based on
the objective to overcome the problems of especially the machine industry in the
manufacturing sector.

The European machine industry accounts for about a third of the manufacturing value
in the whole Union,107 but at the same time faces challenges in the innovation area and

VERITAS, IST 2004-511013, Contract for Specific Support Action, Annex 1- Description of
Work. For more information cf., accessed in November, 2006.
106, accessed in November, 2006.
accessed in November, 2006.
68 Design of Analysis

in the development of highly skilled personnel. European manufacturing companies

find themselves among a landscape of traditional manufacturing industries such as
mechanical engineering where the industry is characterized by employees with low to
intermediate labor skills.108 In the European Union 58% of the manufacturing
companies are SMEs. The industry’s current situation is not without problems: Firstly,
new products and increased flexibility of production processes push manufacturing
companies towards new and faster organizational forms. Secondly, competition arises
from cooperative groups in India and China and from global US-companies. High-tech
manufacturing and ICT-related sectors are underrepresented compared to, for example,
the US economy and companies that show significant underinvestment in services and

In contrary to these problems, the whole manufacturing industry provides around a

fifth of EU output, accounts for three quarters of the EU exports, and employs 34
million people.110 Based on these figures, the role of the manufacturing industry is
regarded as essential for Europe.

Not only financial issues on the short run, but increased collaboration between
research institutes and companies can improve the economic conditions in the EU.
This leads to an increase of labor and upgrade working conditions for all member
countries. The “Report on R&D and Innovation 2006”, outlines the major problems of
the European society,111 that is decreased labor and factor productivity
(O’Mahony/van Ark, 2003) as well as falling behind in the whole R&D sector,
especially as far as the exploitation of ICT is concerned. This means that the whole
economic landscape of SMEs can be strengthened via selective funding, including
R&D activities and new (IC-) technologies.112 Based on the Lisbon Plan,113 the reasons

accessed in November, 2006.
Cf. the report “Creating an Innovative Europe”, January, 2006, accessed in November, 2006.
accessed in November, 2006.
Cf. the report “Creating an Innovative Europe”, January, 2006,, accessed in November, 2006.
More information about research programs can be derived from the descriptions of FP 6 and FP7:,, both accessed in November,
For more details about the Lisbon Plan cf.
accessed in November, 2006.
Sample: Veritas Project 69

for funding cooperation between SMEs can be seen in a general attempt to strengthen
the European Countries in their competitiveness.

The research project VERITAS, carried out from July 2004 to January 2006, aimed
“(…) to increase the dynamics of European Industrial Enterprises by transforming
them, where appropriate and possible, to more flexible and re-active companies that
use the Virtual Enterprise concept in a manageable and effective way.”114 The
ambitious goal was to help manufacturing companies with high production-related
costs to understand and implement the concept of VOs. The model that was used for
the project is based on Schuh et al. (1998) and the Virtual Factory, described as a
stable and fixed network of cooperation partners that is able to react to customer’s
needs by quickly forming intra-organizational teams that dissolve after a project has
been fulfilled.

Figure 8 shows how a customer’s request is dealt with in the Virtual Factory:
Whenever a customer requests a certain product or service, s/he addresses the contact
point of the platform that is represented by either a web-interface115 or a contact person
of the network. This leads to the combination of the optimal factory for the order,
based on the competencies of the network partners. This means that a stable platform
with fixed cooperation partners serves as a basis for temporary joint businesses in the
form of VOs.

Virtual Factory

Stable platform
of partners

Figure 8:Virtual Factory (adopted from Schuh et al., 1998)

VERITAS, IST 2004-511013, Contract for Specific Support Action, Annex 1- Description of
Work. For more information cf., accessed in November, 2006.
One example would be the platform “webcorp” used by the Virtuelle Fabrik Nordwestschweiz-
Mittelland:, accessed on 28th of February,
70 Design of Analysis

The required stable platform of partners is called a Virtual Industry Cluster (VIC).
VICs are seen as source networks that assure the cooperation preparedness of network
partners and that enable loosely-coupled companies to form VOs whenever a joint
business opportunity arises (Camarinha-Matos/Afsarmanesh, 2004). As these networks
are characterized by general cooperation agreements and a well-defined set of rules,116
the underlying concept is related to the formerly established Cooperative Network.

In order to ensure the optimization of the customer-driven process, the following roles
are established in a VIC (Schuh et al., 1998): The Broker is responsible for the
acquisition of orders, for merchandising and the representation of the network, while
the Network or Project Manager is responsible for the efficient execution of all orders,
bringing together the core competencies of the partners. Each partner company
disposes of one responsible person that represents the own firm and its conditions,
often referred to as the In- and Outsourcing Manager. Another role is taken over the
Network Coach, who acts as a consultant, taking care of the rules and roles in the
network and being responsible for the selection of new partners. In the original
concept, the Virtual Factory also implemented the role of an Auditor, a controlling and
revising position (Schuh et al., 1998; Wüthrich et al., 1997).

Based on this model, one VIC/Cooperative Network in each country (Austria, Belgium
and Turkey) should be established during VERITAS.117 An international team of six
partners formed the consortium of the research project: Three industry associations,
representing the national federation of metal and machine manufacturers, the
University of Vienna (UNIVIE)118, Sylvie Feindt Consulting (SFC)119 and Archimedia

ƒFMMI: The Association of Austrian Machinery and Steel Construction

Industries (FMS121) and the Association of the Austrian Metalware Industry

116, accessed on
24th of October, 2004.
VERITAS, IST 2004-511013, Contract for Specific Support Action, Annex 1- Description of
Work. For more information cf., accessed in November, 2006.
118, accessed in November, 2006.
119, accessed in November, 2006.
120, accessed in November,
Original name: Fachverband für Maschinen und Stahlbauindustrie. Cf.,
accessed in November, 2006.
Sample: Veritas Project 71

(FMMI122) are combined to an autonomous professional organization within the

framework of the Austrian Federal Economic Chamber,123 organized into 19
sub-branches and providing service for around 1300 members.124
ƒAGORIA is the largest employers' organization and trade association in
Belgium125 taking care of 1300 member companies.126
ƒMIB: In Turkey, the Association of Machine Manufacturers (MIB)127 is one of
the two existing industry associations and encompasses 183 national
manufacturing organizations.

The main task of the three associations was the presentation of the concept to their
member companies and the guidance of the whole formation process. The activities
listed in the project plan highlighted among others event organization, coaching and
support for the association’s member – in short the process should be supported from
an industry point of view.128

Thus, the trade associations served as the initiators of the VICs/Cooperative Networks
by informing their member companies and by encouraging them to participate in the
project. This means that the three regional networks were established out of existing
industry federations who sought to support their member companies by setting up
partnerships between them. The involved department of UNIVIE – the chair of
Organization and Planning of the department of business129 – was responsible for
providing concepts and academic input as well as analysis and evaluation, SFC took
over the role of a consultant. Here, the main activities were based on supporting the
VICs/Cooperative Networks with the concept of individualized solutions and
collaboration tools for every country, according to the specific industry and cultural
needs. ARMD was responsible for the technological support of cooperation, providing
a platform and collaboration tools to fasten cooperation procedures.
Original name: Fachverband für Maschinen und Metallwaren Industrie, cf.,
accessed in November, 2006.
Comment of the author: FMS and FMMI hold one joint office and representative platform. The
expressions are therefore used as synonyms. Further details:, accessed in November, 2006.
Member information at, accessed in November,
=5550&vUser ID=999999&MyOrDaily=daily&EnewsID=33449, accessed in November, 2006.
Cf. AGORIA presentation at the Kick off meeting, 1st of July, 2006.
127, accessed in November, 2006.
VERITAS, IST 2004-511013, Contract for Specific Support Action, Annex 1- Description of
Work. For more information cf., accessed in November, 2006.
129, accessed in November, 2006.
72 Design of Analysis

To support the establishment of the three countries, each of the non-industry

institutions was additionally assigned to one of the federations particularly: UNIVIE
worked closely with the Austrian Industry Association FMMI, the Belgian Consultant
supported the Belgian Industry Association AGORIA, and the Greek Project Manager
and Software Provider assisted most to the formation of the Turkish initiator MIB.
Different authors mentioned the necessary financial or organizational support from a
neutral institution in establishing networks for different reasons: First, it helps the
firms to develop trust between each other. Second, a promotive institution can
concentrate exclusively on network activities, whereas especially smaller firms often
lack time to build up relationships, search for business contacts etc. (Sherer, 2003).
Generally, a promoter is defined from a macro organizational perspective and serves
as a facilitator or catalyst (Franke, 2001; Pümpin, 1992), identifying market chances,
establishing trust and assuring information exchange between the partners. Sherer
(2003) highlights that this task can be fulfilled by economic development agencies,
universities, trade associations or individuals. In the VERITAS case, the whole
consortium supported the establishment of the networks from different points of view,
including industry experts, business experts (consultants) and academic experts.

The project plan130 included a pre-phase of four months of research on the concept of
VOs in order to develop a guideline for the target companies. After organizing
information workshops, those partners that want to come together and form a
VIC/Cooperative Network are identified and trained how to establish cooperation
between them. The implementation of the cooperative concept was thought to be
accompanied by smart organization and process restructuring, establishing several
rules and roles for working together. Coordination and communication between
partners is supported by the use of Information Technology, and cross-organization
Work Management solutions in particular. At the end of the project, three stable
VICs/Cooperative Networks – one in each country – were aimed to be established.

In order to assure the project progress, the consortium of partners met in July and
September 2004, January, February, April, June, October and November 2005 as well
as in January 2006. Intermediate meetings were held via telephone conferences and
extensive exchange took place via email. Although the three countries advanced in a
rather different way, all consortium partners were continuously involved in changes
and progresses.

Cf. appendix for details.
Research Method: Case Study Research 73

As mentioned, UNIVIE’s role was the academic support of the project. The role of the
author was closely linked to SFC’s work in order to assure scientific and sustainable
procedures, and the main tasks were based on providing concepts for the structure or
roles in a network. Most important, the author took over the role of an evaluator. Work
therefore contained consulting aspects but was mainly based on observing and
evaluating the formation process.

The final research sample was based on three cases, each designed with a supporting
team of the VERITAS consortium. The target mass of the study was participants of the
initiated networks in Austria, Belgium and the Netherlands. As a “participant” the
representatives of every company, i.e. mainly CEOs and general managers were
considered, as i) these people continuously participated at project meetings, and ii) the
research objective of the 5-phases model is a human being and not an institution. The
three cases were observed by a mix of qualitative and quantitative methods over the
period of 19 months.

4.2 Research Method: Case Study Research

In this chapter, the case study method is explained and instruments used for analysis
are shown.

4.2.1 General Aspects of Case Study Research

A case study is “(…) an empirical inquiry that investigates a contemporary

phenomenon within its real life context, when the boundaries between phenomenon
and context are not clearly evident, and in which multiple sources of evidence are
used” (Yin, 2003). Case studies are based on a mix of quantitative and qualitative
approaches, using multiple data sources like observations, interviews and documents
(Rowley, 2002). The method is an empirical method of analysis that results in a
research report, a so-called “story”. As it allows flexibility as well as combination of
methods, case research is seen as useful when a phenomenon is broad and complex
(Dubé/Paré, 2003). It is used in several disciplines, like psychology, sociology or
political science, but increasingly is attributed to problems of business and
organizations. The reason behind this is that in business, social phenomena also have
to be studied (Yin, 2003). Lee (1989, p.117) defines an organizational case study as
74 Design of Analysis

“(…) an intensive study of a single case where the case consists of the individuals,
groups, and social structure in the setting of an organization”. The general
argumentation of case study research shows the fit to the research approach of
investigating social phenomena in the network formation process.

The main aspects of case research are reflected by i) a specific set of research
questions, ii) small amount of cases that allows carrying out in-depth studies, iii) the
application of triangulation method and iv) a strong emphasis on the interpretation of

i) Case studies are seen as a useful instrument for the preliminary, exploratory stage
of research (Rowley, 2002), that is, whenever new theories are developed in an
inductive way. Yin (2003) further amplifies this application field: he argues that
the research questions should be How? or Why? questions, i.e. open research
questions to investigate a broad field, and not detailed questions like How much?
Or What exactly? This is particularly the case when a new research field is entered
or when the researcher wants to investigate in a real life context in order to learn
about a situation or a phenomenon (Eisenhardt, 1989a; Yin, 1994).

ii) Case studies are seen as an adequate form to evaluate the effectiveness of action
whenever quantitative studies do not allow deep insights or explanations for
coherences (Wittmann, 1990; Bortz/Döring, 2000). Therefore, case studies are
carried out with a small number of cases. The idea of case research is not to
provide statistical representative results, but to offer deep insights and
comprehensiveness for understanding a specific (mostly social) context. Although
on behalf of a higher number of cases more robust results could be (Rowley, 2002),
the small number of cases allows closeness and richness of material that would not
be possible with quantitative studies (Halinen/Toernroos, 2005).

iii) Triangulation method means that the evidence for a case study is drawn from
different, multiple sources, including qualitative and quantitative material (Rowley,
2002; Yin, 1994; 2003). Regarded as one of the main advantages of the method,
triangulation method on the other hand increases the complexity of case research.

iv) Thus, most important is the interpretation of the material (Stake, 1995). Besides
direct interpretation of individual instances, the material is aggregated and grouped
Research Method: Case Study Research 75

in order to detect patterns or to derive conclusions from the overall situation.

Interpretation does not follow a pre-structured, linear process and often lasts much
longer than interpretation with quantitative material.

In this study, it is analyzed how the three different countries managed to establish
Cooperative Networks in order to derive conclusions of how to support such networks.
The objective of research therefore is exploratory (Voss et al. 2002), and aims to build
new theories. The study is a longitudinal, real-life comparative case study where three
extensive and detailed cases are carried out and compared. The method fits to the
research design, as the aim of this work is to gain deeper insights into the social
structures of networks. Related questions like How do social relationships develop
over time? or Why does it take such a long time to establish cooperation? can be
classified as How?- and Why? questions. Furthermore, the time period of analysis, 19
months, reflects the longitudinality of the study. Additionally, the small number of
cases – criteria is fulfilled. Interpretation conducts the major part of the study.
According to Yin (2003) all the important requirements for using Case Research have
been met (see table 6).

Strategy Research Control on Focus on

Question Behavioral Events Contemporary Events
Experiment How?, Why? Yes Yes

Survey Who?, What? Where?, No Yes

How many?, How much?

Archival Who?, What?, Where?, No Yes / No

analysis How many?, How much?

History How?, Why? No No

Case Study How?, Why? No Yes

Table 6: Relevant Situations for Different Research Strategies131

Table was adopted from COSMOS Corporation (Yin, 2003).
76 Design of Analysis

4.2.2 Application of Case Research

The author followed the proposed framework of Eisenhardt (1989a, p. 533ff):

Selection of cases: First, the selection of the cases has to take place. On the one hand,
the fewer the case studies the greater the opportunity for in-depth insights, on the other
hand few cases of course have limitations and include the risks of misjudging data
(Voss et al., 2002; Rowley, 2002). However, the selection of cases has to be related to
the object of research (Yin, 1994), which is the network formation process. Although
generalization declines with lower case numbers, the deductive/inductive approach of
the phase model allows a high reliability of the qualitative application. The three cases
of the project VERITAS are regarded as three typical cases for a network formation
process and therefore investigate the internal structure of the network formation in
Austria, in Belgium and in Turkey. Furthermore, the analysis is based on the whole
cases, which reflects a holistic approach (Yin, 2003).

The selection of cases was also restricted by the research project. A comparison of the
situation with existing, recently or Cooperative Networks established a few years ago
would at a first glance have given the opportunity to compare internal structures and
relationship between companies that already built a network on those that just started.
On the other hand, these examples could only have been analyzed reciprocally, and
would have been based on reports of participants or Network Managers. Comparability
thus would have been difficult, and one of the main advantages of the VERITAS cases
was the possibility of real-time observation. Although the network formation
developed in different directions, according to companies’ preferences and attitudes,
all three networks had exactly the same starting point and the same basis, which makes
them perfectly fit for a comparative analysis.

Selection of instruments: In the next step, the tools and instruments were selected.
Although case research is often related to qualitative research only, multiple data
collection methods allow combining both, quantitative as well as qualitative aspects.
While qualitative data is useful for understanding, quantitative surveys can strengthen
its relationship to existing theory (Eisenhardt, 1989a).
Research Method: Case Study Research 77

In the research project the following instruments were used:

ƒ A questionnaire testing expectations of participants, their preparedness to
cooperate (Bauer/Koeszegi, 2003) as well as their general trust attitude
(Yamagishi/Yamagishi, 1994) at the beginning of the project
ƒ Narrative Interviews (Bortz/Döring, 2000; Froschauer/Lueger, 1998) with
participants of the network, evaluating individual experiences of the
establishment of the networks during the last months of the formation process
ƒ A questionnaire based on Social Network Analysis (Brass et al.; 2004) in order
to determine information and communication exchange as well as trust at the
end of the project
ƒ Participant observation for evaluating meetings that took place with the
involved companies

Additionally, documents, emails, correspondence among partners and to the outside,

formal and informal talks, the strategy or vision of the network were collected and
included in the interpretation process.

The selection of methods was based on the importance of having a qualitative-

quantitative mix of methods but, moreover, instruments were adapted to the
preparedness and temporal availability of the participants.

Field access: As UNIVIE was an official partner in the VERITAS project there were
no major difficulties to enter the field of research. Nevertheless, the role of every
partner had to be clarified in the beginning. The addressees of evaluation were the
(potential) partner companies. As all adjustment took place with specific members of
the industry association, the contact to network participants was not always direct and
evaluation was to a large extend based on i) the opportunity to participate in as many
internal meetings as possible, and ii), the goodwill of the industry people who acted as
an intermediary. Delegation of, for example, the distribution of questionnaires could
not always be handled successfully. Nevertheless, the active involvement and
participation in the research project assured data collection to a large extent, which
holds for qualitative data.

Data analysis: Based on figure 9, data is available in a matrix structure: On the one
hand, data from questionnaires and interviews are quantitatively comparable. This
78 Design of Analysis

reflects internal data completed by network participants. On the other hand, there are
three different independent cases that reveal country-specific results.

Austria: Network Formation Process Case A

Belgium: Network Formation Process Case B

Turkey: Network Formation Process Case T

Process observation & Documents

Pre-Study Preparedness Test Interviews Network Analysis Results
01/07/04 31/01/06

Figure 9: Research Design

Database: After collecting data, Yin (2003) recommends to structure it and put it into
a certain database. While during the collection process, all data points (emails from
partners, internal protocols about information meetings, industry information etc.)
were stored, in this step the material was structured into those data sets that were i)
relevant and likely to reveal results and ii) have a certain probability to be comparable
to each other. The following table gives an overview of the data used in the analysis.

Type of evidence Austria Belgium Turkey

Industry information (Internet, brochures) 26 14 11
Information about the three countries (Books, Internet, … 12 7 16
Questionnaire about cooperation preparedness 11 4 9
Narrative Interviews 5 - -
Network questionnaire 8 - 3
Official project documtens (deliverables, reports) 3 6 4
Official meeting minutes 14 12 24
eMails 16 15 6
Internal documents (presentations, list of participants,..) 42 18 32
Personal documentation (meeting notes, diary) 11 6 16
Overall documents used for the study 148 82 26

Table 7: Data Matrix

Research Method: Case Study Research 79

Theory building: In a final step, hypotheses are derived and related to existing theory.
The comparison of the gained results and derived hypotheses with existing literature is
seen as crucial for case study research, because it is able to gain stronger internal
validity or higher generalization (Eisenhardt, 1989a).

For the comparison the author proceeded as follows: First the single cases were
embedded in single study write-ups. These “stories“ included a) a description of the
network’s background (economy, culture, industry, network attitude, reasons for
entering the network), b) the specific evaluation results for this network, and c) the
plotting of the 5-phases model over the time-line. In a second step, cross-comparison
and interpretation of results took place.

4.2.3 Instruments of Evaluation

The generally qualitative method case research capitalizes on ordinary ways of getting
data, which means that raw data is gained through various sources including
observations, interviews, surveys, illustrations etc. (Stake, 1995). The following main
instruments were used for the VERITAS cases. Questionnaire on Cooperation Preparedness

At the beginning of the project, potential network partners in every country were asked
to fill a questionnaire to quantify their personal attitude towards cooperation.132 The
questionnaire contained a) a section on know-how about cooperation and reasons why
they decided to become part of a network, b) a section on trust, and c) a section on the
general preparedness to cooperate. The different parts are explained in the following:

i) The first part of the analysis contained general questions about the companies’
perception to networks. Gulati et al. (2000) as well as Sieber (1998) stated that
previous joint business or cooperation activities result in better future network
relationship than without. This was also confirmed by the pre-study of Haas et al.
(2007). Including aspects like the decisive factors to participate in a network or
those factors that would immediately lead to a phase-out of the company, the
questionnaire determined to analyze the expectancies of the companies and make
them think of both ideal and worst-case scenarios. The answers to these questions

For a detailed description of the questionnaire cf. appendix.
80 Design of Analysis

also served as a basic feedback for the current group in order to learn how their
potential partners view cooperation.

ii) A trust index based on the score of Yamagishi and Yamagishi (1994) was used in
order to differentiate “high trustors” from “low trustors”133. The index was
developed based on the “Interpersonal Trust Scale” of Rotter (1967) and was
reused in several studies where it proved to be a reliable instrument for measuring
the affinity to trust of human beings (e.g. Yamagishi et al., 1998; Köszegi, 2001).
Rotter (1980) stated that individuals base their current decisions on former
experiences and develop a stable personality with different aspects, including trust.
He claims that those people that are trustful in others are more likely to be seen as
trustworthy partners than cautious people. His classification into “high trustors”
and “low trustors” was further developed by Yamagishi and Yamagishi (1994).
The authors have demonstrated that not all individuals are equally prepared to take
social risks, but have a certain tendency to openly address new people and
situations or not (Köszegi, 2001). The integration of the trust index in the
questionnaire was therefore sought to reveal a general picture of possible problems
and challenges concerning the establishment of trust between the partners.

iii) In the last part of the questionnaire, the cooperation preparedness of business
partners was investigated. Internal structures and similarities to the concept of VOs
(low formalization, high linkage through ICT) and the experiences with previous
partnerships were investigated. The questionnaire was based on the Virtual Degree,
developed by Bauer and Koeszegi (2003). Based on the concept or gradual
virtualization, the authors argue that different types of VOs exist and that the
application of the concept of virtuality can be measured by analyzing the level of
specific characteristics of every collaborator (differentiation, configuration,
integration, technology, compare for Bauer/Koeszegi, 2003). The Virtual Degree is
based on seven factors that can be combined into one index. This index reflects the
amount of virtual characteristics a company possesses and therefore the
preparedness for being a member in a VO or a network.

The questionnaire was translated into English, German and Turkish and was
distributed during the first network meetings in every country. Except for Belgium,
where network members were asked to fill the evaluation form at home, they were

The original version of Yamagishi/Yamagishi (1994) is provided in the appendix.
Research Method: Case Study Research 81

distributed and given back during the meeting. On the whole four completed
questionnaires were retrieved from the Belgian meeting in October 2005, nine from
Turkey in May 2005 and eleven from the Austrian Meeting in June 2005.

Descriptive statistics to the companies that participated can be found in the following

Turnover Employees Countries Partners

< 2 million 3 0 2 <10 3 0 0 1 3 2 2 none 0 1 1
2-9 million 2 0 6 10-49 2 0 4 2-5 6 1 2 1-2 3 1 1
10-49 million 3 4 1 50-249 4 4 5 6-19 1 1 2 3-19 5 2 6
> 49 million 1 0 0 >249 2 0 0 >19 1 0 3 >19 3 0 1
no reply 2 0 0 no reply 0 0 0 no reply 0 0 0 no reply 0 0 0
Table 8: Company Description Pre-Questionnaire

Besides preparedness testing, the questionnaire intended to focus on the important

issues of the three target groups and to improve the interventions in the first phase.
Results are integrated in the empirical part. Qualitative Interviews

Personal interview should reveal the individual perception of the network participants.
While comparative and objective answers were expected from the questionnaires, the
author believed that talking to the participants and asking them how they experienced
the establishment of the network could gain the most interesting evaluation on
cooperation and the effects of VERITAS.

The interviews should give insights in individual experience and opinions on

cooperation and partnerships i) on a general level, and ii) related to the project
VERITAS. Main aspects were the climate in the cooperation, trust and the future plans
and visions of every network partner and the usefulness of events and support

Due to the progress of the three networks134 Turkey and Austria were chosen as the
target group and five interviews with each network were carried out (details are
displayed in table 9).

Compare for section 5.
82 Design of Analysis

Country Industry Turnover Employees Function

A Austria Surface treatment 500,000 € 3 Director
Austria Surface treatment n.s. 220 Authorized
Managing Director
Austria Machinery (cluster) 200.000 € 3 Cluster
D Austria Surface treatment n.s. 5 Director
E Austria Consulting n.s. - Network Manager
F Turkey Pump manufacturer 5.,6 million € 90 Director
Turkey Manufacturer of 2.5 million € 30 Director
ground equipment
Turkey Manufacturer of 10 Mio € 92 Director
screw compressors
Turkey Industrial cleaning 3.4 million € 50 Director
J Turkey Consulting n.s. 2 Network Manager

Table 9: Interview Sample

As a method, the Narrative Interview (Bortz/Döring, 2000) based on the principles of

free story telling was chosen. This is an open form of interviewing, where the
interviewer explains topic and focus in the beginning, but then let the interviewee talk
without interrupting or posing additional questions (cf. Bortz/Döring, 2000;
Froschauer/Lueger, 1998). Only at the end of the interview, additional questions are
legitimate. This form of interview allows deep insights into every single person’s
attitudes towards the topic and makes him or her tell about those events that s/he
regarded as the most important ones. It is commonly believed that Narrative
Interviews reveal more meaningful and deeper results than standardized interviews.135

During the process of data collection it was preceded as follows. Firstly, five
participants of every network were selected. The selection of the interview partners
was based on assembling a heterogeneous sample: Critical as well as optimistic
candidates were selected, those people who participated continuously in meetings and
discussions and others who participated less were included, and representatives from
large and small enterprises were considered. Secondly, the interviews were carried out
in October 2005, lasted about one hour and were carried out by a bilingual expert, who
was born in Germany but lived with his Turkish family until the age of 20. Every
interviewee was asked about his or her experiences in cooperation, including former
experiences as well as impressions about the current research project. It was left open
to the interviewee what s/he wanted to report. All interviews were recorded on tape
Details and practical guidelines about the method can be found at http://www.stangl-,
accessed in November, 2006.
Research Method: Case Study Research 83

and transcribed by the interviewer. In a third step, the Turkish interviews were
translated into German in order to make them accessible for the Austrian research

In order to transform the qualitative material that finally encompassed 130 written
pages into quantitative, categorical data the research team chose Content Analysis
(Bortz/Döring, 2000; Holsti, 1969). Content Analysis is a method for investigating
problems in which the content of communication serves as the basis of inference
(Holsti 1969). Although five interviews had been carried out in every country, it was
decided to only include network participants in the evaluation procedure and neglect
the Network Managers’ interviews because of a possible bias problem.

For data preparation, the suggestions of Srnka and Koeszegi (2007) were followed:

1) In a first step the material was divided into coding units (Unitization). The authors
followed the suggestions of Buber et al. (2004) to use units conveying one thought
communicated by the interviewed network member. Two coders independently
structured the material, based on basic predefined rules like the disregard of
punctuation marks. The Gutzkow’s U (Guetzkow, 1950; Folger et al., 1984), a
reliability measure used in this context, did not reveal satisfactory results after the
first round of unitization. Problems were mainly attributed to the complex material:
while in many other Content Analysis studies, written data is used, the research
team first had to transfer spoken language into transcripts. In a second run, based
on more concrete unitization rules, the U equaled 0.0193. Combined with the
intercoder reliability of 84.58% (Simons, 1993) the result was judged to be
satisfactory. Finally, both coders agreed on one scheme, based on 1534 units.

2) Following this, the research team developed a category scheme according to the
conversation categories (Categorization). The category scheme was established in
a deductive/inductive approach and included 12 main categories, 38 subcategories
and two additional levels related to cultural implications (Kutucu, 2006).

3) The third step, Coding, consisted of the systematic allocation of those categories to
the units developed in the first stage. Again, the two coders individually run the
process and reached a Cohen’s (1960) kappa136 of 0.7323, which shows

For a detailed description of the reliability measure compare for Srnka and Koeszegi, 2007.
84 Design of Analysis

discrepancies, but again reveals the problems of the complex material. The inter-
coder consistency matrix showed interfaces of categories that were unequally
interpreted by the two coders but could easily be dealt with in the final adjustment.

The method proved to be quite complex but revealed interesting aspects about culture.
The aspects are included in the empirical part of section 5. For more detailed insights
in method and procedure of analysis compare for Kutucu (2006). Social Network Analysis

Social Network Analysis was used to investigate the current state of the three networks
at the end of the project. It should be determined whether the companies succeeded in
building relationships and if those relationships were regarded as a good basis for
future work. It should be shown how much information people share and how far they
trust each other in business but also private matters.

The used questionnaire was developed based on Social Network Analysis and was
built on a validated questionnaire of Cross and Parker (2004).137 The reason for
choosing Social Network Analysis was to unveil invisible patterns of information flow
and collaboration in the group. Social Network Analysis is a methodological approach
to describe, understand and explain social structure. The basis for network analysis can
be found in graph theory (Brandes/Wagner, 2003). While this form of analysis has
been used in psychology and sociology since decades (Moreno, 1996), it is quite new
in organizations or policy groups. The central argument for applying this method in
network research is that actors are embedded in social relationships in every
organization or institution (e.g. Brass et al., 2004). Networks are accordingly defined
as “(…) a set of nodes and the set of ties representing some relationship (…)” (Brass
et al., 2004, p.795). Social ties are supposed to shape the behavior of actors. By
investigating in the information exchange preferred relationships and central roles in
the network should be made visible.

The questionnaire finally contained 17 questions about the relationship of the

interviewed people towards the other network participants. The respondents were
asked to choose those three network partners the answer would fit most. The target

Details about the method can be found at, 30th of December,
Research Method: Case Study Research 85

group for the questionnaire was defined by the industry associations that created a list
of participants in every country. In total, the questionnaire was prepared for 32
Austrian and 19 Turkish companies and for 21 Belgium network participants. While in
Austria and Turkey the questionnaires were distributed via email, in Belgium the
evaluation form was supposed to be completed at a meeting.

Results of this research process are also integrated in section 5. One main challenge
with network analysis is that it cannot be done anonymous. People are not easily
convinced to give detailed descriptions about their opinions and perceptions. All
questionnaires contained a clear statement that results would only be explored and
used in a cumulative way and that all statements would be kept within the research
team of UNIVIE. The interpretation and further application can be done without
names and companies. Participant Observation

It is commonly agreed to use participant observation as an additional method to others

or during preliminary stages of research, in order to explore and describe a research
field (Lazarsfeld, 1972; Babbie 1986). The qualitative description of observed
situations or dialogues later serves as a basis for formulating concepts for
measurement or for formulating or testing hypotheses.

For the method of participant observation, no pre-defined procedures or techniques

exist (Jorgensen, 1989; Aster et al. 1989). Like in field research, observation follows
the principles of learning from experience (Wax, 1971; Kaplan 1964). The advantage
of the method is its easy application in every research field: The logic of the method is
nonlinear and creative and can be applied as well for studying processes as
relationships among people. Participant observation is considered to be most
appropriate when i) the research problem is concerned with human meanings and
interactions, ii) the phenomenon is observable in an everyday setting, iii) the
researcher has access to this everyday setting and iv) study questions are appropriate
for case study (Jorgensen, 1989). In the context of VERITAS, these conditions were
found in project meetings, training sessions and conferences of the network
86 Design of Analysis

The observation approach can be divided into three phases: The first phase of
observing is seen as an unfocused phase where the researcher “learns” from the
impressions of the field. During the VERITAS meetings the researchers looked firstly
at the space: Where does the meeting take place?, How does the seating arrangement
look like?, How is the conference table organized?. Additionally, the focus was put on
the setting: How many people are there?, Which people are there (age, gender,
specific characteristics)?, Are there any groups at the first sight?, What are people
doing?, What are they talking about?. Aster et al. (1989) suggest to additionally note
the researcher’s emotions.

Once the general field was familiar, the focus of observation was related towards
cooperation and networking. The author wanted to know how the potential companies
viewed the current situation of the process and wanted to learn about their concerns,
their personal attitudes and the challenges they thought to face. Therefore the
researchers looked particularly at the way how people communicated with each other
and how role allocation took place. Furthermore, processes such as decision-making
processes, strategy finding and conflict situations were observed.

In a third step, documentation took place. Notes were taken during and right after the
setting, including i) routine factors like time and place of the meeting, ii) central topics
of discussion, and iii) special points of interest like the communication mode or the
interaction among participants. Observation results were continuously recorded in a
journal and were stored together with meeting minutes and other documents of the
respective day. To conclude, the above-mentioned methods were combined into the
single case study write-ups. Results of all instruments were evaluated separately, but in
a second step combined with the other tools for the case study approach. Table 10
gives an overview about when the different instruments were used strongest in the
context of thee 5-phases model. Besides the 5 phases, an additional section on the
background of the industries was included.
Phase To be analyzed Related questions Used Material
Background Economic Situation How is the general economic situation of the country? Economic reports, official country
5-Phases Model
Manufacturing industry How is the manufacturing industry situation of the Industry reports, current statistics of the
situation country? What about the structure of the companies (size, industry, association reports
owner-structure, …)? How are employers organized?

Initiation Attitude towards Is it common to cooperate in the industry? Are there Industry reports and success stories.
cooperation (of industry) examples to be investigated? How is the first reaction of (additionally: meeting minutes, discussion
and cooperation history the (potential) target group? and reports)

Identification of target Why and how is the target group selected? Meeting minutes, discussion and reports
Research Method: Case Study Research

Way of contacting target How is the target group addressed and invited to the Information folder, correspondence with
group cooperation? target group

Informative workshops Are there any informative workshops organized? How, Meeting minutes, discussion and reports
when and where do these workshops take place?

Specific situation of target How is the specific’s target (or interest) group’s situation at Meeting minutes, discussion and reports
group of the project the end of the Initiation phase? How is their current
(Learning) position and know-how with cooperation activities?

Forming Getting to know each How do cooperation partners get to know each other? Meeting minutes, telephone protocols

Cooperation atmosphere How do cooperation partners behave during the first Meeting minutes and reports,
phase? Are there any leaders or critical people? Who (questionnaires on cooperation
takes over which roles? preparedness)

Reach commitment How do cooperation partners agree to the task of Meeting organization, meeting minutes,
(agreement to stay) / collaboration? Is commitment reached among them? How reports
Strategy formulation is the general strategy of the network being agreed?
(agreement where to go)

Identification of the Which – if any – target market is agreed? How can the Meeting minutes, reports
market decision finding process be described?
Storming Working together Are there first projects carried out? Do project groups Observation, Meeting participation lists

form? How does the general process of network formation and meeting minutes and reports,
proceed? discussions

Discussion of rules and How do the regulations of working together arise? Are Observation, Meeting minutes and
roles there any roles or formally established agreements? How reports, discussions
is the information process among participants?

Handling conflicts Which difficult situations arise? What about hierarchies, Interviews and talks with network
power distribution? How is the general atmosphere among participants, Fluctuation lists
partners? How do network participants deal with the

Norming Establishing rules or How is the agreement among partners? Does Observation, Meeting minutes and
regulations how to work communication style change (including discussion, reports, discussions, cooperation
together feedback, democratic decisions)? Are decisions taken in a agreements
certain manner?

Establishing roles Do partners take over responsibility about their actions? Observation, Meeting minutes and
Which roles are in place and accepted? reports, discussions

Finalizing first projects Do cooperation partners work with each other? Are joint Project reports, Observation, Meeting
results observable? minutes and reports, discussions

Performing Strategy alliance between Is the group acting as one entity? Are they able to Reports, observation of behavior,
network and companies represent each other? Does a joint website exist? How awareness of cooperation on company’s
does the network look like? How are duties and rights official documents and events.
distributed among partners? Cooperation agreements, strategy
papers, Marketing plans.

Systems (ICT, Are internal processes adjusted to partners’ processes? System investigation

Results of joint Is there market recognition of joint results (prototype, Project reports, awareness of projects in
cooperation service…)? Is the platform stable and do partners trust the market. Social Network Analysis,
each other? testing trust level.
Design of Analysis

Table 10: Material for 5-Phases Model

5 Empirical Data: Network Formation Processes

This chapter documents the different stages of the project, embedded in the 5-phases
model based on the group model of Tuckman (1965). The formation of each network
is documented and analyzed over time and at the end of each group formation stage,
the main events and results, but also the main challenges for the formation process are
summarized and interpreted.

Although the general structure was the same for all three countries, they developed in
different manners, according to their cultural, economic and individual preferences.
The three cases differ from each other, but due to the real-life observation they give
deep insights in the network formation process. It is be analyzed how the three
different countries managed to establish business networks. The target of this research
therefore is not only descriptive, but more exploratory (Voss et al., 2002). After
analyzing and comparing the three cases, recommendations how to start networks,
how to keep companies in a network together and which factors to consider in a
formation process, can be derived. Economic and cultural influences are considered
and the result of the network formation process is highlighted at the end of every case.

5.1 The Austrian Case

Economic Situation
Austria, an 83,870 km² country in the middle of Europe with a population of 8,192,880
people (est. July 2006)138 is described as a well-developed market economy with a
high standard of living.139 GDP per capita is estimated to reach 31,400€ in 2007140 and
therefore ranked at 10 spot worldwide.141 Economic growth rate is estimated between
1.8 % (2005 est.)142 and 2.2%143 per year (1995 – 2005).

138, 29th of May, 2006.
139, accessed on 29th of May, 2006.
140,, both accessed on 24th of April, 2007.
141, accessed on 29th of May, 2006.
142, accessed on 29th of May, 2006.
143österreich.pdf, accessed on 29th of May, 2006.
90 Empirical Data: Network Formation Processes

The current inflation rate was at 2.2% in 2005,144 and unemployment rate has
increased to 5.9% in January 2006.145 The main industries (construction, machinery,
vehicles and parts, food, metals, chemicals, lumber and wood processing, paper and
paperboard, communications equipment, tourism) are largely organized as SMEs.146
99.6% of Austrian enterprises are SMEs,147 employing 65% of Austrian labor force.
The majority of them – 218,042 of 252,399 (which equal 86.39%) – employs only
between one and nine people, called micro-enterprises.148 Equity capital in Austrian
SMEs is lower than 20%, and 39.7% of Austrian SMEs are financed completely
without own funds.149

The promotion of SMEs becomes increasingly important: in April 2006, the Council
of Ministers150 decided a package of additional measures to improve income and
corporation tax conditions for small enterprises as well as financial contribution for
innovations and high-tech applications.151 Austria also involves in improving
conditions for SMEs and is member of the European network SME UNION (Small
and Medium Entrepreneurs Union).152 Nevertheless, in parallel with the disadvantages
of size, Austria’s SMEs indicate a shortage of skilled labor force: training and
development of people is restricted by barriers like the lack of time to plan and
participate in such activities, including the lack of human resource management in
small enterprises (Mandl/Dorr, 2004). On an international level, Austria is increasingly
compared to Eastern European countries and despite low corporate tax loses
competitive advantages to other small EU-countries.153

144österreich.pdf, accessed on 29th of May, 2006.
January, 2006: 326,747 unemployed people equal an unemployment rate of 5.9% based on EU-
calculationmode, 7.7% based on national calculation mode. If people that are allocated to training
and development measures are added, the number of unemployed people increases to 395,000.
Information based on, accessed on 29th of May,
146, accessed on 29th of May, 2006.
147, accessed on 29th of May, 2006.
148äge/KMU in Österreich 24-02-
2005.pdf, accessed on 29th of May, 2006.
149äge/WU%2013-01-2005.pdf, accessed
on 29th of May, 2006.
orig: “Ministerrat”, translated by the author.
151, accessed
on 29th of May, 2006.
152, accessed on 29th of May, 2006.
Compare for
id/49455, accessed on 29th of May, 2006.
The Austrian Case 91

Manufacturing Industry Situation

The manufacturing industry includes manufacturing of basic metals, manufacturing of
fabricated metal products, except machinery and equipment and manufacture of
machinery and equipment n.e.c.154 The three categories comprise the fabrication of
tools, tractors, and containers but also the treatment of these products. In Austria,
general purpose machinery is the largest sub-sector of machinery.155 In total, 1,692
companies with a yearly turnover of 31 billion Euros156 are operating in the
manufacturing sector. The Austrian Industry Representative for Machinery and
Metalware (FMMI157) reports the following industry specific picture:158 Although
Europe-wide production volume in the metal sector decreases continuously159 (the
investment activity is low and high raw material prices lead to a strong import activity
from China and Southeast Asia), the Austrian sector shows growing production figures
in 2003 and 2004. Like other European countries, the metal industry players focus on
higher quality levels and consistency,160 including a stronger focus on R&D and
innovation. In 2004, 43% of production order came from the US or Asian economy161
and most important international trading partners were Germany, increasingly Czech
Republic and Russia.162 The high focus on export activities explains partly why a
sector that is characterized by scarcity of raw materials and therewith continuous staff
reduction163 nevertheless is able to survive. Higher financial stability and even
increasing employability have been reported.164 165

accessed on 29th of May, 2006.
eBusiness Watch Machinery and Equipment:, accessed on 31st of May,
156, accessed
on 29th of May, 2006.
Original name: Fachverband für Maschinen und Metallwaren Industrie, cf.,
accessed on November 2006.
158, report was conducted
by IWI (, both accessed on 29th of May, 2006.
Compare for, accessed on 29th of May, 2006.
“The future of European manufacturing”, KPMG-report (,
accessed on 29th of May, 2006.
161, accessed
on 29th of May, 2006.
Compare for the following article: Rapid changes, great challenges in: Machinery and Metal ware
2, May, 2004, p. 6-8,,
accessed December, 2004.
163, accessed on 30th of
May, 2006.
accessed on 30th of May, 2006.
92 Empirical Data: Network Formation Processes

The whole industry is characterized by efficiency considerations because of increased

raw material prices: Metal prices show a yearly increase of 29% between 2003 and
2005166 and therefore force the related organizations to higher economisation. Specific
problems related to the size of Austrian enterprises also effect the organizations in the
machinery and metalware sector: According to reports of Statistics Austria (an
independent federal institution under public law providing statistics on Austrian
topics),167 88% of the companies in the Austrian metal industry are small or medium

To have a better bargaining position, Austrian enterprises are organized and

represented by the Austrian Federal Economic Chamber and its sections. Financial
contribution to the Economic Chamber and the related industry section are regulated
via law169 and guarantee independent and joint representation in Austria’s economic
and political landscape. The Association of Austrian Machinery and Steel
Construction Industries (FMS170) and the Association of the Austrian Metalware
Industry (FMMI) are autonomous professional organizations within the framework of
the Austrian Federal Economic Chamber.171

The membership in the FMMI therefore is binding and is liable to pay costs. In return,
members of the association receive information, are represented in collective contract
negotiations, have a strong industry organization with bundled resources and are able
to state their position in different forums. The manufacturing agency is organized into
19 sub-branches172 and comprises 1,300 members.173

Cf., accessed on 30th of May,2006.
166, accessed on 18th of July, 2006
167, accessed in November, 2006.
168, report was conducted by IWI
(, accessed on 18th of July, 2006
accessed on 30th of May, 2006.
Original name: “Fachverband für Maschinen und Stahlbauindustrie“ (FMS). Cf., accessed in November, 2006.
Please note that FMS and FMMI hold one joint office and representative platform. The expressions
are therefore used as synonyms. Further details, accessed in November, 2006.
Elevators, energy and air conditioning, wood working machines, industrial furnace, boiler, plastics
machinery, farm machines, metal fabrication, surface treatment, pumping and compressors, cable
car, steel construction, steel pipes, doors, door automation, combustion engines and gas turbines,
water technical machinery, tool machinery, central heating and air conditioning construction.
Member information at, accessed on 30th of
May, 2006.
The Austrian Case 93

5.1.1 Initiation

Attitude towards Cooperation and Cooperation History

The concept of establishing networks is one possible countermeasure to negative
developments of the Austrian, SME-shaped economy (Mandl, 2005). Generally
speaking, the importance of networking is rather common and increasingly is
becoming an issue. Around 30 clusters174 can be identified in the country (Payer,
2002), including those with technical, research oriented or comprehensive topics like
human resources or ecological issues.175 Most importance and impact is attributed to
the Automotive Cluster, a branch network with 260 partners, generating an 18.3 billion
€ turnover a year.176

Additionally, the term “networking” becomes continuously important in the Austrian

industry. The Chamber of Commerce177 actively supports different network initiatives
like for example “netzwerken,”178 a platform that provides information exchange
possibilities; or “pool”179, a portal to look for partners in cooperation projects and for
know-how exchange in the course of technical problems, similar to the cooperation
platform “Kooperationsboerse”.180

As far as the attitude towards cooperation is concerned, experience with networks is

rather low. The FMMI was asked to participate in the project during the year 2003,
when the project consortium formed. Before the institution became an official partner,
they had to be convinced in a two-loop process that the project was helpful for their
members. After a first refusal of the board of FMMI in September 2003,181 the
management board finally agreed to participate in the project in July 2004,182 only

A cluster is defined as a regional form of network, incorporating actors, customers, suppliers and
research institutions in order to jointly represent the whole supply chain of a product. Advantages
are seen in for example the stronger representation in the national economic and political
landscape. Cf., 1st of June, 2006.
Examples of Austrian Clusters:, 1st of June, 2006.
Cf. 1st of June, 2006
Also referred to as the Austrian Federal Economic Chamber, cf., accessed in November, 2006.
6th of June, 2006.
Cf., 6th of June, 2006.
Cf., 6th of June, 2006.
Cf. FMMI letter of 22nd of July, 2004, referring to a meeting in September, 2003, where the project
was rejected because of too little information on financial and personal requirements.
Cf. FMMI fax of 29th of July, 2004.
94 Empirical Data: Network Formation Processes

after having ensured that no costs would arise for the organization.183 A close national
cooperation in favour of the FMMI was agreed, highlighting UNIVIE’s task to
“(…)work closely together with the FMS in order to motivate Austrian companies to
participate in the project”.184

At the kick-off meeting on 1st of July, 2004, the organization FMMI did not send any
delegate and did not provide the other partners with information about their
organization. The reservation of FMMI to enter the project can also be learned from
the internal meeting protocol stating that “(…) All the partners apart from FMS have
signed the CA.”185

After an operating time of five months, consortium management issues led to a delay
in the advanced payment for project partners,186 which led to a complete reduction of
activities by the FMMI. Organization and moderation of workshops was rejected until
the payment was received.187 During the year 2004, three Consortium Meetings took
place. The FMMI did not participate at two meetings and left the Austrian one (which
took place in their office) earlier and had their work presented by the two student
trainees188 which were provided by UNIVIE in order to reduce the work load of the

Identification of Target Group

The idea of the Austrian responsible was to communicate the project to all members of
the association, so that those that are interested could participate, independently of
their specific sector or current and earlier cooperation activity.190 The non-selection
was also attributed to the fact that neither business preferences nor cooperation
preparedness, in most cases not even detailed business data of the member companies,
was available at the association. FMMI stated that they were not able to identify those
people that could support the process or be interested in establishing a network among

Cf. FMMI, letter of 16th of July, 2004.
Cf. UNIVIE presentation, kick-off meeting, 1st of July, 2004.
Cf. VERITAS kick-off meeting minutes, 7th of July, 2004.
Comment of the author: Projects carried out in the 6th Framework Programme often contain
advanced payment in order to support SMEs that normally have to pre-finance the whole project on
their own funds. However, this is obligingness but not an obligation of the Commission.
Cf. email of trainee students (FMMI) to UNIVIE, November, 2004.
Cf. VERITAS meeting protocols kick-off meeting on 1st of July, 2004, consortium meeting on 13th
and 14th of September, 2004, meeting on 3rd of November, 2004.
Cf. FMMI - UNIVIE cooperation agreement (“Kooperationsvereinbarung”), 9th of September,
Cf. VERITAS meeting minutes consortium meeting 13th and 14th September, 2004.
The Austrian Case 95

each other. The idea to include the VERITAS initiative in other meetings or
conferences of the industry and promote it in magazines was rejected, instead, those
companies that already participated in a cluster initiative, were excluded from the
target group in order not to overwhelm them with initiatives.191 For informing
members of the VERITAS project and related events, finally all 68 sub-sectors of
FMMI were addressed.

The information and communication to the members of FMMI was planned as

follows. First, a letter and an email should be sent to all members to inform them about
the project, its main ideas, benefits and risks as well as about an informative
workshop. The mailing should be combined with ongoing telephone calls.
Additionally, a communication plan was developed: It included articles in the journal
“Machinery and Metalware”,192 announcements of workshops and conferences in the
monthly newsletter193 and ongoing result reporting via both communication media194
so that on the one hand, information could be spread around all FMMI-members, on
the other hand, further potential partners could be addressed at a later stage in the

Way of Contacting Target Group

For promoting the project to its members the FMMI had already asked UNIVIE for a
short project description195 three months before the project started, that included the
idea and target of the project, opportunities and risks, a short description of VO
Concept, and a timeline. However, the usage of those documents could not be
observed or confirmed later. After a first research phase in the project, it was agreed
among the partners of the VERITAS consortium to organize an informative “SME-
day” in every country.196 In Austria, the process was accompanied by the following
communication media:197 On the 21st of September, 2004, first information about the
project and the information meeting on 3rd of November, 2004 was published on the
FMMI-website. One week later, the FMMI-newsletter which is sent approximately
every three weeks to the complete member list included further information.198 On 13th

Cf. meeting minutes UNIVIE, FMMI, 22nd of September, 2004.
192, accessed in June, 2006.
1st of June, 2006.
Cf. UNIVIE - FMMI communication concept (translated by the author), 4th of June, 2004.
Cf. VERITAS management summary („Kurzbeschreibung“), April, 2004.
Cf. VERITAS meeting minutes, consortium meeting 13th and 14th of September, 2004.
Cf. FMMI presentation, consortium meeting, 3rd of November, 2004.
Cf. FMMI-News 14/04, October, 2004.
96 Empirical Data: Network Formation Processes

of October, 2004, invitations via email were delivered, followed by a postal letter one
week later.199 Written documents were directly addressed to the CEOs of the
companies and contained information about benefits and target of the project, agenda
of the meeting and the information that a best practice example was going to be
presented.200 During the last week of October 2004, telephone calls were carried out in
order to convince members to participate in the meeting. The associations acted as
sponsors of the meetings.

Informative Workshops
The informative workshop took place on the 3rd of November 2004 at the Chamber of
Commerce and was organized as an event, including an information booth and a
reception after the official part. Although marketing activities had been conducted, 201
only 13 companies registered for the workshop and finally eight companies (ten
people) attended the meeting.202

The introductory talk including a project presentation was not carried out by the
management of the FMMI, but by a representative. In the first part of the workshop,
the best practice example Virtuelle Fabrik Nordwestschweiz-Mittelland203 was
presented, including the business perception of one of the member companies.204 It
contained information about history, benefits and successful cooperation projects, as
well as insights into the structure and organization of the network. The internal IT
database and Brokering system as well as the importance of thematic working circles
was presented.205 The main message of the Network Manager was that trust is only
possible if people are really personally linked to each other.206 In a last speech, the
current state of research of the project and potential lessons for future cooperation
were presented by the VERITAS project team.

Most important discussion points during the meeting were the funding of a network –
mainly in the first set-up phase – but also failure in cooperation of those that tried it

Cf. FMMI invitation letter and email, October, 2004.
Cf. FMMI invitation letter, October, 2004, FMMI information leaflet 2004.
Cf. FMMI invitation folder, October, 2004.
Cf. FMMI presentation review meeting, February, 2005.
203, accessed in November, 2006.
204, accessed in November, 2006.
Cf. Virtuelle Fabrik presentation, 3rd of November, 2004.
Cf. personal meeting notes, 3rd of November, 2004.
The Austrian Case 97

before. Some potential partners even questioned the benefits of networking and wanted
to know whether they receive financial compensation for participation in the project.207

During the afternoon it became clear that all parties that attended the workshop were
generally interested in business cooperation,208 although the group was very
heterogeneous so that an immediate joint business opportunity was implausible. Three
out of eight participants operated in the sector of Plant Construction (one in the special
field of Tank and Petrol Pump Construction, one in Steel Production Services, one in
Automotive Engineering), one in the Construction of Cleaning Machines, another one
in the surface treatment industry and another one acted as a Consultant for Plastics
Industry.209 While two companies were situated in Vienna, four were from upper
Austria, one from the western part of Austria, one from lower Austria and one from
Styria. Besides, they differed widely in their corporate structure concerning number of
employees (5 to 270) and therefore financial possibilities were distinct. 210

The next step was to carry out a short questionnaire and establish a company profile
for each interested party in order to find “fitting partners”. The developed
questionnaire contained questions about companies’ core competencies, expectancies
about networks in general and in relation to cooperation partners, as well as former
cooperation experience.211 Furthermore, companies were asked to suggest enterprises
that they would like to invite to further events. Only five questionnaires were returned,
demonstrating that not only the meeting participants but also their expectancies were
rather heterogeneous: While one partner was mainly interested in a joint marketing
platform, others focused on joint R&D activities or production. Additionally a branch
analysis in order to identify similar companies or companies with geographical
closeness to other network interested businesses was carried out.212 Both ideas aimed
at identifying potential network partners and started from a more central view than in
the beginning.

However, the identification of interested sub-sectors and related business calls did not
lead to a satisfactory result. A meeting for the 10th of December, 2004, later for the 3rd
Cf. personal meeting notes, 3rd of November, 2004.
Cf. FMMI documentation “Vienna Workshop”, November, 2004.
Cf. FMMI status report, 1st project period (07/04 – 12/04); FMMI presentation at the 1st review
meeting, February, 2005.
Cf. FMMI document “workshop registration”, 2nd of November, 2004; returned questionnaires on
cooperation areas in December, 2004.
Cf. FMMI evaluation forms, November, 2004.
Cf. FMMI documentation “Vienna Workshop”, November, 2004.
98 Empirical Data: Network Formation Processes

of February, 2005 was planned and organized, including another best practice example
of a German Manufacturing Network213 and based on the idea that the new potential
network members get to know the former interested parties. The workshop was
similarly planned like the November workshop 2004214, but finally had to be cancelled
because of low participation rate.215 End of January 2005, an Austrian Management
Meeting between UNIVIE and FMMI took place in order to clarify how to continue.

At the same time the management board of FMMI remembered the conceptive
suggestions of a consultant of the surface industry216 who had suggested a joint
database and stronger connection of business topics approximately a year before.
Positive response to the ideas had at that time been the only answer to the concept,
whereas now, a solution how to convert the suggestions into a concrete project could
be seen. Therefore, the need for cooperation that was not detected in the informative
workshop was finally brought up by the surface treatment industry as the consultant of
this branch had suggested establishing a network for the members before.217 The main
points contained the establishment of a joint database, better information exchange and
mutual support in training and development. The Austrian project partners and the
Surface Industry Representative agreed on a meeting in March 2005 that should
preliminarily be supported by direct calls of the mentioned consultant and the
responsible from FMMI. The idea was to strengthen the already existing network of
the surface industry that included around 200 members218 and therefore establish the
network on a rather stable basis or at least on existing ties between potential
cooperation partners.219

The consultant of the surface treatment industry was asked to take over the role of the
Network Manager from the beginning so that responsibility was carried by him and the
cooperation agreement between UNIVIE and FMMI was reset.220 Former interested
companies were informed about the change of the project focus by UNIVIE.

213, accessed in November, 2006.
Cf. FMMI Agenda Information Workshop, 3rd of February, 2005.
Cf. VERITAS status report 26th of January, 2005.
Comment of the author: The sector is represented by the Consortium Surface Treatment:, accessed in November, 2006.
Cf. personal meeting notes, 26th of January, 2005.
Further information at, accessed in November, 2006.
Cf. personal meeting notes, 26th of January, 2005.
Cf. personal meeting notes, 19th of February, 2005; official letter UNIVIE to FMMI, 5th of March,
The Austrian Case 99

Specific Situation of Target Group

The surface engineering sector is a sector attributed to metalware and machinery
because of the treatments especially developed for metal production and
manufacturing. Surface technology includes the polishing and protection of metal
ware, including surface refinement and corrosion protection. On the other hand,
surface treatment increasingly becomes a creative job, called metal design.221

In 2004, 68 Austrian enterprises operated in the sector, employing 3,675 people. The
volume of orders reached 468,054 million Euros in 2004.222 On the whole it can be
said that the industry managed to reach good results in spite of increasing ecological
obligations and difficult steel situation. Employee rate increased in 4.6% and orders
could be improved about 7.4% in real figures.223 In addition to the above-mentioned
enterprises, other production factories include surface treatment departments in their
production.224 Additionally, networks and clusters, competence centers and training
institutes as well as technical consultants in the field of Surface Engineering are
added.225 The whole sector therefore consists of around 350-400 companies operating
with surface treatment.

Surface technology has been developed as a key technology in production as it is able

to improve characteristics of tools, machines and other goods (Hoch et al., 1999)
independent of their original material. The treatment goes back to the physicist Luigi
Galvani who detected the effect of static electricity on muscle sells.226 Electro-chemic
reactions on metals lead to protection and refinement of the materials. Major
customers of surface services can be found in the automotive sector, as every car
contains around 3,000 electro-plated components.227 It became more and more a high-
tech field, forced to steadily improve surface treatment and to ensure transfer between
research institutes and companies.228

Cf. job-advertisement
/wko/metall.rm&, accessed on 30th of May, 2006
Cf., accessed on 30th of May, 2006.
Cf., accessed on 30th of May, 2006.
Comment of the author: so-called ”In-House” – Refining.
Cf. Network Manager’s report: “Description and actual state of Networking projects in Austria”,
10th of December, 2005.
Cf. Financial Times Deutschland: „Roh eintauche, veredelt auftauchen“. Article from 5th of April,
227, accessed on 30th of May, 2006.
228, accessed on 30th of May, 2006.
100 Empirical Data: Network Formation Processes

Today’s most important challenges for the industry sector can be found in the structure
of SMEs but also in increasing ecological and quality requirements, often attributed to
national or international recycling laws like the current EU-regulation on chemicals,
called REACH.229 Additionally, the SME-based industry situation often leads to low
transfer of know-how and information and to (time) gaps in realizing external
requirements. Networking and cooperation between companies is a possible solution
to overcome some of the problems.

The following statement why the surface industry was selected as target group of
establishing a Cooperative Network was given by the industry: “FMMI has identified
several branches among its members as core-branches that have to be supported
intensively. One of these branches is the companies dealing with the treatment of metal
surfaces. FMMI decided to join the project to intensify the support for this specific
branch, as the main goal of VERITAS (creating a network) fits into FMMI’s strategy
towards the surface treatment industry. The expected benefits include the assistance in
creating a network”.230

On the other hand, networking did not enjoy high popularity in the surface treatment
industry. Potential network partners had different expectancies and associations with
networks, their objectives and the coordination activities. While some saw a network
as a possibility to jointly work together, others thought more of lobbying as one of the
main functions.231 At one of the meetings of potential cooperation partners it became
clear that in the target group of the project, only some CEOs were definitely interested
in working together, but most of them were more interested in a kind of information

Although in general cooperation became increasingly important for the industry,233

only cooperation on a rather general level (training, communication etc.) could be
observed. In June 2005, the consortium of surface engineers relaunched the industry
platform and incorporated research and development activities as well as new quality

Further information:, critical statements on REACH:
orschlag/,, all accessed on 30th of May, 2006.
Cf. email of surface industry representative (FMMI), 10th of January, 2005.
Cf. interview number 3, unit 01030468 – 01030473, October, 2005.
Cf. FMMI meeting minutes, 15th of June, 2005; interview number 2, unit 01020338, October, 2005.
233 , accessed on 30th of May, 2006.
The Austrian Case 101

guidelines.234 Reinforced topics were professional training of employees,

communication and information exchange, the organization and arrangement of joint
trade fares and conferences, as well as technical and ecological issues.235 Current
cooperation activity in the surface industry is rather low as the Network Manager
reported in the personal interviews.236 The reasons behind this can be mainly found in
the exchangeability of products, and in the small and therefore highly competitive
market. The Network Manager reports that “(…) there are only a few enterprises that
dispose of real market niches, where they can operate exclusively or with only a few
competitors.”237 Competition between the main players is quite high and customer-
supplier relationships are transparent and stable so that the only way to increase
market shares is crowding-out of other corporations.

Furthermore, there were strong concerns about losing specific know-how.238 First,
surface treatment companies have a high liability on their products and the sector
therefore is highly quality-driven. Second, R&D activities in the surface treatment
industry are often carried out in an experimental way. It might take a very long time
and also continuous improvement that brings companies to a final solution for a
problem239. This does not encourage cooperation or information exchange of
successful procedures. Additionally, SMEs do not strategically foster cooperation
activities240, and suffer from a lack of know-how241 and low information exchange242.
The Network Manager expressed the reasons against networking in “no time, no
interest, and no resources”243. This means that the companies only make use of
networks “(…) if they have a quick and close benefit for their enterprise.”244

234, accessed on 30th of May, 2006.
235, 30th of May, 2006.
Cf. interview Network Manager, October, 2005.
Interview Network Manager, October, 2005. Translated by the author. Original text in German:
„“Es gibt wenige Betriebe in diesem Bereichen, die in wirklichen Nischen sind, wo sie ganz allein
sind, oder wenige Mitbewerber haben,(…)“.
Cf. interview Network Manager, October, 2005.
Cf. interview Network Manager, October, 2005.
Cf. interview Network Manager, October, 2005.
Cf. interview Network Manager, October, 2005.
Cf. interview Network Manager, October, 2005.
Cf. interview Network Manager, October, 2005.
Cf. interview Network Manager, October, 2005. Translated by the author. Original text in German:
“(…)werden nur soweit genutzt, soweit sie im engen und raschen Nutzen der Firmen sind.
Ansonsten nicht, ja.“
102 Empirical Data: Network Formation Processes

Summary and interpretation: To recapitulate, the Initiation phase that consists of the
identification and information of the target group was carried out in a time span of
seven months (July 2004 to January 2005). The process can be described in three
steps: First, an open approach that aimed at inviting as many interested parties as
possible was chosen. Second, – according to low participation rates – the strategy had
to be revised and the heterogeneous sample was restricted to pre-defined sub-sectors.
Finally, in a third step, it became clear that the enthusiasm for being part of a network
cannot be inflicted by an outside institution, following a top-down approach but had to
be derived from internal business and cooperation needs. The original idea to follow
an open approach had to be reconsidered and was changed to a more concrete idea of
with what to link and which roles have to be taken over by supporting institutions.245
In the Initiation phase only one meeting with potential network members took place,
another meeting was cancelled because of low participation rate. On the whole 32
different companies showed their interest in the topic either by participating in
meetings or expressing their interest on the phone.246 Based on the limited number of
registration and little feedback from SMEs an explanation might be that the Austrian
companies lack interest in the topic of networking or at least could not detect the
derived benefit for their own business.247

On a closer look, it becomes clear that most important during the Initiation phase are
the concrete identification of potential partners and the contacting distribution
(Freitag/Winkler, 2000; Eggers/Engelbrecht, 2005). In summarizing the order of
events during the seven months, two major challenges can be identified: First, the
identification of potential interested parties did not follow a concrete strategy and
related measures. The so-called “open approach” was the easiest, but at the same time
the most fault-prone way to initiate cooperation between partners embedded in the
FMMI organization. There was no analysis of needs, nor an examination of earlier
activities or initiatives that could have led to cooperation requirements. The reason for
this can be partly found in the second challenge: The top-down or “external” approach
of course needs a very strong driver, a person (or an institution) that pushes the project
personally and knows how to establish marketing plans for the network. The project
partner FMMI had to be persuaded to participate in the initiative, had even rejected a
participation in a first stage, and did not show commitment during the Initiation phase.

For role allocation cf. correspondence between UNIVIE and FMMI during March, 2005.
Cf. FMMI list of participants and interested parties, November 2004.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise, January, 2006.
The Austrian Case 103

The indicators for low involvement can, for example, be found in the immediate
cancellation of all activities at the point of time where an (advanced) payment was
delayed, in the non-participation in project meetings as well as in poor support of the
process to contact potential cooperation partners. The selection of the surface industry
finally showed the need for a defined target group, but still, the required high level of
involvement (Stahl-Rolf, 2004) was being shifted to a consultant.

5.1.2 Forming

Getting to Know Each Other

After the identification of the target group, all members of the surface treatment
industry were invited via letter to participate in a fist informal meeting.248 In parallel to
the written invitations, the surface industry consultant phoned the CEOs and
personally highlighted benefits of the network formation process.

The first network meeting took place on 12th of April, 2005 in Vienna, and was
attended by representatives of three companies. Although the invitation contained
evidence that further meetings will not be restricted to Vienna, other key players of the
industry did not show up. In total, seven companies had expressed their interest in the
meeting before.249 Given the new business focus of the surface treatment industry,
only one enterprise from the first informative workshops had been included in the new

The agenda for the meeting included a short project description, the introduction of the
partners to each other, a cooperation preparedness test250 and the presentation of the
planned core competence database.251 A core competence database can be seen as a
joint database of all services and products, a network is able to provide. During the
project VERITAS, the three networks should consider a joint database for supporting
their collaboration and the coordination with potential customers.252 The database was
seen as a major “product to be delivered” to the network members, representing a

Cf. FMMI invitation letter, April, 2005.
Cf. FMMI attendance list, 12th of April, 2005.
Description of the cooperation preparedness questionnaire to be found in chapter 4.
Cf. FMMI meeting minutes, 12th of April, 2005; personal meeting notes 12th of April, 2005.
VERITAS, IST 2004-511013, Contract for Specific Support Action, Annex 1- Description of
Work. For more information cf., accessed in November 2006.
104 Empirical Data: Network Formation Processes

benefit for joining the project253 and formed a major focus of the Austrian network in
this phase.254 The idea to have a competence database was accepted by all participants,
but led to a discussion on whom to include, how to present the competencies (in form
of production procedures, different treatments, linked to the customers) and which
legal problems could occur including suggestions on registering in the data base. In
this part, official meeting notes of FMMI and personal documentation differ from each
other. While the meeting minutes contains the information that “(…)after a great deal
of discussion it was decided(…)” to present best practices in the next meeting255, the
author’s notes do not provide any hints on discussion on networks but only on the
combination of companies via a competence data base256. Only during the last part of
the meeting, the topic of discussion changed to the next steps which the major
discussion point of how to present the network idea – basically the linkage of
companies via the competence data base to other potential network members.257 Due
to the very low participant rate, the planned test of cooperation preparedness was
rescheduled to the next meeting.

The second meeting took place on the 15th of June 2005 and was organized in an
industry region of Styria, approximately a two hour drive from Vienna in order to
approach participants who did not have an office or company in the capital. This led
to a participant rate of eight companies, two research institutes, one Competence
Center and an Austrian Cluster258 so that the meeting participants were again
heterogeneous. As agreed during the first network meeting, every representative
should bring additional interested companies.259 260 The meeting lasted four hours and
aimed at discussing expectations, former experience and the next steps for

Cf. VERITAS telephone conference, meeting minutes, 11th of May, 2005.
Cf. VERITAS consortium meeting minutes, 27th of April, 2005.
FMMI meeting minutes, 12th of April, 2005. Translated by the author. Original version in German:
“Nach einer Reihe von Diskussionsbeiträgen wird festgestellt(...)“.
Cf. personal meeting notes, 12th of April, 2005.
Cf. personal meeting notes, 12th of April, 2005.
Cf. FMMI attendance list, 15th of June, 2005.
Cf. FMMI meeting minutes, 12th of April, 2005
As the surface treatment industry comprises around 180-200 members, including research institutes
or competence partners, some other institutions also became interested and participated. However,
the second meeting was officially only announced to those that had expressed their interest before.
For further information cf. FMMI email, 13th of May, 2005 and invitation, 11th of May, 2005.
Cf. FMMI meeting agenda, 15th of June, 2005, and FMMI invitation letter, 13th of May, 2005.
The Austrian Case 105

After an introduction, different best practices of networks like the manufacturing

network Virtuelle Fabrik Nordwestschweiz-Mittelland262 or the Austrian cabinet-
makers’ network Aufmöbler263 and critical success factors were presented.264 One of
the FMMI’s student trainees presented a suggestion how to structure and cluster the
services of the industry. Although it was explained that the user interface of the
database had not been included in the first structure and can be easily adapted to the
industry’s preferences,265 the suggestion of how the competence database should look
like266 led to a discussion about its complexity and the need for a simple front-end. In
this case, the interpretation of the observing party and the official meeting protocol
again differ, because the official protocol only contains very positive remarks on the

The meeting did not contain joint work on strategy or goals. Discussion level was
rather low; around 85% of speaking time can be attributed to the Network Manager
himself.268 While the meeting agenda highlighted group work and no central
moderation, in the real meeting companies to a large extend leaned back and waited
for information and instructions. Based on the initiative of two research institutions, a
brainstorming session on the objectives of the network was done. While it became
clear that different expectations existed in the group,269 one of the members suggested
informing each other about core competencies and strengths. It was agreed to send a
short questionnaire to all members, including a section on core competencies and on
the own idea what to contribute to the project.270

Additionally, at the end of the meeting, a written investigation on the expectancies and
on the cooperation preparedness was carried out. Before the meeting was closed,
evaluation forms were distributed. Eleven questionnaires were filled. The pre-
questionnaire271 revealed that the main factors of cooperation were the establishment
of a long-term cooperation basis (which was confirmed by all companies) aiming to

262, accessed in November 2006.
263, accessed in November 2006
Cf. UNIVIE presentation, 15th of June, 2005; meeting minutes, 15th of June, 2005.
Cf. personal meeting notes, 15th of June, 2005.
Cf. personal meeting notes, 15th of June, 2005.
Cf. FMMI meeting minutes, 15th of June, 2005.
Cf. personal meeting notes, 15th of June, 2005.
Cf. FMMI meeting minutes, 15th of June, 2005.
Cf. FMMI “Competence Presentation”, June, 2005; FMMI meeting minutes, 15th of June, 2005.
For structure and aim of the pre-questionnaire, compare for chaper 4 and the appendix.
106 Empirical Data: Network Formation Processes

increase the companies’ efficiency.272 Further important aspects were the

representation of one face to the customer and capacity sharing. Both aspects can be
partly explained by the high dependence of the automotive industry273 which activates
a strong desire to have more industry power. As decisive prerequisites to enter
cooperation, the existence of clearly defined rules and roles as well as open
communication played the most important role for Austrian network participants,
followed by a clearly defined vision, the trustworthiness of partners and that everyone
takes over responsibility and shows commitment.274 On the other hand, unprofessional
behavior, fraud, but also the lack of legal cooperation agreements would lead to
immediate exit of the better part of potential network partners. Trust was also
identified as being critical for cooperation: at least four out of eleven people were only
“medium trustors”.275 No “low trustor” could be identified, however, one index was
returned without answers. Partners had the opportunity to give recommendations for
trust building in an open questions–section. For the Austrians, getting to know each
other was the most important factor. The suggestions included as well the organization
of meetings as the establishment of a competence database. Mutual visits of each
other’s production plants, the establishment of joint rules as well as open discussions
were also mentioned.

Cooperation Atmosphere
Both meetings were organized within a short time frame from about two hours and
included an informal part with open discussion in the end. Nevertheless, informality
and getting to know each other was quite low at this stage. On the other hand people
tended to talk to each other during the coffee breaks but treated each other with
reservation during the meetings.276

At this point of time, no core competence description or company presentations took

place and mutual visits had not been discussed yet. Still, the number of participants
that committed to the joint activities was rather low and the heterogeneity of the group

Cf. UNIVIE presentation “Fragebogenauswertung – ein Überblick”, 6th of September, 2005.
Cf. personal meeting notes, 12th of April, 2005.
Cf. analysis of critical success factors in UNIVIE presentation “Fragebogenauswertung - ein
Überblick”, 6th of September, 2005.
Cf. trust index results in UNIVIE presentation “Fragebogenauswertung - ein Überblick”, 6th of
September, 2005.
Cf. personal meeting notes 12th of April, 2005;15th of June, 2005.
The Austrian Case 107

At the second meeting, one of the most dedicated representatives extended an

invitation to its subsidiary in upper Austria, including a tour in the production plant
and a visit of the research laboratory. Besides the invitation, this company was present
at every meeting and showed the first initiatives for joint projects.277 The arguments of
the representative were characterized by the need to exchange ideas and know-how by
saying for example “There are a number of people who are experienced in this or that,
what do they think about our ideas?”278 Other partners seemed to be more sceptical
and still did not know if they should join the Cooperative Network or not. Statements
like “(...) I think, that the project VERITAS is one of those EU-projects, where some
institution – whoever it may be, I don’t know, maybe the University or another
institution – gets money in order to spend it.“279 underlined a negative or
undetermined attitude, while others are still in a wait-and-see attitude.280

Reach Commitment and Strategy Formulation

The meeting in Styria was trend-setting as the main discussion points were i) the
definition of a network and ii) the various ideas where to go.281 282 Expectancies were
discussed and it became clear that different foci according to the organizations’
backgrounds arose. While research institutions would have liked to focus a network
more on lobbying and positioning of the surface technologies, technical offices were
looking for customers and others for concrete projects to work on.283 At the end of the
meeting it was agreed that the three sub-groups in the areas lobbying, customer-
oriented solutions and knowledge-exchange should be formed according to everyone’s
preferences, meet before the next meeting and present their concrete objectives at the
next meeting.284

Cf. interview number 1, units 01010058, 01010085, 01010093, October, 2005.
Cf. interview number 1, unit 01010085, October, 2005. Translated by the author. Original text in
German: “Da gibt’s jede Menge Leute, die haben Erfahrung in dem und den Bereich, was sagen
die überhaupt dazu?.“
Cf. interview number 2, unit 01020171, October, 2005. Translated by the author. Original text in
German: „(...) ich glaube halt, dass das Projekt VERITAS ein EU-Projekt ist, wo irgendeine
Institution, wer auch immer das sei, ich weiß es wirklich nicht, ob das Uni oder wer anderes, Geld
bekommen, um es auszugeben“.
Cf. interview Network Manager, October, 2005.
Cf. interview number 3, unit 01030469 ff, October, 2005.
Cf. UNIVIE presentation consortium meeting, 15th of June, 2005.
Cf. FMMI meeting minutes, 15th of June, 2005.
Cf. FMMI meeting minutes, 15th of June, 2005; Cf. VERITAS D41: Report on the experiences with
setting up a Virtual Enterprise. January, 2006.
108 Empirical Data: Network Formation Processes

On the other hand, the project consortium’s suggestions and ideas of methods and
workshops in order to establish a joint strategy285 were rejected by the Network
Manager and the representative person of the surface treatment industry.286 This also
holds for ideas on trust building activities.287 Instead of formalizing the loosely-
coupled network, the idea to reach commitment was supported via informal, but
personal contacts of the Network Manager to potential network members’ quick wins
in order to attract more people for the network.288 His main idea for presenting a
benefit to potential network members was the establishment of the competence
database. All other points, like structural aspects or the decision who really
participated in the network, were postponed. The next planned steps were to enhance
knowledge and experience exchange between partners and identify topics and areas of
mutual interest to at least initiate joint work on a bilateral level.

Nevertheless, the ideas formulated by the FMMI and the surface industry were to
increase the competitiveness and the positioning of the industry as qualified sub-
suppliers. The main tasks derived from this strategy can be seen in the areas
qualification and training, R&D and, innovation, technology and environment and in
the sector of public relations.289

Identification of the Market

Instead of a concrete target market, a “pool of projects” was initiated by the Network
Manager. Companies could address him with project ideas or specific challenges they
had to face so that he could look for the right partners or experts. Basically, the
Network Manager started Brokering activities as he selected and contacted potential
partners for different ideas.

First suggestions and working projects arose in July 2005290 and contained i) a request
for knowledge in how to galvanize gas-nitrated parts,291 ii) a request for selling a used
waste-water-treated machinery and iii) a suggestion for an R&D project, that is the

Cf. UNIVIE/SFC: Recommended Structure for Workshop 2, April, 2005.
Cf. personal meeting notes,15th of June, 2005.
UNIVIE/SFC. Suggestions on how to build trust in networks, 16th of February, 2005.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006.
Cf. FMMI presentation, review meeting, 10th of February, 2005
Cf. VERITAS telephone conference, personal meeting notes, 6th of July, 2005.
Cf. email of surface industry responsible to network members, 22nd of July, 2005
The Austrian Case 109

construction of a prototype of a new method to galvanize motor-parts.292 Concerning

the last business idea, the Network Manager supported the members with finding the
right partners, writing proposals. The “owner” of the ideas and the contributors were
not communicated officially until the end of the VERITAS initiative.

Summary and interpretation: To sum up, the Forming phase can be interpreted as a
phase that took place from February to August 2005, which is seven months. During
this time frame, two official network meetings took place where target companies
came together and a group of potential participants vaguely formed. People got to
know each other from a business and private perspective – at least to some extent.
However, the process of getting to know each other was a little bit difficult, as not
every company participated in every meeting. After the second meeting, 14 different
institutions had expressed interest, three of them had not participated at any of the
meeting and only three had taken part in both meetings. The network at this stage was
characterized by mutual partner selection and the nomination of new partners. The
companies decided on their own whether they would form part of the network or not
and therefore decide with whom they would like to cooperate.

The role of the Network Manager was assigned. Although no official application and
selection phase took place, he was accepted immediately because of his consulting
activities in the business sector. He took over a central rule in bringing companies
together, and introducing them. His behavior and attitude how to organize the partners
was crucial at this stage of formation.

According to Tuckman (1965) people do not know where to go, what to do, whom to
follow and ask a lot of questions in the Forming phase. This could be clearly observed
in the considered time frame: Representatives behaved insecurely, did not talk a lot
and seemed to expect a strategy or an impetus from outside. Abstract discussion
determined the conversation. The discussion and questioning of the competence
database can be seen as an indicator for the predominance of uncertainty.

Cf. FMMI presentation, review meeting, 26thth of January, 2006; personal meeting notes, 6th of
October, 2005; interview number 1, unit 01010084, October, 2005.
110 Empirical Data: Network Formation Processes

West (2004) even mentions the high anxiety in this phase where concerns about the
strategy and about the role of the management may arise. In this case, the atmosphere
was very calm and observant. It seemed that the potential members were still in the
decisive phase and wanted to get more information before they finally commit to the
cooperation. This can for example be confirmed with expressions like “I decided to
participate to the first VERITAS meeting without commitment”. 293 Another expression
was “It was nice, friendly, open; but I had the impression, that a lot of (participants) –
and I think it were two-thirds – were in an observing position.”294

The low participation in discussions can either be attributed to the strong need for
guidance and leadership, but also to the need for protection: Typically, the information
given to partners or group members is quite low in the beginning. Courteousness and
reservation could be observed during the meetings, and no criticisms were openly
expressed. These aspects reflect typical characteristics of politeness in the Forming
phase (Tuckman, 1965). The need for formalization and structure was present in
several parts of the study295, although not observable during meetings.

During the Forming phase, partners are introduced to each other, get to know each
other and are supposed to decide on at least a joint strategy or direction where to go.
Most important therefore would be the formalization of joint goals (West, 2004) and
the establishment of trust based on joint meetings and numerous contact points
(Handy, 1995). Unfortunately, none of these two points were fulfilled during this

5.1.3 Storming

Working Together
As agreed in the meeting on the 15th of June, 2005, core competencies should be
reported and companies were expected to meet in the working groups. However, the

Cf. interview number 1, unit 01010104, October, 2005. Translated by the author. Original text in
German: “Veritas, das ist auch wieder so etwas, das horche ich mir auch an.(... )“
Cf. interview number 2, unit 01020214, October, 2005. Translated by the author. Original text in
German: “Es war nett, freundlich, offen, aber ich habe schon den Eindruck gehabt, dass sehr sehr
viele und damit meine ich 2/3 in einer Abwarteposition waren.“
Cf. results of the Virtual Degree in UNIVIE presentation “Fragebogenauswertung – ein Überblick”,
6th of September, 2005.
The Austrian Case 111

next joint activity was not before the 6th of September 2005, where another network
meeting took place.

The meeting was hosted by the innovative company that had invited the other
companies to their plant and offered a guided tour through the manufacturing site. The
preparedness to share inside information with other companies was answered by a
participation rate of 12 companies, three of them completely new to the project.296 The
agenda contained i) the project status of Austria, Belgium and Turkey, ii) the reporting
of existing project initiatives and iii) the competence database and its process status

After a short overview on the current projects including the current situation that the
competence database was nearly ready and would be sent to the partners as soon as the
technical part by ARMD was ensured, the Network Manager moved on to an overview
of the current projects during the first part of the meeting.298 The three projects that
have been initiated during summer were explained:
ƒThe nitration of galvanized parts: Knowledge exchange in order to support a
specific customer request in hardening. Several anonymous answers were
received by the Network Manager at that point of time.
ƒThe development of a motor part: The development of a new technology led to
a call for partners which means that interested parties could apply for
participation. The project idea should ideally be based on public funding.
ƒThe sales and retro-fitting of second hand machinery: One company was
looking for clients to buy the machine.

All the information on the projects was given on a rather superficial level,299 without
mentioning the concrete solutions or even the names of the project initiators. Besides
the second project, the ideas were bilateral cooperative projects where information or
contacts were shared by means of the Network Manger as the connecting part between
actors.300 However, the idea of jointly developing a prototype was inserted by the same
company that invited the others to visit its plant, which underlines the high
preparedness of this institution to cooperate with others on a business level.

Cf. participant list, 3rd network meeting, 6th of September, 2005.
Cf. agenda 3rd network meeting, 6th of September, 2005.
Cf. personal meeting notes, 6th of September, 2005
Cf. VERITAS Diary, 7th of September, 2005.
Cf. VERITAS D41: Report on the Experiences with Setting up a Virtual Enterprise, January, 2006.
112 Empirical Data: Network Formation Processes

The Network Manager did not mention the companies involved in the concrete
projects, neither did he provide any details, but offered interested parties or people
who would like to initiate another project, to address him trustfully. Joint working was
shifted to the single projects, and no information was given to those not involved.
Furthermore, no detailed documentation took place and even the final report of the
Network Manager only included rough project descriptions, protecting companies’
names or detailed information on potential and current solutions.301 Nevertheless, the
meeting protocols included very positive statements about development and status of
joint work.302

In a second phase of the meeting, participants were provided with current information
on funding policies: The Network Manager discussed difficult subventions of the
Austrian government and new issues in the sector like a new regulation of chemical

After two hours and right at the end of the official agenda, the results of the
questionnaires distributed during the first phase were asked to be presented briefly.304
As this part was not mentioned on the agenda, nor was there equipment or time
provided for the explanations, the presentation was rather short and detailed
documentation was forwarded to all members afterwards305. The presentation therefore
was restricted to the highlights and most outstanding results like the need for rules and
cooperation agreements on the one hand and the negligibility of geographical
closeness and technical trainings on the other hand; advocacy for long-term
cooperation; the importance of trust and professionalism and the diversity of
suggestions how to establish joint strategies and trustful relationships.306 Although
some companies seemed to be interested, others were skeptical concerning the
results307: One of the representatives, who attended the meeting for the first time, said
that he was not surprised that the proximity and knowing his partners before starting
cooperation is ranked far behind the other issues. He thought that companies did not
trust each other and therefore would be glad if their competitors were far away.
Furthermore, the results were partly questioned by the companies and the Network

Cf. Network Manager’s intermediate report, 3rd project period, December, 2005.
Cf. meeting minutes, 3rd network meeting, 6th of September, 2005.
Cf. meeting minutes, 3rd network meeting, 6th of September, 2005.
Cf. email of surface industry representative (FMMI) to UNIVIE, 22nd of August, 2005.
Cf. VERITAS Diary, 7th of September, 2005.
Cf. UNIVIE presentation “Fragebogenauswertung – ein Überblick”, 6th of September, 2005.
Cf. VERITAS D41: Report on the Experiences with Setting up a Virtual Enterprise, January, 2006.
The Austrian Case 113

Manager as not being representative because of the small sample. On the whole,
reactions during and after the meeting reactions were quite low.308

The official meeting lasted around one and a half hour; afterwards, the tour through
the manufacturing site took place. During this tour, most of the parties were very
interested and listened carefully. As the leading company was seen as one of the most
sophisticated and high-technically equipped plants in this sector, people asked a lot of
questions as well.309

After the meeting, an additional project idea was distributed to the interested parties.310
The topic of interest was a special challenge in galvanization and the initiator was
looking for companies that had had the same problem before and could help with their
expertise. The invitation was formulated as follows: ”We are looking for partners that
are prepared to share their technical know-how (…)” and contained the question
“Who has experience with the electro galvanization (on zinc) of gaseous parts?
(…)”.311 The project could be classified as pure knowledge and information

Although it was agreed to work in the sub-groups, there had not been any meeting
during the summer. Only after this meeting, the FMMI invited the three subgroups to
meet at their office and participated both, the Surface treatment Representative, as well
as the Network Manager.313 In total, eight people participated in the subgroups.

ƒThe Knowledge Exchange workshop incorporated four project partners, where

one had not been at a meeting before. The objective of the meeting was
formulated as “(…) designing suggestions how to enhance knowledge exchange
between members of the Austrian Surface Industry, but also international and
inside the companies.”314 The result of the meeting were four topics that should
be improved in the future: i) Knowledge exchange between international

Cf. VERITAS Diary, 7th of September, 2005.
Cf. personal meeting notes, 6th of September, 2005.
Cf. email of FMMI / Network Manager to the project partners, 20th of September, 2005.
Cf. email of FMMI / Network Manager to the project partners, July, 2005.
Cf. email of FMMI / Network Manager to the project partners, 20th of September, 2005.
Cf. FMMI invitation to VERITAS working groups, 10th of October, 2005.
Cf. meeting minutes group “Knowledge Exchange”, 20th of October, 2005. Translated by the
author. Original text in German: ”Erarbeitung von Vorschlägen um den Erfahrungsaustausch
innerhalb der österreichischen OT Branche, international, aber auch innerhalb von Betrieben zu
114 Empirical Data: Network Formation Processes

VERITAS-project partners, ii) the improvement of internal communication

processes in the companies themselves, iii) the concentration of information for
non-German native speakers and iv) the idea of establishing an anonymous
forum to discuss current challenges of the Surface companies.315 No concrete
steps or suggestions were reported.
ƒThe last point was also an issue in the group for Customer-Oriented
Solutions,316 where the clearly formulated objective of the seven participants
(three of them new) was to establish a knowledge platform like with a search function that enables potential
customers to look for different application areas, different forms of
galvanizations, and also technical requirements like protection against
corrosion.317 It was agreed to jointly develop a questionnaire for potential
customers. All project partners were invited to prepare topics of interest that
should be addressed in the questionnaire.318
ƒIn the workshop of the Lobbying working group with four participants, three of
them new, it was agreed to organize events and seminars for the members of the
Surface treatment and to develop proposals for projects in technical colleges.319
The ideas incorporated for example the preparation of relevant information
from the Surface treatment industry to FMMI companies, the development of
concepts how to incorporate concrete business projects in the formation of
mechanical engineers.320 Although the suggestions were rather concrete, no
action plans were established.

No agreements on further meetings were made by any of the groups.

A meeting planned for the 6th of December, 2005, where a cluster expert from Upper
Austria was invited to give a talk on his experience,321 was cancelled because of no
registrations322 although the date had been announced one month earlier.323 Based on
the communicated need to learn more about networks, the manager of the Plastics

Cf. meeting minute group “Knowledge Exchange”, 20th of October, 2005.
Cf. meeting minute group “Customer oriented Solutions”, 20th of October, 2005.
Cf. Network Manager’s presentation at the final VERITAS meeting, 18th of January, 2006.
Cf. email of surface treatment representative to project partners, 21st of October, 2005.
Cf. meeting minutes group ”Lobbying”, 20th of October, 2005.
Cf. Network Manager’s presentation at the final meeting, 18th of January, 2006.
Cf. agenda of the 4th network meeting, 6th of December, 2005.
Cf. email of surface industry representative to project partners, 5th of December, 2005.
Cf. email of surface industry representative to project partners, 8th of November, 2005.
The Austrian Case 115

Cluster in Upper Austria would have given a talk on his experiences.324 In this cluster
initiative as well knowledge exchange, lobbying, formation and training of existing
and future employees and trainees as well as joint research and business project are

In December 2005, an article about the current status of the competence database was
published in the industry journal of the “Working Committee Surface Treatment”.325 It
was reported that the former “Supply and Service Catalogue” could be restructured
and was intended to be sent to all the members of the industry for self-actualizing.
Again, an invitation to join the working groups was expressed.

Discussion of Rules and Roles

No rules were established during these months, although the results of the
questionnaire clearly reveal the need for structure.326 Although the atmosphere in the
meeting was described to be “(…)good and constructive” by the surface treatment
representative,327 it was at the same time recognized that the low discussion level
could be attributed to the moderating style of the Network Manager.328

First attempts for establishing at least a joint overview of core competencies had been
made during the meeting in June 2005 and led to another discussion on the 6th of
September, 2005: The idea to define the own core competencies led to a big discussion
on the general definition of a core competence: Some of the companies argued that
they of course would be able to produce everything a customer wants, because they
would always find a solution with external partners.329 The partner that had
continuously developed to be an important member of the group finally suggested
drawing the line between those activities that a company definitely is producing on its
own and those that it would be able to produce.

Implicitly, however, some rules seem to have been appointed. First, the regular
organization of short and compressed meetings that ostensibly lead to an information
exchange between partners. Second, the main business process in the network is

324, accessed in November 2006.
For further information cf.: “Kompetenz Oberfläche: Die Mitgliederinformation der ARGE OT“,
01/2005, p. 4.
Cf. UNIVIE presentation “Fragebogenauswertung – ein Überblick”, 6th of September, 2005.
Cf. FMMI presentation at the 3nd review meeting, 26th of January, 2006.
Cf. FMMI presentation at the 3nd review meeting, 26th of January, 2006.
Cf. VERITAS Diary, 7th of September, 2005.
116 Empirical Data: Network Formation Processes

coordinated by the Network Manager who gets information, neutralizes it and

distributes it again. It seems that all partners have agreed on this procedure and the
related anonymity in the network. In the second suggested project, there was the need
for more concrete rules and distribution of work, which was definitely followed by
establishing a written concept and a formal agreement between potential partners.330

Two main roles developed over time. The Network Manager represented an
indispensable intermediary between the companies. He brought the companies
together, identified the most important topics, and took the main decisions for the
network. During that time his role also became official, as he received a contract for
his work. The Network Manager carried out his work according to the following
scheme:331 A first conversation at any company’s initiative helped to clarify the topic
and the general conditions. In a second step, the business idea or request was
formulated as an anonymous tender. The Network Manager then organized a meeting
with all interested parties, including those who were part of the surface treatment and
the project VERITAS, but also other companies that might be helpful.332 Based on the
decisions and directions of this meeting, he either accompanied further steps or
distributed results to other interested parties. In the network meetings, he talked for
nearly all the available meeting time and provided information to the participants,
which also led to the fact that the companies themselves did not have any discussion
on the rules or roles, not even on common needs and objectives.333

Besides the Network Manager, the company that invited the others to its production
site played a major role as a multiplier and as the one who brought in ideas on how to
work together. The open-minded management of this company led to the guided tour
in the own production plant.

Concerning the rest of the network, no joint identity can be identified. At this stage,
there were no clear boundaries how to define, who is “in” and who is “out of” the
network. 334 Different approaches how to count members led to the following result.
In December 2005, 32 people from different firms were nominated to be members of

Cf. interview number one, unit 01010059, October, 2005.
Cf. Network Manager’s presentation at the final meeting, 18th of January, 2005.
Cf. the description of the open approach in the meeting minutes of the Network Managers’
meeting, 17th of November, 2005.
Cf. VERITAS D41: Report on the Experiences with Setting up a Virtual Enterprise, January, 2006.
Cf. personal meeting notes, 6th of October, 2005.
The Austrian Case 117

the VERITAS network by the Surface Industry Representative;335 a few of them had
never participated in one of the network meetings before. A core group of six to seven
(rather heterogeneous) companies which were involved in most of the communication
and working groups can be identified. According to the Surface Industry
Representative, around ten companies had been constantly involved in the network

After the meeting on the 6th of September, 2005, participants still thought of bringing
other people to the network by asking for joint communication strategy and a project
folder.337 Additionally, there was high need for information about the project, its
objectives and its embedding in the European Subvention policy, which reflects a low
information status of the interested parties.

Handling Conflicts
One main conflict that affected the members of the Austrian Network was based on
trouble with the VERITAS project partner ARMD because of database. Since the joint
database had being communicated as a central benefit of the project, its success was
crucial for the surface industry and for the Network Manager. Nevertheless, the
software to be provided was based on suggestions of ARMD, customized according to
the associations’ needs, but based on an interactive process between the VERITAS
partners.338 According to the FMMI, ARMD was seen as the software delivery service
that had to adopt the wishes of its “clients”, i.e. the project partners.339 The discussion
about the database mainly contained clarification of responsibility and the possibilities
to adapt the database according to the own wishes. During the meeting on the 6th of
September, the fault and delay were shifted to the Greek partners.340 341 In this
meeting, the Network Manager also mentioned that Austria had only become a
member of the project because of the possibility to improve the competence database
of the surface industry by getting a free software package from ARMD.342

Cf. email of surface industry representative to VERITAS partners, 5th of December, 2005
highlighting business contacts of 37 VERITAS members.
Cf. FMMI presentation at the final VERITAS meeting, 18th of January, 2006.
Cf. VERITAS Diary, 7th of September, 2005; email of surface industry representative to project
partners, 8th of September, 2005.
VERITAS, IST 2004-511013, Contract for Specific Support Action, Annex 1- Description of
Work. For more information cf., accessed in November, 2006.
Cf. meeting minutes, 3rd network meeting, 6th of September, 2005.
Cf. VERTIAS Diary, 7th of September, 2005.
Comment of the author: According to the Greek partner, most of the troubles could have been
avoided by having participated in the planning meetings during the first phase of the project.
Cf. VERITAS Diary, 7th of September, 2005.
118 Empirical Data: Network Formation Processes

Another concern was that two members of the surface treatment representative board,
who normally acted as strong competitors, were both interested in the project.
Whenever one of them was participated in a meeting, the other one did not.

On the whole, there seemed to be more conflict avoidance than conflict itself. During
the official meetings, participants did not talk to each other or involve in the
discussion. The interviews reveal high conflict potential based on the fear to lose
know-how to competitors.343 Furthermore, the idea to invite companies to their own
plant was not followed up by companies other than the leading partner.344

The strong mistrust was also reflected by the search procedure of interview partners
where it was quite difficult to convince the members of the network to give an official
statement to the project status and to report on former experiences and current
expectancies345. Based on the challenge to establish trustful relationships to each other,
the results, concerning trust aspects are of special interest. As table 11 shows, the
Austrian entrepreneurs talked about trust in 19 sections and only used the term “trust”
37 times. Only one interviewee focused specifically on the concept of trust.346
Interestingly, mistrust was only discussed by the Network Manager.347 All
interviewees had personal preferences as to what experiences to mention. While
Interviewee 1 focused on the rules and roles and the necessity of concrete business
ideas, Interviewee 2 revealed partly negative experiences of the interviewee that led to
a rather critical evaluation of the networking concept. Based on the results of the
Content Analysis,348 10.9% of the units focused on trust, whereas 16.2% referred to
the necessity of commitment and one third of all units analyzed explicitly focused on
Network Management issues.349 From the 87 units that focused on the topic of trust,
most important was the imperative to get to know each other which can be related to
Handy’s (1995) rule of “trust needs touch” where he recommends that people have to
meet in person formally, as well informally.350

Cf. interview number 1, unit 01010159; interview number 3, unit 01030454 ff., as well as unit
01031462; interview number 4, unit 01040643, October, 2005.
Cf. meeting minutes of Network Manager Meeting, 17th of November, 2005.
Cf. email of FMMI student trainee to UNIVIE, 31sth of August, 2005.
Cf. interview number 2, October, 2005.
Cf. VERITAS D51: The importance of trust in the phase of network formation, January, 2006.
First results are displayed in Kutucu (2006).
Author’s comment: Please note that the interview of the Network Manager is not included in this
For further information cf. VERITAS D51: The importance of trust in the phase of network
formation, January, 2006.
The Austrian Case 119

Taking a closer look at the network management issues, most important to discuss
were the coordination of partners and activities (65 of 263), leadership issues (53 of
263) and contracts and legal agreements (41 of 263). Other highly relevant factors
were the reasons for and against networking, with a portion of 12.6%, which reflects
higher concern than trust issues. Interestingly, 22 of 100 units were reasons against

To conclude, trust was recognized as an important factor in cooperation but was not a
predominant issue in all interviews. While the Network Manager focused on trust
aspects, other interlocutors only mentioned it selectively.
Time/Place Atmosphere Main topics Trust related issues Frequency Point of time

1 51:50 Friendly and Importance of rules Trust related to fair comportment, Topic is End of interview
Company office professional but didn’t and roles, necessity trusting each other depends on discussed two
want to spend too much of concrete business personal emotions (first sight or “gut times, “trust” is
time. Narrative telling ideas. Examples of instinct”) used twice
worked in the beginning, cooperation
later the interviewee
seemed to wait for
2 55:09 Comfortable. Interviewee VERITAS project, Trust as non-disclosure of information. Topic is Starts in the middle
Trade started with a very Competition and Trust as prerequisite for networking, discussed seven of interview, topic is
association positive statement about profit maximization, based on personal aspects. Trust is times (two times discussed in a
Austria cooperation but later former experiences more important than liking each other, personal trust), longer dialogue
more and more (partly negative) but cannot be enforced. Describes “trust” is used 21 between
questioned the concept himself as “overtrustful”. People must times throughout interviewer and
of networking. be trustworthy for networks, Trustful speaking interviewee
relationships as basis of cooperation
3 46:16 Relaxed, calm, and Gives examples, Trust related to fair comportment (one Topic is Middle of interview
Trade comfortable. Interviewee technical co- must be able to trust his partners) discussed one
association was more prepared to operation, need for time; “trust” is
Austria answer questions than to networking exists used twice.
report own experiences
4 50:24 Very friendly, Problem of Trust depends on getting to know each Topic is Two times in the
Company office interviewee made efforts information other, trust cannot be enforced, trustful discussed four beginning, one in
to give a good exchange, relationships should be protected to the times, “trust” is the middle, one in
contribution. networking concept in outside, trust grows after successful used five times the end (answering
Austria, importance projects a specific question
of informal events on trust)
M 54:17 30 minutes late. Friendly Problems of SMEs, Trust takes time. Trust in the institution Topic is Mainly first third of
Trade atmosphere, detailed high competition, of the Network Manager, Mistrust is discussed five interview.
association and extensive crucial role of Net- related to the fear of losing competitive times (two times
Austria explanations. Very work Manager, advantages. the Network
confident and convinced participants have to Manager, two
of own ideas. know each other times mistrust),
term “trust” used
seven times,
“mistrust” once.

Table 11: Trust Issues in Austrian Interviews

Empirical Data: Network Formation Processes
The Austrian Case 121

Summary and interpretation: The Storming Phase was entered as soon as the first
project started and people began work with each other. This is the point where
independent activities were changed into more or less joint ideas. The phase took place
from around September 2005 to January 2006, that is, five months. First projects and
at least bilateral information exchange started.

The Storming phase is seen as the most crucial phase in group development and is
often decisive for the participant’s decisions to stay or leave a team which could result
in a team’s failure (Tuckman, 1965). Norming and Performing seem to be easy once
the Storming phase has been completed (West, 2004). Generally, Storming reflects the
phase when relations and authorities are established, subgroups are built and everyone
looks for his space in the collaboration setting. As can be learned from the meeting in
September 2005, the different actors had different expectancies and ideas where to go,
but also how to proceed. The network had not become a joint group during this time –
the expressed need for structure, guidance and formalization that can be derived from
questionnaires and interviews was without response at this stage. No discussions or
consensus finding on a joint strategy had taken place and project-wise suggestions for
strategy and rule-finding workshops had been refused by the Network Manager.

The authority of the Network Manager was crucial at this point of time: On the one
hand, it seems that he recognized the need for information exchange and wanted to
support the network members by bringing the people and institutions together and
provide them with current and relevant information. On the other hand, by restricting
the information to a rather superficial level, where none of the auditors was able to
find out what was going on in the different projects, he actively supported the
establishment of anonymity and secrecy. He continuously took over control of the
network, including the fact that he openly spoke about his personal impressions and
doubts about networking and the VERITAS project, including negative remarks about
the project consortium, like for example about ARMD. Interestingly, he offended his
employer – which was the VERITAS consortium – and therefore behaved more like a
member of the team who would like to resist by dominantly moderating network
meetings, for example.

Although no obvious conflicts could be observed, resistance was one of the most
noticeable emotions. Meetings were cancelled or were subjected to low participation
rates are accepted, and people did not reveal any additional company information.
122 Empirical Data: Network Formation Processes

The fact that the sub-groups Knowledge Exchange, Customer-oriented Solutions and
Lobbying did not organize themselves for a meeting shows that structural and
administrative tasks were shifted to the role of the network management.

The distribution of requests and answers was characterized by strong anonymity and
non-disclosure of information, which maybe describes a subliminal conflict: In the
interviews 22% of the formulated reasons for or against networking reflected negative
attitudes or skepticism.351 This relates to a phenomenon in the Storming phase where
the concept itself is questioned by the participants: On the one hand, people feared
losing their know-how and were not willing to exchange ideas because of possible
misuse for own purposes. On the other hand, some of the participants even questioned
whether networking works by critically analyzing results of the questionnaires or by
mentioning that perceived personal benefits that every single actor could get out of the
network were always the most relevant questions in the beginning.352 This was also
supported by the arguments of the Network Manager himself who continuously
underlined than an open-minded network in the surface industry was not possible.353
These considerations are described as “(…) questioning the wisdom of those who
selected this project and appointed the other members of the team” (Alleman, 2004).

Another factor was the establishment of sub-groups. The working groups established
their own identity, their own way to exchange information and seemed to be much
more coherent than the larger loose network. The Network Management obviously
supported the establishment of those sub-groups.354

All in all, the Storming phase was characterized by skepticism and reservation and it
was thought to be crucial for the Austrian network to cope with these emotions in
order to form a joint network. The Network Manager as the representative of the
network became increasingly important and trend-setting.

Cf. interviews 1-4, October, 2005.
Cf. interview number 4, unit 01040567, October, 2005. Original text in German: “Die ersten
Fragen, wenn man mit einem Netzwerk kommt, sind immer die, was habe ich von euch? Was bringt
mir das, wenn ich dabei bin? Was bringt mir das, wenn ich mitfahre, mitarbeite? Der fragt sich
immer nach dem Nutzen,(...)“
Cf. interview Network Manager, October, 2005; Network Manager’s presentation at the final
meeting, 18th of January, 2006.
Cf. interview 1, unit 01010063 ff, October, 2005.
The Austrian Case 123

5.1.4 Norming

Establishing Rules or Regulations How to Work Together

A final meeting on 18th of January 2005 took place in a seminar hotel near Vienna
including a formal dinner and a wine–tasting event.355 14 project partners joined, three
of them had never been at one of the meetings before.356 Companies had to be invited
several times,357 including a keen email of the Network Manager who mentioned the
importance of establishing contacts between companies and people and demanded the
participation of everyone.358 The idea of the meeting was to have a formalized
completion of the VERITAS project, and to decide on future steps. The agenda of the
final meeting further contained final presentations of the three VERITAS networks,
results of the joint work in Austria and a section called “lessons learned”.359

At the meeting, the results of the joint projects were presented. Eight “projects”
including the competence database, the establishment of expert groups, and the
establishment of international contacts were reported to be carried out during
VERITAS so far.360 Table 12 represents the five business projects that were mentioned
to have been successfully integrated into the VERITAS project.361

Project Start of End of Initiator

project project Sector Employees
A Nitration of galvanized 10/07/2005 09/08/2005 Surface treatment Not specified
B Sales and Installation of 15/07/2005 Open Technical 0
2nd hand machinery Consultant
C Chrome-plating and 15/09/2005 Open Surface treatment 50
galvanizing line
D Development of motor 15/09/2005 To be finished Hardening; 70
part in August 2006 Machinery for
E Powder coating line 22/11/2005 To be finished Surface treatment 14
in 2006

Table 12: Austria: Network Project Overview

Cf. FMMI presentation at the 3nd review meeting, 26th of January, 2006.
Cf. participant list, 18th of January, 2006.
Cf. email of surface industry responsible to project partners, 4th of January, 2005.
Cf. email of Network Manager to project partners, 9th of January, 2005.
Cf. agenda final meeting, 18th of January, 2005.
Cf. Network Manger’s presentation at the final meeting, 18th of January, 2005.
Cf. FMMI presentation at the 3nd review meeting, 26th of January, 2006.
124 Empirical Data: Network Formation Processes

Project A) contained knowledge-exchange via the Network Manager who

anonymously collected and distributed information and experience, projects C) and E)
included the installation of working groups and mutual visits in order to gain ideas for
the restructuring process of a manufacturing plant. This project was enriched with the
involvement of external consultancies.362 363 Project B) was brought to the network in
order to find potential customers. A complete funding strategy was developed for
project D) where the treatment of a certain motor part required substantiated research
activities in a team of three companies.364 For this project, finally a national funding
institution was contacted and further partners like a university and potential customers
were involved in a project proposal.365 Additional information about the project could
also be found in the branch specific journal or website of the surface treatment

Besides the report on the projects, there was a short report on the ideas of the three
established working groups Knowledge Exchange, Customer-oriented Solutions and
Lobbying. In the meantime and with help from one of the institutions involved in
VERITAS,367 a questionnaire for all members of the FMMI had been designed in order
to find out about the needs of potential customers of the network.368

Crucial factors like time, trust, the concrete benefit for all the partners as well as the
establishment of Network Manager were highlighted as “lessons learned”.369
Additionally, the concept of anonymity was highlighted by the Network Manger and
the Surface Industry Representative as being crucial for bringing together companies
from the surface industry.370 From the participants themselves, new business contacts
as well as concrete business opportunities were mentioned as the most important

Cf. Network Manager’s report: Description and Current State of Networking Projects in Austria,
10th of December, 2005.
Cf. Network Manager’s presentation at the final VERITAS meeting, 18th of January, 2006.
Cf. Network Manager’s report: Description and Current State of Networking Projects in Austria,
10th of December, 2005.
Cf. Network Manager’s presentation at the final VERITAS meeting, 18th of January, 2006
ot/index.php?site=ak_kommunikation_detail&id=4&detail=arbeitskreise&name=Kommunikation ,
accessed in June, 2006.
Cf. interview number 4, October, 2005.
Cf. personal meeting notes, 18th of January, 2006.
Cf. “lessons learned” in Network Manager’s presentation, 18th of January, 2006 as well as in FMMI
presentation at the 3nd review meeting, 26th of January, 2006.
Cf. “lessons learned” in Network Manager’s presentation, 18th of January, 2006 as well as in FMMI
presentation at the 3nd review meeting, 26th of January, 2006.
The Austrian Case 125

highlights.371 On the other hand, the head of FMMI expressed his unhappiness with the
development of the VERITAS initiative, stressing the fact that he could not detect any
added value for the members of the association.372

At the end of the meeting, the surface treatment representative expressed that the “(…)
future of (…) network (is) up to its members (…)373” but that there existed “(…)
different possibilities of development.”374 Several possibilities were presented,
including i) continuing like before through the self-organizing of small projects, ii)
establishing a loose organization without a Network Manager, but based on a formal
contract or iii) establishing a fixed network with a rewarded Network Manager.375
Companies were advised to express their interest in future cooperation by sending a
short email, and then they would be invited to a meeting during February 2006.376

With the meeting minutes, an official request for continuing the network was sent out
to all members, asking them to decide their interest in joint activities, and in the
possible structural and financial solutions.377

Establishing Roles
In order to benefit from mutual exchange, a meeting of the Austrian Network Manager
with the Network Manager in Belgium and in Turkey was organized for the 17th of
November 2005.378 The meeting agenda included a sequence of presentations as well
as discussion and exchange forums.379 In contrary to the two other representatives, the
Austrian Network Manager did not prepare a presentation but presented the
development and status in an oral talk.380 Main elements in his description of the
situation contained troubles between organizations of the surface industry and the
representative partners at the Chamber of Commerce, as well as the problem of an
industry with very small companies. His main ideas of the project were i) to create a
competence catalogue, ii) to create knowledge for the companies via “learning by

Cf. FMMI meeting minutes, 18th of January, 2006.
Cf. personal meeting notes, 18th of January, 2006.
Cf. FMMI presentation at the 3nd review meeting, 26th of January, 2006.
Cf. FMMI presentation at the 3nd review meeting, 26th of January, 2006.
Cf. FMMI presentation at the 3nd review meeting, 26th of January, 2006.
Cf. personal meeting notes, 18th of January, 2006.
Cf. FMMI Meeting Minutes, 18th of January, 2006.
Cf. invitation SFC to Network Managers, 3rd of November, 2005.
Cf. agenda Network Manager meeting, 17th of November, 2005.
Cf. personal meeting notes and meeting minutes, Network Manager meeting, 17th of November,
126 Empirical Data: Network Formation Processes

doing” and iii) to provide the interested companies with information on best practices
and funding policies.

The overall idea of the meeting was to develop an action plan, with respect to the
current situation in the country. For Austria, the identified challenges were mainly in
the technical area, and the solution proposed by the Network Manager was to look for
cooperative concepts or collaboration with international networks.381 He expressed that
together with the Surface Industry Representative collection of general information
was possible, but thought that more active involvement was not necessary at the

In order to find out about roles and important actors in the network, a network analysis
evaluation did take place. The questionnaire was sent to the network members on the
19th of December 2005 and distributed during the final meeting on the 18th of January
2006.383 On the whole, only seven questionnaires out of the list of 37 VERITAS
members384 had been returned, others were provided with remarks like “Because of
the fact that I could only participate at one single meeting, it is not possible for me to
make such decisions.”385 Nevertheless, the detailed results revealed that most of the
questionnaires had been returned with a lot of variations – instead of selecting the
three people, a statement can be most related with, respondents arbitrarily voted for
one, two, four or even five opponents and left a lot of questions behind. Only one
interviewee selected three partners for answering “This person I would like to have a
fixed partnership with:”386 and only one person selected another one to describe that
he “(…) would be more effective in my work if I were able to communicate more with
this person:”387

Cf. meeting minute of Network Manager meeting, 17th of November 2005.
Cf. meeting minute of Network Manager meeting, 17th of November 2005.
Cf. VERITAS D51: The importance of trust in the phase of network formation, January, 2006.
Cf. email of surface industry representative to VERITAS partners, 5th of December, 2005 including
business contacts of 37 VERITAS members.
Cf. forwarded email of network member, sent via FMMI to UNIVE, 19th of December, 2005.
Translated by the author. Original text in German: “Nachdem ich aus Zeitgründen gerade ein
einziges Mal an einem Meeting teilnehmen konnte, ist es mir leider nicht möglich, hier die
entsprechende Auswahl zu treffen.”
Cf. network analysis questionnaire, December, 2005.
Cf. network analysis questionnaire, December, 2005.
The Austrian Case 127

Summary and interpretation: First attempts to develop norms for the network could
be recognized during November 2005 based on the Network Manager meeting, but
further efforts have not been carried till the end of project time. At the meeting on 18th
of January 2006, a turning point was reached: With the official end of the research
project, former and ongoing activities were analyzed in retrospect and future
possibilities were identified.

Feedback from the participants showed that they generally enjoyed the good
atmosphere and the business contacts and although most of them had been skeptical in
the beginning, they thought that the project should be continued.388 Nevertheless, at
this point of time, no network identity was present. Although those companies that
participated in the final meeting might have felt as being part of a project, there had
been difficulties to make them join the meeting. Additionally, the failure of the
network analysis and the selective response to the questions clearly showed that the
participants were not able to feel and act like one joint network, since they had not
gotten to know each other until this point of time. On the other hand, they were
interested in the results and did not want to miss important presentations, which was
maybe the reason why they finally joined the meeting. The boundaries of the network
were still open so that even the Network Manager describes it as an “open consortium”
where all members were invited to join without restriction to surface treatment. In his
opinion 5-40 companies were involved in the VERITAS initiative.389 Based on his
official report, however, 20 institutions were “actively involved”.390 The responsibility
of all actions was still within the limits of the Network Manager, which should be
substituted by active involvement of other participants during the Norming phase.

The Norming phase represents a phase where positive cooperation between partners
begins, working standards are established and the communication level between
partners increases (Tuckman, 1965; West, 2004). Normally, new behavior patterns can
be observed and mutual acceptance and trust are established. Based on the experiences
with the Austrian Network, it can be summarized that only little progress in the
Norming phase had been taken.

Cf. FMMI presentation at the 3nd review meeting, 26th of January, 2006, personal meeting notes,
18th of January, 2006
Cf. meeting minutes of Network Manager Meeting, 17th of November, 2005.
Cf. Network Manager’s report “Description and Current State of Networking Projects in Austria”,
10th of December, 2005.
128 Empirical Data: Network Formation Processes

5.1.5 Performing

Strategy Alliance between Network and Companies

No alliance of partner companies’ strategies could be observed, nor was there any
establishment of a joint strategy or discussions. According to the Network Manager,
the development of a joint marketing strategy for all involved companies was not
possible. Main challenges were the fact that every company wanted to see immediate
benefit of the network and that exactly those benefits were hard to show since the
activities in the sector are very diverse.391 The heterogeneity was also represented by
the different project ideas. Nevertheless, he mentioned that a joint marketing plan
could be possible in a future phase, provided that in a first step joint objectives and
strategies would have been developed.392

Systems (ICT, Controlling)

The original idea for the network contained a joint competence database that should
serve on the one hand for internal project coordination, and that can on the other hand
be accessed via a network website in order to directly contact potential customers.393
Although not realized in the project, the surface treatment representative presented a
first result in the final meeting:394 The industry platform included
an Internet forum where members and guests can initiate discussions about technical
issues, services and jobs, but also about potential cooperation topics.395 Anonymous
inquiries can be sent via email.396

Results of Joint Cooperation

Besides the positive statements of the project participants397 that included perceived
benefits on joint projects and the established business contacts, 398 results can only be
reported on a project-based level. On a bilateral level, companies established contacts
and could benefit from mutual expertise. Concerning the development of galvanized
motor parts, the leading company described it as a success during the meeting on the
Cf. Network Manager’s arguments for the marketing plan, January, 2006.
Cf. Network Manager’s arguments for the marketing plan, January, 2006.
VERITAS, IST 2004-511013, Contract for Specific Support Action, Annex 1- Description of
Work. For more information cf., accessed in November, 2006.
Cf. FMMI presentation, 18th of January, 2006.
395, accessed on 30th of May, 2006.
396, accessed on 30th of May,
Cf. FMMI presentation at the 3nd review meeting, 26th of January, 2006, personal meeting notes,
18th of January, 2006.
Cf. FMMI presentation at the final meeting, 18th of January, 2006.
The Austrian Case 129

18th of January 2006 as it was submitted to a national research programme and got
funded.399 The project team was able to extend the research activities to an interested
customer who tested the motor parts.400

Summary and interpretation: The Performing phase was not entered during project
time. No effective structure was established and the network was still dependent on the
involvement of the Network Manager (West, 2004). Normally, during Performing the
team becomes highly effective, powerful and innovative and relationships are
embedded in an atmosphere of mutual appreciation (Francis/Young, 1989; Kauffeld,
2001). In the Austrian case, selective, positive results can be detected, but even from
the Surface Industry Representative, the project outcomes are not regarded as
“network” result, but as results of having successfully established bilateral
assistance.401 Neither trust nor self-organization could be observed. The discussion and
activity level had not changed in comparison to earlier phases.

Figure 10 gives an overview of the timeline of the network in respect to the group
formation model:

Initiation Forming Storming …

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

01/07/04 31/01/06

Figure 10: Formation Process Austria

During the Initiation phase, an open and unfocussed approach to select and contact
potential network members had to be reviewed and exchanged by a concrete target
group. In parallel, the early installation of the Network Manager took place, in order to
have a “driver” for the network initiative. Forming was characterized by heterogeneity
in the group and different levels of interest that was observed via changing
participation rates and fluctuation in meetings. Companies treated each other with

Cf. personal meeting notes, 18th of January, 2006.
Cf. personal meeting notes, 18th of January, 2006.
Cf. FMMI presentation at the 3nd review meeting, 26th of January, 2006.
130 Empirical Data: Network Formation Processes

respect, but waited for the next steps and only partly participated in discussions. While
Forming showed typical characteristics and behavior (Tuckman, 1965), Storming went
a little different: Instead of high rivalry and struggle for power, people expressed their
different expectations but did not demand a decision. On the other hand, resistance and
indifference was observed, as network members for example did not show high
meeting discipline. Another typical Storming behavior was the questioning of the
benefits of networking and the strong focus on anonymity. During Norming, mutual
acceptance, rules and roles should arise (Francis/Young, 1989). However, only little
attempts on joint plans and work standards were noticed, none of them in the network
meetings, but only during the meetings of project teams. Behavior did not change
instead of slightly more discussion in meetings. Boundaries of the network were not
defined and no roles except the Network Manager had been developed. By entering the
Performing phase, one should be able to observe joint solutions and a compact team
where members appreciate each other. Neither closeness, nor successful outcomes
(West, 2004) or critical, innovative discussion culture could be observed.
The Belgian Case 131

5.2 The Belgian Case

Economic Situation
In the Kingdom of Belgium 10,419 (2005 estimate) million people live on
10,296km².402 The country is reflected by a tripartition of language communities, that
is Flanders with Flemish-speaking inhabitants in the North, Wallonia with French-
speaking people in the South, and a German-speaking minority in the East of the
country.403 Economy-wise, Belgium is one of the few EU-member-states with a
balanced budget that produces a national product of 325 billion Euros.404 Most
relevant sectors are based on the industry (25%) as well as on service (75%), both with
a strong-expert-oriented trade of high value-added goods.405 Belgian expert goods
encompass automobiles, food and food products, iron and steel, as well as textiles,
plastics, and nonferrous metals. The whole export accounts for 269.6 billion Euros.406

The GDP per capita is estimated to reach an amount of 30,100 Euros in 2007,407
whereof 19.9% of the GDP is used for investment.408 With these figures, Belgium is
ranked among the Nordic European States, Canada, Switzerland and Hongkong of the
International Monetary Fund.409 Between 1985 and 1995, the country undertook a
period of fast economic growth.410 Today, the annual growth rate is at 2.7%.411 In
2005, the inflation rate reached 2.8% in consumer prices.412 In Belgium, 8.5% of the
population is unemployed, which shows an average European unemployment rate, but
is much higher than for example in Denmark, Austria or the Netherlands.413 The
industry in Belgium is characterized by strong labor associations and collective action,
but also by many employers’ organizations and institutions. SMEs form a significant

Cf., accessed on 17th of August, 2006.
Cf., accessed on 17th of August, 2006.
Cf., accessed on 18th of August, 2006.
framework.internal.refresh&pageid=indexPage&navId=2477, accessed on 18th of September, 2006;, accessed on 17th of August, 2006.
Cf., accessed on 18th of August, 2006.
Cf. or, both accessed on 24th of April, 2007.
Cf., accessed on 18th of August, 2006.
409, accessed on 21st of
September, 2006
Cf. for example, accessed on 17th of August, 2006.
framework.internal.refresh&pageid=indexPage&navId=2421, accessed on 18th of September, 2006.
412, accessed on 21st of September, 2006.
413, accessed on 21st of
September, 2006.
132 Empirical Data: Network Formation Processes

part of Belgian companies, which are for example supported by the Federation of
Enterprises in Belgium414, a multi-sector employers’ association, also called “the voice
of business” that encompasses 33 federations.415

Manufacturing Industry Situation

With an export rate of 71%, the manufacturing industry generates an annual turnover
of 46.6 billion Euros.416 The Belgian mechanics and mechatronics sector operates
worldwide. In this area, 84% of the companies have fewer than 100 employees,417
which means that a better part of the industry consists of SMEs.

AGORIA is the largest employers' organization and trade association in Belgium.418 It

is financed by member contributions and represents companies in the technology
industry, with a special focus on business relations and establishing national and
international partnerships.419 The organization is run with 250 people that take care of
1300 member companies.420 The association supports its members with activities in
research and development, but also held training sessions and takes care of ecological
issues. Collective bargaining and trade policies in the country are influenced by the
organization. AGORIA’s mission is “(...)to serve its members and to exert its full
influence in order to improve the economic and social environment in which they
operate.”421 One of the main fields is the support of companies related to partnerships
and innovation. In this context, AGORIA is involved in research activities and in the
organization of related conferences. 422

Mechanical and mechatronic engineering is one of eleven departments at the

association, encompassing 355 member companies with a total delivery amount of 7.8
billion Euros.423 The major market trends in the area show increasing demand for all-
in-one solutions, with one interface to the customer, but also on increasing
customization and user-friendliness of products quality issues on the customer side,

Cf., accessed on 19th of September, 2005.
Cf., accessed on 19th of September, 2005.
Cf. AGORIA presentation at the kick-off meeting, 1st of July, 2004.
417, accessed on 19th of September, 2005.
5550&vUserID=999999&MyOrDaily=daily&EnewsID=33449, accessed on 21st of September,
Cf. AGORIA document “voorstelling-kort”, December, 2005.
Cf. AGORIA presentation at the kick-off meeting, 1st of July, 2004.
Cf. AGORIA presentation at the kick-off meeting, 1st of July, 2004, p.5.
Cf., accessed on 19th of September, 2006.
Cf. AGORIA presentation at the kick-off meeting, 1st of July, 2004.
The Belgian Case 133

globalization and concentration on the other side. AGORIA cites that the number of
manufacturers of weaving machines has dropped by half over the last decade.424 One
of the major trends reported by the industry is the need to turn products into services,
including maintenance or leasing possibilities.425 These trends result in a strong need
to change structures, look for new partners and establish innovative, high-quality
products in order to be able to survive.

5.2.1 Initiation

Attitude towards Cooperation and Cooperation History

Generally, Belgium is reflected by skepticism towards government and authority,
which might be related to the imposture of many foreign rules in the past.426 The
VERITAS Network Coordinator of Belgium reported a low cooperation preparedness
of Belgian companies, related to the High Uncertainty Avoidance Index of Hofstede
and Hofstede (2005) and to the internal difficulties of the French, the Walloon and the
German groups.427

Nevertheless, AGORIA has been trying to push the concept of networking since the
1990s and initiated several networks including the Flanders' Drive (automotive sector),
Flanders' Mechatronics (mechanical engineering), and Flanders’ Materials Cluster
(materials), Grappe méchatronique (mechanical engineering).428 AGORIA expressed
its interest in the VERITAS project because it wanted to learn more about Virtual
Enterprises and cluster formation, since this is one of the core tasks of AGORIA.
Benefits for the members were listed as follows: “(…)- better assistance in the
network creation process, - tools and methods for the network creation process (trust
building), - tools and methods for the network exploitation (ICT tools).”429 The
VERITAS Network Coordinator was a manager of AGORIA who had participated in
similar projects before. Due to his experience, he always stated that “Nobody is
interested in a project. People are interested in business.”430

424, accessed on 19th of September, 2006.
425, accessed on 19th of September, 2006.
Cf., accessed on 17th of August, 2006.
Cf. AGORIA 6 months presentation at the 2nd review meeting in June, 2005.
Cf., accessed on 19th of September,
Cf. email AGORIA to UNIVIE, 5th of January, 2006.
Cf. personal meeting notes, VERITAS meeting, 14th of September, 2004.
134 Empirical Data: Network Formation Processes

The association AGORIA established the “Flanders' MECHATRONICS Network” in

October 2003 with an Innovation, an Engineering and a Technology Center, as well as
a Joint Purchasing Platform and a Joint Maintenance Center431. The network is based
on the principles of the Virtual Factory concept (Schuh et al., 1998): It consists of 15
companies and was based on a three year’s development plan with the phases of
design, professionalization and benefit for the members.432 The group of companies is
heterogeneous, ranging from power transmission applications to food processing
systems and textile machines.433 The idea of the network was to have a platform that
focuses on joint research on the one hand and joint business on the other hand. Current
and past research projects contain for example the development of new positioning
systems or motion controls.434 However, the Network Coordinator of VERITAS
always reported the difficulties of setting up and maintaining this initiative.435 It took
more than two years, only based on meetings and discussions, before the technology
platform has been made public and still, research activities are positive, while joint
business projects are still very rare.436

At the initial workshop, some of the present companies therefore were already well
aware of the concept as they were members of the cluster Flanders' Mechatronics. The
audience, hence, had a quite diverging knowledge of the subject in the beginning of
the project.437

Identification of Target Group

Based on the efficiency approach of creating business for the network members, the
Belgian companies should be attracted with the advantage of cost-cutting models. A
network of sub-contractors should be formed in order to reduce the number of
suppliers and to have one contact points to the Original Equipment Manufacturers.438
This approach was closely related to former experiences with the network “Flanders
MECHATRONICS” which wanted to learn and benefit from the VERITAS
initiative.439 The finally addressed sub-group contained 350 companies in the sector of

Cf. , accessed on 19th of September, 2006.
Cf. AGORIA document “Voorstelling FM”, January, 2005.
Cf. AGORIA document “Voorstelling FM”, January, 2005.
Cf., accessed on 19th of September,
Cf. personal meeting notes, VERITAS kick-off meeting, 1st of July, 2004.
Cf., accessed on 19th of September, 2006.
Cf. AGORIA introductory workshop report, March, 2005.
Cf. personal meeting notes, VERITAS meeting 3rd of November, 2004.
Cf. email AGORIA to UNIVIE and SFC, 12th of October, 2004.
The Belgian Case 135

metal cutting, sheet metal, plastics manufacturing, composite manufacturing, heat

treatment, surface treatment, assembly, maintenance and repair. 300 out of the 350
were SMEs, 130 French-speaking, and 170 Dutch-speaking. The Network Coordinator
decided to concentrate on the Dutch-speaking group in the VERITAS initiative, as it
would have been difficult to include both language groups in one project.440

In order to follow a strategy that fits to business and to involve the partners from the
beginning on, the idea was to talk to the potential enterprises and ask them about their

Way of Contacting Target Group

The first workshop was announced for the 3rd of November, 2004. The invitation was
started with questions like “Does your company suffer from severe capacity
fluctuations? Do you want to upscale your projects without investing in production
equipment?” and explained that the concept of Virtual Enterprise might be a solution
to these shortcomings.441 Assuming that people are more interested in business than in
a project, the registration fee was set with 40€ for AGORIA members, 80€ for non-
members. VERITAS was considered to be the framework for business networks, so
that the project was only mentioned in a footnote.442

The workshop was rescheduled to the 24th of November 2004, with an even stronger
focus to establish a cluster for subcontracting companies.443 150 member companies
were identified and addressed via direct mailing444 and the meeting was additionally
announced in the electronic members’ newsletter and in several magazines.445
However, the author has no information about which and how many magazines had
been chosen, nor about the exact point of time of the proclamation. AGORIA’s
follow-up approach was planned with calling and visiting each company that
participated and discuss their final participation to the Belgian network.446

Although planned for the 24th of November 2004, the workshop had to be postponed.
The information to the consortium partners only contained the following message:
Cf. email AGORIA to UNIVIE and SFC, 12th of October, 2004.
Cf. AGORIA leaflet “Virtual Enterprises are a promising solution”, October, 2004.
Cf. VERITAS meeting minutes, 3rd of November, 2004.
Cf. VERITAS meeting minutes, 3rd of November, 2004.
Cf. AGORIA document “VERITASFolder_NL”, 18th of October, 2004, referred to in the email
AGORIA to VERITAS, 27th of October, 2004.
Cf. AGORIA 6 months report, December, 2004.
Cf. VERITAS meting minutes, 3rd of November, 2004.
136 Empirical Data: Network Formation Processes

”Due to some problems we have to postpone the workshop in Belgium to next

year.”447 One obvious problem was the low participation rate. The Network
Coordinator listed the following reasons for the low attendance:448
ƒ“November 2004 was a very heavy loaded seminar period with several
workshops and seminars per day aiming at our target audience.
ƒAs the economy recovered slightly and the companies had reduced their
workforce to the very minimum level, all hands were needed inside the
ƒThe idea was to focus on metalworking SMEs, mainly subcontractors. As a less
dynamic director has led this section with AGORIA, this concept must have
been surprisingly new to them, launched by unknown persons. Thus it was not
able to profit from an existing personal relationship that made it especially

Several workshops were planned and cancelled again, as the number of inscriptions
(for example for January 2005) was below ten, and additionally the audience could not
be classified as the target group identified before.449 At this point of time, the Network
Coordinator started to personally contact and invite companies for a new workshop
end of February 2005 and thought of eventually having two groups with diverging

Informative Workshops
Finally, the introductory workshop was set for the 22nd of February 2005 and included
an entrance fee of 25€ for AGORIA members, 50€ for non-members.451 The workshop
was additionally announced in the VOOR E-NEWS on 31st of January 2005 and on
10th of February 2005 with a short article and contact persons452 and can also be found
on the web site of the association on the 15th of February 2005.453 Press releases were
sent to: Vraag & Aanbod454, CXO magazine455, De Vlaamse ondernemer456.457 In
addition, AGORIA listed other preparatory activities such as the preparation of posters
Cf. for example email AGORIA to VERITAS,17th of November, 2004.
Cf. AGORIA 6 months report, December, 2004, p.2.
Cf. email AGORIA to VERITAS,17th of December, 2004.
Cf. personal meeting notes, 10th of January, 2005.
Cf. AGORIA document “EU Veritas2_inschrijf”, February, 2005.
Cf. AGORIA document “EU Veritas2”, February, 2005.
453, accessed on 22nd of September, 2006.
454, accessed on 22nd of September, 2006.
455, accessed on 22nd of September, 2006.
456, accessed on 22nd of September, 2006.
Cf. AGORIA introductory workshop report, March, 2005.
The Belgian Case 137

and badges as well as the organization of guest speakers from KFSNet458, a

subcontracting network of six enterprises in the German machinery industry.459 The
introductory material that contained a section on general aspects of networking,
cooperative structures and the best practice example IMPRO460 as translated into
Dutch and distributed among participants461 via the AGORIA online daily electronic
newsletter to 6300 persons.

The workshop was organized as follows. The introductory session about the
advantages of networks and Virtual Enterprises462 was followed by a conceptual
presentation with best practice examples and critical success factors for cooperation.463
Based on the Belgian approach to highlight business advantages as the most important
factors, the presentation contained argumentation on competitive advantages via
networking and cost-cutting possibilities.

A real life case was presented with KFSnet, which groups six small mechanical
engineering manufacturers bundling forces to retrofit the massive installed basis of
GDR manufactured machines installed in Russia.464 Based on their former
experiences, they highlighted the most important factors and the lessons learned.
Besides a general matching of partners, commitment of involved people, – the so-
called “network of heads” – the preparedness to invest money and time as well as clear
structures and legal agreements were stressed.465

AGORIA closed the workshop by explaining the network creation process with the
next steps to define a common strategy, define the structure and the roles, define the
rules of the game, and define the business processes, and explained the related role of
AGORIA. In this part, the Network Coordinator highlighted the need for a group of
dedicated enterprises, a joint vision as well as a high service level related to the

accessed on 22nd of September, 2006.
Cf. AGORIA introductory workshop report, March, 2005.
460, accessed in November 2006.
Cf. AGORIA document “EU Veritas2_bijlage”, February, 2005.
Cf. AGORIA document “Genetwerkte bedrijven groeien sneller“, 22nd of February, 2005.
CF. SFC workshop presentation “United we stand - Approaches & critical success factors of
network cooperation”, 22nd of February, 2005.
Cf. AGORIA introductory workshop report, March, 2005.
Cf. ICM Chemnitz workshop presentation “Best Practice of Networking in the Mechanical
Engineering in Saxony“, 22nd of February, 2005.
138 Empirical Data: Network Formation Processes

readiness to cooperate.466 Afterwards, a reception took place in order to start informal

networking between companies.

On the whole, 23 persons participated to the workshop, incorporating mostly large

enterprises, but also four SMEs and two technology centers.467 The discussion about
networks revealed a set of detailed questions to be answered, starting from the ideal
amount of competition within the network or the necessity of funding. Interest and
interaction was high during the meeting and the coordinator was satisfied. On the other
hand, the audience was too heterogeneous to start one cluster with the person that
attended the workshop and some of them also mentioned skepticism with the concept
because of bad experiences.468 Additionally, the smaller subcontracting companies
were thought to be addressed separately.469

After the introductory workshop, AGORIA found that a clear network strategy has to
be chosen in a top-down approach and that companies should be selected with care.470
The first idea was to bring together heterogeneous parties that might have
complementary competencies but quickly the alternative to contact some engineering
companies and helping them improve their own supplier relationships arose.

In April 2005, the Network Coordinator reported a slight delay because of being
involved in other initiatives that he wanted to combine with the VERITAS project with
at ARGORIA. The action plan for the summer period contained the detailed selection
of 15 subcontractors in the metalworking industry and to personally visit them in order
to establish a core group of companies.471

At a review meeting in June 2005, the Network Coordinator reported nine company
visits. Three out of nine companies already took part in some kind of network and
therefore did not want to enter additional obligations. Two out of the nine enterprises
did not think that networking on the whole would be beneficial for them. The other
four companies were interested in cooperation partners only. However, these four

Cf. AGORIA document “Genetwerkte bedrijven groeien sneller“, 22nd of February, 2005.
Cf. AGORIA introductory workshop report, March, 2005.
Cf. AGORIA 6 months presentation at the 2nd review meeting in June, 2005.
Cf. AGORIA introductory workshop report, March, 2005.
Cf. VERITAS D4.4: Marketing Plans of the four Cooperative Networks, January, 2006.
Cf. VERITAS meeting minutes, 27th of April, 2005.
The Belgian Case 139

companies were project-based subcontractors that were looking for business partners –
no matter if in or out of a network’s scope.472

Another workshop was planned for 14th and 15th of September 2005 but had to be
cancelled because of a time conflict with the EMO fair473 on the one hand, and low
registration rates on the other hand.474

Finally, the target group of the small companies was invited for the 28th of September
2005, but only one company showed interest.475 On the 5th of October, 2005, five mid-
sized companies – referred to as a ”group of winners” by the Network Coordinator476 –
participated in the workshop for larger enterprises. On average, they employed 50-100
workers, a well-balanced turnover477 and held long-term contracts with large
companies.478 For this meeting, the participants were asked to prepare the expected
objectives and actions. The focus of the meeting was planned to be joint purchasing as
a first step of working together. Although the participating companies were not
operating in the same sector, and therefore were rather heterogeneous, they disposed of
the same customers.479 In this meeting, a pragmatic approach was agreed on the
network and as “homework” participating companies should analyze their value chain
and think about possible combinations of their offers. As this was another important
task during discussion, the question on how to gain competent personnel should be

However, only five companies participated. The low participation rate was partly
interpreted by having a non-attractive agenda; additional companies expressed their
interest to act in a network, but not to talk about a network.481

The evaluation forms on cooperation preparedness of the partners were distributed at

this meeting and via email.482 Till the 18th of November 2005, they were only

Cf. AGORIA 6 months presentation at the 2nd review meeting, June, 2005.
473, accessed on 22nd of September 2006; email AGORIA to VERITAS,
7th of September, 2005.
Cf. email AGORIA to VERITAS, 29th of August, 2005.
Cf. VERITAS meeting minutes, 6th of October, 2005.
Cf. personal meeting notes, 6th of October, 2005.
Cf. personal meeting notes, VERITAS meeting 6th of October, 2005.
Cf. VERITAS meeting minutes, 6th of October, 2005.
Cf. AGORIA verbal presentation about current state, VERITAS meeting 6th of October, 2005.
Cf. VERITAS D41: Report on the Experiences with Setting up a Virtual Enterprise, January, 2006.
Cf. VERITAS Network Manager meeting minutes, 17th of November, 2005.
Cf. email AGORIA to potential companies, 18th of October, 2005.
140 Empirical Data: Network Formation Processes

completed by four companies. This small and non-representative sample found it most
important that companies act in a professional way and that they were trustworthy.483
Interestingly, cooperation preparedness of the four respondents was medium for 75%,
25% – which is one participant – even showed rather low cooperation preparedness

The Network Coordinator reported 20 companies being “part of the Belgian

network”485 at this stage. This was inconsistent with a second list in the same month
that highlighted nine companies that had participated in one of the meetings or had
expressed interest in participating.486 On the whole, only three companies took part in
the meeting in February 2005 and showed interest in the meeting in autumn.

From the beginning on, the Network Coordinator wanted to learn about the concept of
Virtual Enterprises and related topics. He suggested inviting somebody from WZL
Aachen, a department of the University of Aachen487 involved in the set-up process of
the Virtual Enterprise ProTECA488 in order to avoid mistakes.489 Given his former
experience and his close work with Prof. Schuh (the founder of the Virtual Factory
concept) the speaker was referred to as “the real expert” by the Network
Coordinator.490 The Belgian Network Coordinator was interested in the business
approach of ProTECA491 as he noticed that one of the mission sentences of the
competence center was “What are successful positions for manufacturing enterprises
in particular market environments?”492 ProTECA493 sees itself as a business processor,
and underlines the argument that motivation for companies to participate in any kind
of network was earning money and making business.494

Cf. UNIVIE presentation: Evaluation of questionnaires, December, 2005.
Comment of the author: However, the four companies that answered the questionnaire cannot be
taken as an indicator for a possible network of subcontractors.
Cf. VERITAS document “Kompetenzdarstellung International”, October, 2005.
Cf. VERITAS document “in-out_netowrk_Bel”, October, 2005.
487 , accessed on 22 nd of September, 2006.
488, accessed on 22nd of September, 2006.
Cf. email AGORIA to VERITAS, 28th of July, 2004.
Cf. email AGORIA to UNIVIE, 27th of August, 2004.
491, accessed on 22nd of September, 2006.
Cf. personal meeting notes, VERITAS meeting 13th of September, 2004.
493, accessed on 22nd of September, 2006.
Cf. personal meeting notes, VERITAS meeting 13th of September, 2004.
The Belgian Case 141

In total, a critical attitude towards the network approach was noticeable. The Belgian
Network Coordinator was sure of the fact that the former Virtual Enterprise would not
work, since one previous initiative (Virtuelle Fabrik Rhein-Rhur) had failed495
although it was only one of the four virtual factories that were initiated.496

In the project meeting on the 13th and 14th of September 2004, an internal research part
was presented by UNIVIE and SFC.497 The presentation included not only an analysis
of best practices and success factors but also highlighted first suggestions for the
follow-up workshops. The Belgian Network Coordinator was interested in the business
background of the companies and asked which business was carried out in the network
– whether it was generated via a Brokering entity or if just bilateral synergies between
partners were used.498

For the continuation of the analysis he proposed to add the size and membership status
of the networks, business characteristics like turnover or employee figures in order to
be able to give a statement on the homogeneity or heterogeneity between companies in
size and power.499 He put a strong focus on not only the structure of VOs, but also on
the process of value-creation which could have been measured in the number of
transaction or the transaction volume. He asked for more elaborated descriptions of the
cases on the whole, but also in the early formation phases since they were considered
to be crucial for the VERITAS initiatives.500 He definitely wanted to know more
concrete results and guidelines for the set-up process of the network. Research
activities during the project should in his view, lead to more detailed and elaborate
outcomes like guidelines for the VERITAS networks.501

Fabrik%20Rhein%20Rhur%22, p.8, accessed on 22nd of September, 2006.
i.e. Virtuelle Fabrik Nordwestschweiz-Mittelland (, Virtuelle Fabrik
Baden-Württemberg ( and Virtuelle Fabrik Euregio Bodensee
(, all accessed in September 2006.
Cf. UNIVIE/SFC presentation about work package one, VERITAS meeting 13th of September,
Cf. VERITAS meeting minutes, 13th of September, 2004.
Cf. email AGORIA to UNIVIE, 2nd of August, 2004.
Cf. email AGORIA to UNIVIE, 2nd of August, 2004.
Cf. email AGORIA to VERITAS, 8th of November, 2004.
142 Empirical Data: Network Formation Processes

Summary and interpretation: The whole Initiation phase took from July 2004 until
September/beginning of October 2005, which is a time period of 15 months. During
this phase, most importantly the identification and information of the target group took
place. This process proved to be rather difficult in Belgium. Although the potential
cooperation partners in the sub-sectors had been identified in the beginning, the
process of addressing and inviting these people was quite difficult. The Belgian
Network Coordinator decided to follow a top-down strategy, but could not realize his
plans. Additionally, the activity level of the association was only high during the very
first phase, as a lot of emails were distributed among the VERITAS project partners, a
lot of discussions took place and the Network Coordinator for example organized
documents of the competence database of Flanders’ MECHATRONICS and even
translated them.502 From his behavior it became clear that the Network Coordinator
was really interested in creating business for its members. The details he thought of as
being most important for the potential network members were related to business
opportunities and the structure of such a network. When it came to activity and
commitment required by the Network Coordinator himself, the involvement and
initiative declined. It was noticeable that the coordinator expected more structure,
guidelines from the project team, but on the other hand, the skepticism was present
over the course of the whole project . At the same time the VERITAS project was
obviously not seen as a project with high priority – maybe due to a lack of time of the
Network Coordinator himself.

5.2.2 Forming

Getting to Know Each Other

On the 7th of December 2005, a meeting took place at one company’s office. This
company was a leading first-tier supplier of sheet metal components and pre-
assembled units for industries, such as trucks and off-road vehicles. They produced
series between 2,000 and 20,000 units per year and cooperate strongly with a limited
number of customers, putting a strong focus on quality and innovation.503 A very
positive report indicated that the eight participants of the meeting were highly
interested in talking to each other.504 In order to get to know each other better, the host
company first offered a tour through its manufacturing site and then reported on the
Cf. email AGORIA to VERITAS, 27th of January, 2005.
Cf. VERITAS D41: Report on the Experiences with Setting up a Virtual Enterprise, January, 2006.
Cf. AGORIA document “Ag_ToeLever_GS_Verslag 051207_E”, January, 2006.
The Belgian Case 143

history of the company, including former and current challenges and successes as well
as failures. The discussion was continued with more general concerns of the industry
like rising steel prices or the need to find competent partners for business.505 The
discussion level was rather detailed and participants were interested in getting to know
each other. On the other hand they refused to fill the network analysis questionnaire
because of being too early: The Network Coordinator reported that the participants
looked at the questionnaire but then said that they would have to return two empty
pages, since they did not have any contacts between them. At the same time the
coordinator noticed that some private appointments were started at the reception after
the meeting.506

Although the agenda would have contained an explicit point on the economical
environment and “feelings & outlook about business in 2006” as well as the
finalization of objectives and an action plan of the networking group. Due to time
restrictions these parts were shifted to the next meeting due to the restricted time-
frame. Follow-up meetings were agreed for May, September and November 2006.

Cooperation Atmosphere
Generally, the atmosphere between potential cooperation partners was friendly and
positive. It was reported that they wanted to know each other more, and therefore
would like to start mutual company visits.507 On the other hand, there was not much
personal or business related contact at this point of time, which makes it difficult to
describe the cooperation atmosphere.

As far as the cooperation atmosphere of the Network Coordinator was concerned,

there were time shortages throughout this network phase. For the different meetings
scheduled in June and September 2005, for example, the evaluation questionnaires
were prepared by the research team of UNIVIE. Feedback or replies to these
evaluation forms were restrained by the Network Coordinator. After a copied email to
the VERITAS project manager on the 26th of September 2005, the coordinator replied
one day before the planned meeting of small companies: “I received the files. At the
moment, I do not need any further support. We have enough forms. And I hope to use
them tomorrow.”508

Cf. AGORIA document “Ag_ToeLever_GS_Verslag 051207_E”, January, 2006.
Cf. email AGORIA to UNIVIE, 19th of December, 2005.
Cf. personal meeting notes, 6th of October, 2005.
Cf. email AGORIA to UNIVIE, 27th of September, 2005.
144 Empirical Data: Network Formation Processes

During summer 2005, most of the telephone conferences were held without the
Network Coordinator of Belgium. He apologized because of technical problems.509
During summer months, not much activity was observed with the Belgian network.510

During the whole VERITAS project time, activities were often questioned by the
Belgian Network Coordinator. He asked detailed questions, such as the reason for a
financial limit for paying the Network Manager, or requested detailed information
about why the consortium met at a certain conference and not in another place.511

Reach Commitment and Strategy Formulation

In March 2005, shortly after the introductory workshop in Belgium was carried out
AGORIA formulated a short strategy statement.512 The Network Coordinator found it
rather troublesome to just bring companies together without concentrating on possible
synergies in advance and suggested to focus more on the selection of potential
cooperation partners. To avoid a long and iterative process of joint strategy finding,
AGORIA planned to bring together companies with complementary competences such
as engineering, machining or sheet metal work and let them jointly realize projects
they would not be able to realize on their own. An explicit selection and visitation of
those companies was started in March 2005 and aimed at inviting the “right”
companies to a second workshop in April.513 Should this approach prove to be
unsuccessful, the second best alternative was thought to contact large engineering
companies and try to set up a network with their current subcontractors.

However, a second approach was to restructure part of the existing Flander’s

MECHATRONICS network into a VIC in order to have the most efficient
subcontractors available.514 The first ideas had to be reconsidered several times. After
the first round of company visits it became clear that those companies that work on a
project basis should not be mixed up with those that carry out life-time contracts.515

The selection of the Network Manager was carried out at the same time like for the
other networks. This meant that the Belgian network started to look for a Network

Cf. email AGORIA to VERITAS, 7th of July, 2005.
Cf. VERITAS telephone conference meeting minutes, June-September 2005.
As an example compare for email AGORIA to VERITAS, 20th of May, 2005.
Cf. AGORIA document “Strategy Belgium”, March, 2005.
Cf. AGORIA document “Strategy Belgium”, March, 2005.
Cf. AGORIA 6 months presentation at the 2nd review meeting in June, 2005.
Cf. AGORIA 6 months presentation at the 2nd review meeting in June, 2005.
The Belgian Case 145

Manager right after the first workshop attempts. This was considered to be an
advantage in identifying companies and a joint strategy for the network.516 After
having interviews with two different candidates, the final Network Manager was a
person who had worked as a general manager for 15 years before he opened his own
consulting company and therefore had lots of experience in B2B517 consulting.518 In
his function as an AGORIA consultant he had already established networks

In the Network Manager’s meeting in November 2005, the Network Manager clearly
stated that the small and large series groups would be addressed separately, although
the same approach was followed: The main objective of the networks should be the
development of more business in-between the affiliates in order to reinforce mutual
cooperation and to openly share results and exchange know-how.520 Only in a second
step the influence on the whole industry could be thought of.

The vision for the network(s) was a long-term one: The Network Manager wanted the
cluster to become an “(…) operational, interactive, healthy profitable (means
productive) and funny platform of the companies.”521 Every year only two smart
objectives should be formulated and reviewed if necessary. To overcome the challenge
of how to get started and how to get good reputation, the Network Manager thought it
most important to personally engage in contacting people and coaching the
managers.522 However, the final analysis of the sector and the resulting validation of
the network was not planned to be completed before September 2006.523

In January 2006 a detailed concept called “Metalworking Subcontracting Industry”

was designed by the Network Manager and the Network Coordinator. It contained a
project approach as well as important steps for the future. The conceptual paper
reflected the need to increase the ROI (Return of investment) for the participants and

Cf. VERITAS D41: Report on the Experiences with Setting up a Virtual Enterprise, January, 2006.
Business to Business
Cf. VERITAS D4.4: Marketing Plans of the four Cooperative Networks, January, 2006.
Cf. VERITAS Network Manager meeting minutes, 17th of November, 2005.
Cf. VERITAS Network Manager meeting minutes, 17th of November, 2005.
Cf. VERITAS Network Manager meeting minutes, 17th of November, 2005.
Cf. VERITAS Network Manager meeting minutes, 17th of November, 2005.
Cf. VERITAS D4.4: Marketing Plans of the four Cooperative Networks, January, 2006.
Cf. VERITAS Network Manager meeting minutes, 17th of November, 2005.
146 Empirical Data: Network Formation Processes

the need for a clear strategy of the network.524 It included a project plan and the
following vision for the Belgian Cluster: “Reducing costs, raising revenues and
exploit network opportunities for manufacturing companies active in the Metalworking
Subcontracting Industry, through the use of Virtual Industrial Network, allowing them
to improve their competitiveness and agility.” The next steps were formulated as 1)
conduct personal interviews, 2) develop a draft network action plan, and 3) implement
the action plan. For the year 2007, the consolidation of the network structure, a
marketing plan and the establishment of stable rules and roles was planned. 525

In the marketing plan for the future, the main strengths and weaknesses (see table 13)
as well as possible competitors have been discussed and finally, an interim marketing
plan was agreed. Objectives of this interim marketing plan were to rise “(…)
awareness of the initiative in-between the members, in-between the sector and building
reserve’s bench (if sufficient candidates starting a second group of maximum 15
network members).”526

Strengths Weakness
ƒ AGORIA has 13 sub sectors in the ƒ A small mixture of life time order oriented
metallurgical industry, more than 1300 companies & project base companies might
members and network experience. contain the progress
ƒ AGORIA is full partner to technological ƒ So far limited to 15 participants
research centers, universities and ƒ Only in the Flemish part
innovation associations ƒ ICT infrastructure
ƒ Highly motivated members were ‘gathered’, ƒ AGORIA has limited resources to maintain
who confirmed their enthusiasm the network
ƒ Several highly important needs formulated

Opportunities Threats

ƒ Nothing similar exists for this sector ƒ Too high expectations on the “Virtual”
ƒ Big customers are also demanding content
participation ƒ Long term costs to maintain the network
ƒ New companies will probably want to join ƒ Abused trust (see trust building & trust
ƒ Maintain the international interaction with evaluation)
the other associations in Austria & Turkey ƒ Departure (delocalizing) of big customers

Table 13: SWOT Analysis Network Belgium

Cf. SFC document “Metalworking Subcontracting Industry. Growing from a “Collaborative
Network” to a “Manufacturing Oriented VE”.” January, 2006.
Compare for AGORIA document “Vision & Strategy Belgian VE network for Metalworking
Subcontracting Industry”, January, 2006.
Cf. VERITAS D4.4: Marketing Plans of the four Cooperative Networks, January, 2006.
The Belgian Case 147

The marketing plan, written on four pages, contained a lot of general information like:
“The final Strategic Marketing Plan must consist of following eight components: -
Mission statement, objectives & strategies, - Summary of performance, (…).527 Listed
with bullet points, the eight points nearly composed one half page. Additionally, the
documentation was more based on the project VERITAS and not on the network and
its members, highlighting difficulties of the approach of the project but not on the
specific situation of the participants.

Identification of the Market

No sales market had been defined during project time.

Summary and interpretation: The Forming phase started around October 2005 and
was not finished when the project VERITAS ended. During this phase, only one
meeting took place in December 2005, where it became clear that the initiative was
back to square one. The network at this stage was characterized by first contact points
and reserved interest in each other and it became questionable whether some sort of
network would come up during project time.

On the one hand, a lot of delays and a lot of cancellations had taken place. On the
other hand, there were long intervals between meetings and although the Network
Manager had been installed, he was reported to have “a full agenda”.528 The
impression was that the project was not been taken very seriously at AGORIA as for
example the cancellation of one meeting according to the interference with the EMO
fair529 as one of the major events of the industry should have been familiar to
AGORIA as an industry expert. Another example was the very short timeframe
estimated for the meeting in December 2005 that should initially give the possible
partner companies the change to get to know each other. No project ideas were
mentioned, no concrete network activities were discussed. According to Tuckman
(1965) the phase would be characterized by a lot of questions and insecurity. As this
was not the case yet, the non-binding status of the cooperation becomes clear.

Cf. VERITAS D4.4: Marketing Plans of the four Cooperative Networks, January, 2006, p.22.
Cf. personal meeting notes, VERITAS meeting, 6th of October, 2005.
529, accessed on 22nd of September, 2006.
148 Empirical Data: Network Formation Processes

No anxiety or concerns (West, 2004) came up from the network participants and no
reservations were noticed. On the other hand, the whole phase was characterized by
strong skepticism of the Network Coordinator himself. Belgians are considered to first
ask before they are supposed to do something and will not start acting unless they have
an acceptable reason (Heylighen, 1998). Instead of getting the network started, the
Network Coordinator and his personal opinion and concerns came to the fore.

Especially during summer time, the impression was that during these months there was
no progress in terms of network formation. The Network Coordinator spoke in this
context of a “slight delay”.530 His behavior, however, was characterized by typical
aspects of the Forming phase, that is insecurity (Francis/Young, 1989) and a strong
need for structure and formalization, which was expressed in a lot of questions on
rules, roles and background of the concept (West, 2004).

Although the Network Manager was assigned at this time, there was no change in
behavior or involvement. Interestingly, the engagement of the Network Manager that
he himself thought to be most important was not observed during the project time.
Only very little time was invested in introducing partners.

The “Metalworking Subcontracting Industry”-document531 sounded like a start over of

the whole VERITAS initiative as the Network Manager and coordinator wanted to
conduct personal interviews, then develop an action plan and than implement the
action plan. The Forming phase was at the very beginning, when the project was

5.2.3 Storming

Working Together
No joint work was realized during project time.

Discussion of Rules and Roles

There were no discussions on rules and roles during the first meetings.

Cf. VERITAS telephone conference, personal meeting notes, 25th of May, 2005.
Cf. SFC document “Metalworking Subcontracting Industry. Growing from a “Collaborative
Network” to a “Manufacturing Oriented VE”.” January, 2006.
The Belgian Case 149

Handling Conflicts
No conflicts arose within project time. One could interpret the behavior of the
Network Coordinator, refusing to work with the concept and to invite potential
network partners as a typical resistance to leadership (in this case the VERITAS team
or the project institution), but as there was no group being formed at this stage, the
author does not interpret his behavior as group-driven.

Summary and interpretation: The whole Storming phase was not entered during the
project time. Working together and discussion of rules and roles were planned for the
year 2006.532

5.2.4 Norming

Establishing Rules or Regulations how to Work Together

Establishing Roles
Finalizing First Projects

Summary and interpretation: The whole Norming phase was not entered during the
project time. Carrying out joint projects and the establishment of rules and roles were
planned for the year 2006.533

5.2.5 Performing

Strategy Alliance between Network and Companies

Systems (ICT, Controlling)
Results of Joint Cooperation

Summary and interpretation: The Performance phase was not entered during the
project time.

Cf. VERITAS D4.4: Marketing Plans of the four Cooperative Networks, January, 2006.
Cf. VERITAS D4.4: Marketing Plans of the four Cooperative Networks, January, 2006.
150 Empirical Data: Network Formation Processes

Figure 11 displays the formation of the Belgian network over time. During the
Initiation phase, although having identified the need for a clear structure and a pre-
defined selection of partner companies, there was a lot of cancelling and rescheduling
of meetings. When people finally met, Forming was characterized by first steps
towards a network, paper work and low active involvement of the Network Manager.

Initiation Forming …

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

01/07/04 31/01/06

Figure 11: Formation Process Belgium

The Turkish Case 151

5.3 The Turkish Case

Economic Situation
Turkey – a democratic, secular republic since 1923534 – encompasses a population of
70,413,958 million people (July 2006 estimate) on 780,580 km².535 In the capital,
Ankara, around 5 million people are settled, whereas Istanbul – the biggest city – has
around 12 million inhabitants (Seufert/Kubaseck, 2004).

In total, GDP was 299.48 billion in 2004, and 366.88 billion in 2005,536 which reflects
an annual growth rate of 7.6%.537 GDP per capita (PPP) is estimated to reach 7.400€ in
2007.538 Inflation rate has improved significantly during the last years: 2005 inflation
was around 7.7% whereas in the year 2003, it was around 20%.539

The country became an associate member of the European Community in 1964540 and
since then has been interested in becoming a member of European organizations.
However, negotiations on accession to the EU are not to be entered before the so-
called “Copenhagen Criteria”541 are fulfilled and experts do not count on a date
before 2014.542 Most important criteria are the financial situation, i.e. the stabilization
of economy, the guarantee of freedom of religion and opinion, but also advocacy for
minority groups. Furthermore, a clear commitment to sound relationships to neighbor
countries, including the ambition to solve disagreements around the Republic of

Cf., accessed on 25th of July, 2006.
535, accessed on 25th of July, 2006.
536, accessed on 24th of July,
Other statistics and prognostics even calculate higher figures: Cf.
figures at, (8,9%) accessed on 25th of July, 2006.
538 or, both accessed on 24th of April, 2007.
539, accessed on 26th of July, 2006.
540, accessed on 25th of July, 2006.
The criteria to enter the European Union are also indicated as the “Copenhagen Criteria” because
of their adoption in Copenhagen on the 22nd of June, 1993
(, accessed on 25th of July, 2006). The criteria
encompass a) the institutional stability (democracy, state constitution, protection of human rights),
b) an executable market-economy, c) the adoption of legal rights of the Union, and d) the
preparedness to integrate new states
accessed on 25th of July, 2006.)
542, accessed on 24th of July,
152 Empirical Data: Network Formation Processes

Cyprus is required.543 Although privatization moves forward in an efficient way,

reforms are only carried out slowly. The unemployment rate was 10.2% in 2005 and
the population below the poverty line even reached around 20% in 2002.544 Experts
therefore have conflicting opinions on the EU-entry of Turkey:545 On the one hand,
there is fear of the increase of a culture with a strong Islamic influence, 546 neglecting
the fact that Turkey has anchored its secularity in the constitution and – especially
around Istanbul – modern Islam is in existence (Seufert/Kubaseck, 2004). On the other
hand, advantages are seen in the political bridging function between Europe and Asia.

Concerning industry, the Turkish economy is predominantly shaped with “Small and
Medium Industrial Enterprises”.547 Most common forms of ownership are individual
or single proprietorships employing up to ten workers. A typical career path in the
industry contains a start as apprentice, the development to a master in the same
enterprise and the immediate starting of an own business afterwards.548 Therefore,
micro-enterprises account for 95% of Turkish businesses and 34% of Turkey’s jobs,
but do not obtain more than 7.8% of production output.549 Turkish SMEs typically
suffer from lack of information and technology, but also from low know-how of
management systems or even innovative technologies. Although the critical factors are
comparable to those in other countries, the situation in Turkey is worse as the
companies are even smaller and geographically more dispersed.

Increasing globalization makes it therefore extremely difficult for SMEs to survive:

While most of the small industrial firms already have to fight for their position on the
domestic market, the global market brings up even more challenges550 so that support

543, accessed on 24th of July,
544, accessed on 25th of July, 2006. For
detailed economic figures, compare for, accessed on
27th of July, 2006.
Compare for example the conference “Turkey and Europe: Is There a Common Future?" in Ankara,
February, 2006, Information. on or
different newspaper entries (
schauble-david-l-phillips/talking-turkey.html), both accessed on 26th of July, 2006.
546, accessed
on 3rd of August, 2006.
Cf., accessed on 26th of July, 2006.
548, accessed on 26th of July, 2006.
549, accessed on 26th of July, 2006, p.29:
Explanation shows that countries like Italy or Portugal that dispose of less SME companies and less
involved workers contribute to the economy on an 11-15% level.
550, accessed on 26th of July, 2006.
The Turkish Case 153

and training would be necessary. On the other hand – based on financial difficulties –
the accessibility of external consultants is reserved to a small number of companies.551

To overcome these problems, several initiatives have been initiated: KOSGEB – a

non-profit semi-autonomous organization established by the Turkishgovernment in
1990 – combines and supports the concerns of small enterprises as “Small and
Medium Industry Development Organization”.552

In addition – and in line with the European Charter for Small Enterprises – Turkey
established an “SME Strategy and Action Plan” in 2003, which aims at creating a
(legal) framework for SMEs and enhance their position in the Turkish economy.553
These plans and strategies aim at affecting SMEs either directly (via subventions,
research projects and new business concepts etc.), or indirectly by strengthening the
whole economy, which of course also affects the small companies because of their
prominent position.

One of the first measures is to develop a definition of SMEs that is congruent with
definitions used in the European Union and based on standards developed by
EUROSTAT.554 Initiatives for training and vocational training are included in the
document and financial burdens for SMEs are to be reduced.555

Further initiatives are for example the 8th 5-year development plan that includes the
clear statement to improve the productivity of SMEs by increasing their share within
total value added. Included is the enhancement of their international competitiveness
and improvement of credit systems, but also the establishment of e-commerce

Manufacturing Industry Situation

Based on huge natural resources like coal, iron ore, copper, chromium and others,557
the industrial sector plays an important role in the country. The largest industrial
sector, however, is textiles and clothing. Other economic sectors encompass

551, 26th of July, 2006
552, 27th of July, 2006
553, accessed on 27th of July, 2006.
554, accessed on 26th of July, 2006.
555, accessed on 27th of July, 2006.
556, accessed on 27th of July, 2006.
557, accessed on 25th of July, 2006.
154 Empirical Data: Network Formation Processes

automotive, iron and steel, but also tourism and construction.558 Still, traditional
agriculture accounts for more than 30% of employment.559

Machine manufacturing is one of the most traditional, but also most expanding
production sectors in Turkey. The export rates of this industry are above the average
export rates of all other sectors560 and an association of Turkish Machine
Manufacturers founded in 1990 was accepted as an exclusive member of CECIMO
(European Committee for Cooperation of Machine Tool Industries). Exports in the
manufacturing sector account for 4.5% of the manufacturing industry and the volume
of exports has reached 4.5 billion US dollars. The industry comprised 247,000
companies in 2002, employing 32.31% of Turkish labor force.561 Like in other
industry sectors, the average number of employees is one to nine (89% in 2002).
99.6% of the total number of manufacturing firms are SMEs.562

The manufacturing industry is organized in the two associations “Association of

machine manufacturers (MIB)”563 and “The central Anatolia machinery and
accessories exporters’ union (OAIB)”564. The participation in one of these
organizations is voluntarily. In return for their membership fees, companies receive
industry support, know-how via R&D-projects and consultants, or organization of joint
events. While the OAIB concentrates on topics that deal with export,565 MIB is the
major national manufacturing organization with 183 members in 2005 including “(…)
companies manufacturing wide range of general machineries, machine parts,
accessories and cutting tools. In its portfolio, manufacturers of construction, earth
moving, mining and agricultural machineries, machine tools; both metal cutting and
forming, woodworking, packing machines and machineries for process industries,
food processing and packing machines, ovens, balancing machines(…)are present.”566
Main activity areas are the legal protection of members’ rights, the harmonization
between Turkish and EU-related regulations and the information and organization of

558, accessed on 26th of July, 2006.
559, accessed on 25th of July, 2006.
560, accessed on 18th of October,
TURKSTAT, 2003, taken from, accessed on 27th of July,
562, accessed on 26th of July, 2006.
563, accessed in November, 2006.
564, accessed on 27th of July, 2006
565, accessed on 27th of July, 2006.
566, accessed in November, 2006.
The Turkish Case 155

international trade fairs.567 According to MIB information, manufacturing industry

grew more than 10% in the year 2004. The members of MIB are referred to as the lead
members of the industry.568 In 2003, an investigation among the members revealed
that 67 out of 78 companies reported an increase in production; seven indicated a
decrease and four reported stagnation.569

The association is structured into 36 sub-groups570 and is guided by a management

committee of nine people, all of them owning a manufacturing business and elected by
the 183 members.571 Every year, a short industry report and a list of involved
companies, including their main competencies and contact dates is published. As well,
the MIB website provides a detailed database with a search function including the
complete address and Internet site of a company, a contact person, and the most
important competencies.572

5.3.1 Initiation

Attitude towards Cooperation and Cooperation History

Clusters are quite common in the Turkish textile industry (e.g. Bulu et al., 2004),573
but also in manufacturing industry (Sedef, 2006). However, these clusters aim at
strengthening the industry and establishing a regional value chain of interdependent
firms. Turkish manufacturers are therefore not prepared to design a joint network;
even the term “iúbirli÷i a÷ı” (network) is completely new for Turkish
Manufacturers.574 There is no culture of information exchange or idea exchange
because of high competition in the industry.575

On the other hand, the Turkish industry still suffers from high import rates and from
growing competition from the Asian market. Therefore Turkish manufacturers,
especially smaller enterprises, realized that they need to engage in more aggressive

Cf. MIB introductory presentation, kick-off meeting 1st of July, 2004.
Cf. document “MIB - Makina Imaltatcilari Birligi. Üyeleri. Members of Association of Machine
Manufacturers 2003. Brochure printed by Önder Matbaacilik Tic.Ltd. Sti.
Cf. document “MIB - Makina Imaltatcilari Birligi. Üyeleri. Members of Association of Machine
Manufacturers 2003. Brochure printed by Önder Matbaacilik Tic.Ltd. Sti.
570, accessed on 27th of July, 2006.
571, accessed in November, 2006.
572, accessed on 27th of July, 2006.
An example is to be found on, accessed on 27th of July,
Cf. interview Network Manager, October, 2005.
Cf. interview Network Manager, October, 2005.
156 Empirical Data: Network Formation Processes

strategies and build up partnerships with internal and external companies in order to
compete on the worldwide market.576 The above-mentioned “SME Strategy and
Action Plan”, for example, contains a section about the importance of regional clusters
in order to strengthen the SMEs of Turkey.577 Another indicator for the importance of
investigating in new concepts related to ICT is given by the preparedness ranking of
the World Economic Forum's Global Information Technology Report (2002-2003), in
which Turkey is rated on place 50 among 84 countries which reflects a low e-
Readiness where the ICT indicators show quite a low ICT usage. 578 Networking,
cooperation and partnerships are therefore seen as a possible solution to overcome the
major SME and globalization related problems. However, the question arises whether
these innovative and new concepts fit to the Turkish manufacturing culture. Although
MIB579 and OAIB580 try to support the small and medium enterprises of the sector by
organizing trade fairs and exhibitions or by establishing contacts to foreign countries,
the industry itself has not yet established a cooperative culture or a way to exchange
know-how between companies and/or entrepreneurs. Turkish manufacturers have
difficulties in trusting each other and fear losing their competitive advantage if they
cooperate or enter a network initiative.581

To overcome these problems, MIB entered the FP6-project VERITAS. The

professional approach of a research project aimed to create attention and awareness of
the network concept in the whole sector and motivate at least a group of machine
manufacturers to establish a network initiative on their own.582 Additionally,
VERITAS was seen as a change to bring new members to the industry association, as
MIB was one of the first organizations participating in an FP6 project.583 In contrast to
the normal cluster concept, the establishment of a Virtual Industry Cluster contains
both the integration of ICT and the extension to the whole country and therefore fits to
the enterprises of MIB, with an average employment number of 88 people, including
54 workers and seven engineers.584

576, accessed on 18th of October,
577, accessed on 26th of July, 2006.
578, accessed on 27th of July, 2006.
579, accessed in November, 2006.
580, accessed on 27th of July, 2006.
Cf. interview Network Manager, October, 2005.
Cf. VERITAS D41: Report on the Experiences with Setting up a Virtual Enterprise, January, 2006.
Cf. personal meeting notes of the kick-off meeting, 1st of July, 2004.
584, accessed in November, 2006.
The Turkish Case 157

The project was coordinated and carried out by an external consultant of the industry
who had worked with the members of the executive committee in projects before.585
She is an expert in ICT and e-Business and has her own consulting company in the
sector of consulting for SMEs in order to enhance competitive knowledge. The second
person involved in the project was an industry expert who had worked for the defence
ministry before and was a former member of the MIB management board and
therefore had a good standing among the MIB management board.

Identification of Target Group

90% of the MIB companies were classified as being SMEs, predominantly machine
manufacturers. Most of the MIB members are export-oriented so that all of them were
supposed to be interested in gaining know-how and establishing contacts via an
international project.586 While on an association level the advantages in participating
in the project were seen in being the leader on providing innovative concepts and
stimulating the machinery industry on getting together (and affiliating to MIB),587 for
the member companies the main advantage was to be one step ahead because of the
ability to learn about new concepts, and new technologies and to increase
collaboration between other European countries and Turkey.588 The board of MIB
discussed models of networking long before, trying to establish a strong industry that
is able to survive at the international market.589 The main problem of the industry
seems to be the low capacities590 and the unpreparedness for large orders, as every
Turkish entrepreneur owns his own single business. Based on the attractiveness of an
international project for the Turkish industry and the mission of MIB, it was decided to
integrate all members of the association in the project.

Way of Contacting Target Group

Originally, the first introductory workshop where a general presentation of the
Network concept, different best practice examples and benefits for the potential
members should be presented,591 was planned for the first week of December 2004592

Cf. MIB CD-presentation, 2004.
Cf. personal meeting notes, VERITAS meeting 3rd of November, 2004.
Cf. MIB introductory presentation, kick-off meeting 1st of July, 2004.
Cf. MIB introductory presentation, kick-off meeting 1st of July, 2004.
Cf. personal meeting notes, Turkish network meeting 27th of May, 2005: One of the board members
of MIB mentioned that such concepts were discussed years before but now was the right point of
time to start.
Cf. VERITAS meeting minutes, 3rd of November, 2004.
Cf. VERITAS meeting minutes, 13th of September, 2004.
158 Empirical Data: Network Formation Processes

Later this was switched to the week around the 15th of December 2004.593 Information
about the workshop was planned to be sent via mail, but people also were to be
contacted personally.594 Other companies in Turkey that are part of the manufacturing
industry, but do not have a MIB membership were planned to be invited for
exchanging ideas, as they already started some network of collaboration.595

For the distribution of information, a short overview on how to set up a Cooperative

Network596 including the best practice example of the German network IMPRO597, the
benefits of networking was translated into Turkish and included in the invitations. In
the leaflet, suggestions were presented on how to find out whether companies and their
competencies match to other’s as well as first hints on how to manage a network.598 It
was decided to use the traditional form of a letter and address the invitations strictly to
the CEOs of the companies. Nevertheless, a lot of lobbying and informal talks were
carried out during the first phase. The Industry Representative mentioned that 30
companies answered the mail invitation immediately.599 In a second step, personal
phone calls and distribution of folders to SMEs, research centers and chambers took
place.600 A secretary carried out the phone calls, but it was offered that one person
from MIB management called back in case more information was needed. However,
MIB and the representative consultant mentioned that most companies were simply
attracted by the topic and the agenda and did not have to be convinced.601

In sum, the invitation was sent to around 200 organizations including the members of
MIB, TUBITAK Office, KOSGEB, the Turkish SME Development Organization and
TTGV, the Turkish Technology Development Foundation, the TBV (Turkish
Informatics Foundation, TOBB (Turkish Chambers Association) and to technical

Cf. personal meeting notes, VERITAS meeting 13th of September, 2004; VERITAS meeting
minutes, 13th of September, 2004.
Cf. VERITAS meeting minutes, 3rd of November, 2004.
Cf. personal meeting notes, VERITAS meeting 3rd of November, 2004.
Cf. VERITAS meeting minutes, 3rd of November, 2004.
Note from the author: In Turkey, the term Cooperative Network was used from the beginning on as
especially the term “virtual” proved to be difficult to understand.
597, accessed in November, 2006.
Cf. VERITAS D1.2: First Contact Material, November, 2004.
Cf. personal meeting notes, VERITAS meeting, 10th of January, 2005.
Cf. MIB workshop leaflet Turkey; document “basvuru formu” (workshop registry), 10th of January,
Cf. personal meeting notes, VERITAS meeting, 10th of January, 2005.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006.
The Turkish Case 159

Informative Workshops
Finally, the workshop took place on the 10th of January 2005 at a conference center in
Istanbul and lasted from 16:00 – 18:30. Around 50 people registered for the
workshop603, in the end 36 people from 28 different companies participated.604 Most of
the participants were from Istanbul, but participants also came from Konya, Gebze,
Bursa and Adana. The workshop was organized like a conference event, including a
registration desk where participants received a conference map with the presentations
and first contact material,605 as well as badges and headphones for the simultaneous
translator.606 Representatives of press were also present.607

The agenda608 contained i) an introduction by the Network Coordinator,609 ii) a

presentation on the need for the establishment of VOs, presented by the head of
MIB,610 and iii) the Cooperative Network Approach presented by SFC who highlighted
the theoretical background of networks and the advantages for SMEs.611 This
presentation also included a systematic approach how to design the formation process.
iv) As well, the workshop contained a best practice example of the Swiss Network
Swiss Microtech Network.612 The example shows a network in the screw machinery
industry that was founded in 1996 and is a specialist in sharing orders, but also raw
material, tools and commodities. The presentators suggested to first define the
strategy, second, to decide on structure and roles, then in a next step on rules and
business processes, before finally establishing a real business plan for the network.613
The network, its structure and main successes like cost reductions and joint trade fairs
were presented by one participant company from the plastics industry who

Cf. personal meeting notes and official VERITAS meeting minutes, 10th of January, 2005.
Cf. MIB participation list (“takipsheet”), January, 2005.
Cf. VERITAS D21: First contact Material, November, 2004.
Cf. MIB workshop report, January, 2005.
Press releases had been sent to: Makine Magazin, Machinery Industry Magazine, Turkey,
Mühendis ve Makine, Machinery Engineering Magazine, Turkey, Kobi Efor, SMEs Magazine,
Turkey, Ofis øletiúim, Industrial Communications, Turkey, BT Haber, BT Net, IST Industry,
Turkey, Dünya, Referans, Gözlem, all daily newspapers, Expo Channel (Business Newspapers and
TV Channels), Kanalturk, EU Communication Project. Cf. MIB workshop report, January, 2005.
Cf. MIB workshop leaflet, 10th of January, 2005.
Cf. MIB introductory presentation, 10th of January, 2005.
Cf. MIB presentation, 10th of January, 2005.
Cf. SFC presentation “United we stand – approaches & critical success factors of network
cooperation”, 10th of January, 2005.
Cf. Swiss Microtech presentation “Competitor based Collaborative Network of SME”, 10th of
January, 2005.
Cf. Swiss Microtech presentation “Competitor based Collaborative Network of SME”, 10th of
January, 2005.
160 Empirical Data: Network Formation Processes

successfully participated in two networks and reported his own experience.614 The
meeting was concluded with an interactive, lively discussion, where the main concerns
was discussed, for example how to build up trust between participants. The question
arose how to change the mentality of the industry to create a collaborative network.615
Companies also required feedback from outside: One of the entrepreneurs asked how
the Turkish Machinery was viewed from external countries.616 At the end of the day, a
short questionnaire was distributed.617 15 companies completed the evaluation forms.
The analysis revealed that more than 80% of the participants appreciated the
presentations. 60% of the sample thought that training and joint work could make them
implement the model, and would like to receive more information about the network
concept.618 The official part of the meeting ended around 19:00, but was concluded
with a reception in the conference center.

As the Virtual Enterprise concept was relatively unknown in the Turkish industry, the
introductory workshops aimed at introducing the concept and creating awareness, but
also to identify the interest of potential partners. All in all, the workshop was judged as
being a success for the industry: ”Before, bosses and managers were not in agreement
with the concept or understood what it means and now besides understanding, they
started to believe it as a solution for their problems.”619 Concerning the next steps,
MIB suggested establishing a group of leaders in order to attract additional interested
companies. Further follow-up meetings should take place.620

After the first workshop, the presentations were judged according to their ability to
explain the concept. Statements like “Even though trust is mentioned as highly
important, information on how to provide trust was not mentioned”, or, “Presentations
were not satisfactory by means of its objectives, e.g., it is not understood well how a
virtual enterprise works” were found at the evaluation forms.621 The request for
information and detailed information and support was an important aspect during the

Cf. Swiss Microtech presentation ”SMT – a success story”, 10th of January, 2005;, accessed in November, 2006.
Cf. VERITAS D41: Report on the Experiences with Setting up a Virtual Enterprise, January, 2006.
MIB workshop report, January, 2005.
Cf. personal meeting notes, VERITAS meeting 10th of January, 2005.
Cf. MIB questionnaire ”Degerlendirle formu“, 10th of January, 2005.
Cf. MIB workshop report, January, 2005.
Cf. MIB workshop report, January, 2005, p.9.
Cf. VERITAS meeting minutes, 10th of January, 2005.
Cf. MIB workshop report, January, 2005.
The Turkish Case 161

first months for the Turkish representative persons as well. The representatives found
it important to learn about the concept and get more information from the beginning
on. They were in favor of the idea to invite a representative of the Virtual Factory
Rhein Ruhr – which had failed – to a meeting of the VERITAS consortium622 in order
to get meaningful insights and help to avoid mistakes. Another indicator of the high
preparedness to learn about how to set up a network was recognized in the project
meeting on the 13th of September 2004. At this meeting an internal research part was
presented by UNIVIE and SFC that including best practices, success factors and
highlighted first suggestions for workshops. The ideas to invite experts and present
success stories was very quickly agreed and adopted by the Turkish representatives.623
Due to the fact that the first Austrian meeting took place before the Turkish
information workshop, the Turkish representatives were present at the Austrian
meeting. At the end of the day they asked for a translation of the best practice example
Virtuelle Fabrik Nordwestschweiz-Mittelland624 that had been presented at the

The impression of not having any experience with networking was maintained during
the whole project. Expressions like “Well I have to add, that I do not have any
experience with setting up a network”.626 , or, “But I don’t have any experience with
such networks.”,627 were often noted during interviews with Turkish network
members. Insecurity was related to the low experience with networks (“In other
respects, I don’t have ample experience in collaboration.”628, “To be honest, I don’t

The decision to invite those experts was taken during the kick-off meeting on the 1st of July, 2004
(Cf. VERITAS meeting minutes, 1st of July, 2004). On 13th of September, 2004, a member of WZL
RWTH Aachen (, accessed in November, 2006)
presented the actual business concept of Virtual Factories and Virtual Organizations (cf. VERITAS
meeting minutes, 13th of September, 2004.)
Cf. UNIVIE/SFC presentation about workpackage one, 13th of September, 2004
624, accessed in November, 2006.
Cf. personal meeting notes, 3rd of November, 2004.
Cf. interview number 5, unit 02050797, October, 2005. Translated by the author. German text
(translated by a bilingual expert): “Also, ich muss dazu sagen ich habe keine besonderen
Erfahrungen mit Kooperationen“.
Cf. interview number 5, unit 02050823, October, 2005. Translated by the author. German text
(translated by a bilingual expert): “Aber ich habe keine Erfahrung mit solchen Netzwerken.“
Cf. interview number 6, unit 02060995, October, 2005. Translated by the author. German text
(translated by a bilingual expert): “Ansonsten habe ich aber in dieser Richtung, etwas gemeinsam
zu machen, keine großen Erfahrungen.
162 Empirical Data: Network Formation Processes

have ample experiences in that, because we haven’t had many cooperations so

far.”629) and was tried to be overcome with a lot of questions.

Summary and interpretation: The Initiation phase lasted from July 2004 until
January 2005 that is seven months. During these months, the process was mainly
characterized by learning and understanding the concept, and at the same time creating
awareness at the Turkish manufacturing industry. The Turkish representatives showed
strong interest in motivating their members to enter cooperation and defined a clear
approach whom to address as potential partners. The VERITAS project was also seen
as a “service” to their members, a possible solution to adopt European Union concepts.
In fact, MIB and the workshop initiatives were seen as “pioneers” because such
projects had not been addressed from the industry before. Thus, the identification of
the potential partner companies followed a clear approach.

The information of the manufacturers, however, took quite a long time and only one
meeting took place in a time frame of four months.630 The meeting was planned like an
event, including press representatives and translators, and an informal reception.
Although the Network Manager had expected around double the amount of people
during the first meeting, the workshop can be judged as rather successful as the
companies attended the meeting with interest and asked a lot of questions. 60% of the
participants thought that they would be able to implement the virtual enterprise model
with some work and training.631 Some of the participants, however, also stated that it
would be difficult to find partners. On the other hand, the potential network partners
came at least from the same industry, had the same background and some of them even
knew each other before.

During the Initiation phase, the representatives showed strong commitment and
personal involvement with the network idea and even tried to convince the
manufacturers via personal talks. The long timeframe can be mainly attributed to the
insecurity with the concept. This is also reflected by the decision to now look for a
leading team of the network in order to attract more people for the cooperation.

Cf. interview number 7, unit 02071261, October, 2005. Translated by the author. German text
(translated by a bilingual expert): “Um ehrlich zu sein habe ich keine großen Erfahrungen darin,
denn wir haben noch nicht viele Kooperationen gehabt.“
According to the VERITAS consortium meeting in September, an informative workshop could not
have held before.
Cf. MIB introductory workshop report, 17th of January, 2005.
The Turkish Case 163

5.3.2 Forming

Getting to Know Each Other

The next meeting took place on the 17th of March 2005, where nine people from seven
companies took part. The aim of the meeting was to discuss the preparedness of the
machine-manufacturing sector to establish a network, to identify relevant sub-sectors
and competencies to be included.632 Additionally, it should be discussed on a general
level which strengths and weaknesses are demonstrated by the industry. In addition,
the first workshop was reviewed and the status of the VERITAS project including the
development in Austria and Belgium was reported.633

In order to get to know each other on a technical level, a SWOT analysis was carried
out and the results summarized in Table 14.634 The analysis showed that strengths
could be attributed to well-experienced workers and the cheap labor force. Most
critical for the establishment of a network was the lack of knowledge on how to start
such a cooperation.635

ƒ Well experienced employees

Strengths ƒ Excess of machinery
ƒ Cheap labor force relative to international markets

ƒ Lack of knowledge on how to establish a network

Weaknesses ƒ Lack of training
ƒ Lack of international marketing capability and resource utilization

ƒ The geographical area

ƒ Communication possibilities
Opportunities ƒ Closeness to Middle East and Russia
ƒ Virtual technological platforms for marketing

ƒ The decrease in national funding supports

ƒ Price competition with Asian countries
Threats ƒ Competition between companies
ƒ Volatile economical status

Table 14: SWOT Analysis of the Turkish Manufacturers

Cf. MIB workshop report, 17th of March, 2005.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006.
Cf. MIB workshop report, 17th of March, 2005.
Cf. MIB presentation at the 2nd review meeting, June, 2005.
164 Empirical Data: Network Formation Processes

Identified cooperation areas were seen in joint procurement of compressors, pumps,

generators, spare parts and moulding. Moreover, cooperation in cross-servicing,
capacity sharing and sharing of R&D engineers was mentioned.636 The final idea was
to set up a customer-oriented cooperation network like Swiss Microtech Network637 in
the long run, but before this to establish a B2B-market for mutual services. In a very
first step, cooperation with either AGORIA or Swiss Microtech Network638, was also
addressed. If the Belgian partner association AGORIA could be involved in network
considerations, the major benefit for Turkish companies would be seen in contacts to
Belgian business partners. The same holds for Swiss Microtech Network639, but here
the aspect of learning from the experts would also be included in a joint
cooperation.640 In both directions first contacts had already been made. It was agreed
on the following points to be considered seriously for the establishing of Cooperative
- “MIB should make a research on the sectors and capacities in order to create a
cooperation infrastructure by collecting data, so requirements and supplies will
be better seen.
- Idle machine capacities should be identified.
- We should take part in the existing Cooperative Networks.
- It could be useful to start with joint procurement networks as a start point of
mentality change and awareness creation.
- MøB members need to know each other more.”641
From this meeting, it was learned that the set-up process would be a learning process
for the member companies. 642

Cooperation Atmosphere
Generally speaking, the atmosphere during the meetings was calm, relaxed and open.
A lot of discussions took place. The most critical factors discussed were trust and fear
of competitors.643 In terms of the Network Coordinator’s opinion, “(…) manufacturers
are friends.” 644 Nevertheless this does not mean that they do not compete with each

Cf. MIB workshop report, 17th of March, 2005.
637, accessed on 23rd of October, 2006.
638, accessed on 23rd of October, 2006.
639, accessed on 23rd of October, 2006.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006.
Cf. MIB workshop report, 17th of March, 2005.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006,
p. 56.
Cf. UNIVIE meeting minutes, network meeting, 27th of May, 2005.
Cf. MIB presentation at the 2nd review meting, June, 2005, p.4.
The Turkish Case 165

other. She expressed it with: “(…) when there is business they compete toughly”.645
Therefore, the positive discussion atmosphere was helpful, but on the other hand, the
points agreed on the task list were only agreed on an abstract level. Delegation to
outstanding potential partners took place as meeting participants discussed how to
convince “the others” of networking and thought less about cooperation among

The preparedness questionnaire – translated into the Turkish language647 – was

completed by nine companies (eight potential network partners and one external
consultant). Before the evaluation, the Turkish industry association was aware of the
fact that entrepreneurs would not like to fill in the questionnaires.648 As an incentive,
UNIVIE brought Austrian chocolate for the ones who did the evaluation,649 which was
on the one hand accepted as a present, but on the other hand increased cooperation
preparedness. The entrepreneurs were pleased by the present and the atmosphere was
good although it took 30 minutes until everyone was finished.

Eight questionnaires were given back at the day of the meeting, the 27th of May 2005;
one was handed in later because the company had left the meeting early. The
objectives of cooperation were mainly access to new markets and the improvement of
flexibility. Interestingly, cooperation was based on short-term use of market

Trustworthiness of partners was the most important aspect for all partners to
participate in cooperation. The impression of negative trustworthiness that would lead
to ending the cooperation was also ranked on the first position (µ=4.78).651 Turkish
participants additionally highlighted the need for transparency and openness in
discussion, and well-established contracts between partners so that everyone is aware
of the profits s/he can get out of the network.652

Cf. MIB presentation at the 2nd review meting, June, 2005, p.4.
Cf. personal meeting notes, network meeting, 27th of May, 2005.
Cf. questionnaire “Günümüzde Iúbirlikleri”, May, 2005.
Cf. VERITAS D51: The importance of trust in the phase of network formation, January, 2006.
Cf. VERITAS D51: The importance of trust in the phase of network formation, January, 2006.
Cf. UNIVIE presentation “Evaluation of questionnaires”, 6th of October, 2005.
Cf. UNIVIE presentation “Evaluation of questionnaires”, 6th of October, 2005. (µ=5 would reveal a
100% agreement of all parties). For further information compare for VERITAS D51: The
importance of trust in the phase of network formation, January, 2006.
Cf. UNIVIE presentation “Evaluation of questionnaires”, 6th of October, 2005.
166 Empirical Data: Network Formation Processes

The participation rates at the meetings were quite low. The coordinators had to talk
with companies one by one to assure attendance.653 Additionally to being responsible
for their own companies, managers suffered from a lack of time. This led to severe
problems with establishing ideas/commitment because many aspects had to be
discussed again and again.654

Reach Commitment and Strategy Formulation

Most important considerations of the Industry Representative and the Network
Manager were that the companies did not understand that they had to become active
themselves. Most of the participants thought that the main business model resembled
either a joint venture or an Internet platform.655 It was recognized that companies
would need an expert to tell them what to do and follow his guidance. Additionally,
the Network Coordinator often mentioned the lack of experience of companies with
networks. Contrary to the consortium’s suggestions on how to structure the follow-up
workshops,656 she expressed it as follows: “Brainstorming on the following questions
is not relevant in our case: What is expected from a network? Which experiences on
networking do companies have so far? (…)”657 and argued that it was more important
to think of concrete business and business opportunities since there were no
experiences with networking.

To identify a market and to promote the idea of networking, a lot of press releases
were written. The industry consultant for example presented the current project status
at a conference in September 2005, highlighting the process from no experience to first
steps in networking.658

On the 27th of May 2005, a third meeting took place. The agenda659 contained the
presentation of two successful Turkish successful networks, the presentation of SWOT
analysis results with the discussion on joint objectives and first steps towards a joint
marketing plan as well as the decision on requirements for the Network Manager. The

Cf. VERITAS telephone conference meeting minutes, 4th of May, 2005.
Cf. interview with Network Manager, October, 2005.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006,
p. 56.
Cf. VERITAS recommendations on workshop structure, April, 2005.
Cf. email network coordinator to SFC, 6th of April, 2005.
Cf. MIB presentation at the International Conference on Strategic Partnerships in Istanbul,
September 2005.
Cf. agenda Machine Manufactures Association, VERITAS Project – Cooperative Networks
Establishing Platform, 27th of May, 2005.
The Turkish Case 167

meeting took place in the morning and was concluded with a joint lunch.660 Although
12 people were expected,661 only eight managers participated, and one left before
lunch. Again, during the meeting, the atmosphere was relaxed and people spoke in a
very open manner to each other.662

The first best practice presentation was about HMS Makina663, a network based on 90
people and 30 machines, that is lead by one central company.664 It is a hierarchical
model where the leading company brings different competencies together. It was
established based on different outsourcing projects. The idea is to use the existing
capacity and the existing machinery park, but jointly produce different component
parts and. The model requires strong quality control support665 and open information
exchange between partners666. During his presentation, the manager of HMS Makina667
even mentioned that exchange of human resources had taken place. Most important in
his opinion was a strong leader with a trustful and proper personality and the
establishment of a core group first.668 This presentation led to an intensive discussion
about how to start a network – different ideas that ranged from joint marketing to the
establishment of a completely new organization were mentioned.669 One of the
members stated that clear strategies must be identified before starting.670 The Network
Coordinator presented different network concepts that could suit the manufacturers.
The meeting participants wanted to further discuss the models with the members of the

First experiences with a Cooperative Network were presented by Platform 360672, a

network that has the same cooperative concept and theoretical background as HMS
Makina673 but was embedded in the IT sector. A strong company that enabled
cooperation partners to establish a wider marketing network capacity, different
competencies and financial power again took the umbrella role. The ideas of Platform
Cf. VERITAS telephone conference meeting minutes, 18th of May, 2005.
Cf. VERITAS telephone conference meeting minutes, 25th of May, 2005.
Cf. personal meeting notes, MIB network meeting, 27th of May, 2005.
663, accessed in May, 2005.
664, accessed in May, 2005.
Cf. MIB network meeting minutes, 27th of May, 2005.
Cf. personal meeting notes, MIB network meeting 27th of May, 2005.
667, accessed in May, 2005.
Cf. personal meeting notes, MIB network meeting 27th of May, 2005.
Cf. MIB workshop report, 27th of May, 2005.
Cf. personal meeting notes, MIB network meeting 27th of May, 2005.
Cf. UNIVIE meeting minutes, MIB network meeting 27th of May, 2005.
672, accessed on 1st of August, 2006.
673, accessed in May, 2005.
168 Empirical Data: Network Formation Processes

360674 were mainly based on joint marketing and R&D.675 The manager highlighted
the importance of trustful relationships and open information exchange. Six months
after the cooperation had started, the partners were able to present higher turnover for
partner companies and strong name recognition of the network.676 677

Several other models were discussed, including examples like the Virtuelle Fabrik
Nordwestschweiz-Mittelland678, but also more general cooperation concepts like the
idea of joint marketing or capacity sharing models.679 Further ideas how to cooperate
were thought of:680
ƒ Sector-based capacity sharing (either on the same subject, but with different
competencies or on the same subject and on the same competencies or even
contractor based.
ƒJoint Marketing (either under the umbrella of MIB or under another brand
ƒR& D with either national or international partners.

An action plan was agreed at the end of the meeting: For the sub-sectors of pumpers,
compressors, textile machinery and machine tools it was agreed to carry out pre-
studies on feasibility. In the sector of “on the vehicle machinery and equipments” 681 a
first Cooperative Networks would start.682

Despite the numerous ideas, it became clear that training activities would be needed
for the Turkish participants. The Industry Representative believed that only short-term
business could lead to better involvement. The same aspects were revealed with the
analysis of the questionnaire as short-term business was much more important than
establishing long-term contacts.683

674, accessed on 1st of August, 2006.
Cf. MIB network meeting minutes, 27th of May, 2005
Cf. personal meeting notes, MIB network meeting 27th of May, 2005
Comment of the author: Despite the successfulness it must be stated, that the umbrella company
KocSistem is one of the most powerful enterprises in Turkey, and disposes of a well-known
reputation. This might be one of the reasons why the network is that successful.
678, accessed in October, 2006.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006.
Cf. MIB network meeting minutes, 27th of May, 2005.
“On-the-vehicle”-machinery refers to machines on for example trucks like airport stairs, tree
cutting machines and so on. Later, the cooperation based on “on the vehicle –machinery” was
renamed to Super Structure Network.
Cf. MIB network meeting minutes, 27th of May, 2005. p.3.
Cf. UNIVIE presentation “Evaluation of questionnaires”, 6th of October, 2005.
The Turkish Case 169

At the end of the meeting, characteristics for a Network Manager were discussed. It
was agreed that such a Network Manager should have i) industrial know-how, ii)
professionalism, iii) reliability and communication abilities, but should iv) also have
knowledge about Cooperative Networks.684 The participants agreed to come back with
ideas and suggestions.

The impression arose that the direction of the network would depend on the selection
of the Network Manager and his background685: Based on the idea of cooperating with
the manager of Swiss Microtech Network686, a strong connection between the Turkish
and the Swiss clusters was thought to be fruitful for the advancement of the progress.
However, it was decided to look for potential partners and other companies to
cooperate with and come back to the consortium.

Identification of the Market

No real market was identified during this time but a lot of ideas were derived on where
the network could go and what could be done, mostly based on other examples.

Summary and interpretation: The Forming phase lasted from February until June
2005 – five months. During this phase, two meetings with interested parties took place
in order to develop ideas about joint work and in order to find cooperation
possibilities. Four CEOs participated at both meetings, but the others expressed their
explicit interest to be invited to further meetings. Nevertheless, it became clear that the
non-experience with networking would be crucial throughout the whole network set-
up and that – although a lot of ideas and positive contributions came up – a lot of
questions on how to start arose. These aspects reflect the typical need for dependence
in the Forming phase (Tuckman, 1965). People asked a lot of questions and the
purpose of the group was questioned.

According to their roles, participants were to a large extent members of the MIB
management board or had at least held such a function during the last years. Questions
were not only characterized by interest and need for help, but also by skepticism. At
least one person seemed very skeptical at the meeting on 27th of May 2005; another
manager had some doubts, too.687

Cf. MIB network meeting minutes, 27th of May, 2005.
Cf. VERITAS telephone conference, meeting minutes 25th of May, 2005.
686, accessed on 23rd of October, 2006.
Cf. personal meeting notes, MIB network meeting 27th of May, 2005.
170 Empirical Data: Network Formation Processes

Generally, the Forming phase is seen as a phase of orientation, but also “testing” the
leaders (West, 2004). This could be identified during the meeting in March 2005,
where the Network Coordinator was overwhelmed with questions about concept, idea,
direction and guidelines for the network initiative. Questioning the meaningfulness of
the cooperation could also be derived from non-commitment or late commitment to
meetings. On the other hand, the typical problems of politeness and antipathy
(Kauffeld, 2001) were not observed, as most of the participants knew each other
before. Therefore, the discussion level was quite lively – and the questionnaire
revealed that the participants recognized trust as the most crucial issue.688 No anxiety
was recognized. The concept of networking was accepted and discussed by the
companies. A lot of project ideas arose and everyone participated in discussions. They
could not agree on more concrete points like the sectors to be involved, but wanted to
discuss it with companies outside of the meeting. The internal meeting report showed
that on the one hand commitment and preparation for collaboration was high, but on
the other hand, commitment to actively be involved in creating business was still very
low.689 On the one hand, this could be interpreted as lack of knowledge, but on the
other hand, this could also be low commitment because of skepticism. One of the
participants questioned that examples like Swiss Microtech Network690 were successful
since they had not expanded to other countries and still depended on only ten
companies.691 On the whole, it seemed to be unclear for the potential partners that the
establishment of a joint cluster takes time and commitment.692 Among other factors,
this was the reason for the initiation of training.

To summarize, commitment was observed on a talking level but not on an activity

level.693 For example, a lot of action suggested contained the carrying out further
studies or the involvement of other people. Important aspects that should be ensured
during this phase is (…) that team goals are clearly stated and agreed” (West, 2004,
p. 29). However, a concrete direction could not be finalized but decided to further
discuss it with others.

Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006,
p. 60.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006.
690, accessed on 23rd of October, 2006.
Cf. personal meeting notes, MIB network meeting 27th of May, 2005.
Cf. VERITAS meeting minutes, 27th of April, 2005.
Compare also for meeting notes of UNIVIE during a meeting with cultural expert, 1st of June,
The Turkish Case 171

5.3.3 Storming

Working Together
During the Storming phase that took place during summer, network participants started
to work with each other. The author was not able to observe the selection of partners
as most of these issues were carried out in informal meetings and bilateral idea-

In June 2005, one of the leaders in MIB who was involved in “on-the-vehicle”-
machinery”694 defined four companies that would like to cooperate with each other and
tried to ask them about their competencies via personal talks. The questions included
figures and facts on revenue, export share, exporting countries, number of
employees, exporting expectations, existing certificates, and products. The list was
established by one central member of the Turkish interests and more questions were
asked from the consortium team.695 However, no reports on further meetings or events
of this group have been submitted. Finally, two Cooperative Networks were initiated,
a) the so-called Super Structure Network, consisting of three companies and b) the
Compressor Network with eleven companies, and c) the Precise Mechanics Network
with four companies.696 All three initiatives were based on one joint collaborative
network that is the VERITAS network (see figure 12). The precise mechanic network
was not pursued afterwards.

a) The Super Structure Network (called “on-the-vehicle”-machinery before) was

based on three companies that wanted to carry out joint marketing together and
help each other with various topics. Company 1 was involved in manufacturing
airport equipment; company 2 in manufacturing mounting systems and lifts for
trucks and platforms etc. and company 3 manufactured military equipment and
trucks. All three of them were well-established companies in the Turkish market
with export-oriented production and had between 20 and 30 years of business
experience.697 The smallest of the three partners had 30 employees, whereas

“On-the-vehicle”-machinery refers to machines on for example trucks like airport stairs, tree
cutting machines and so on. Later, the cooperation based on “on the vehicle –machinery” was
renamed to Super Structure Network.
Cf. email MIB to UNIVIE and SFC on 12th and 13th of June, 2005.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006.
Details about the companies can be found at, 10th of August,
172 Empirical Data: Network Formation Processes

company 3 worked with over 180 employees. Company 1, with a representative in

the MIB management board, was the one who initiated the network.698

Precise Mechanics
Super Structure

Figure 12: Turkish Network Initiatives1

During a first meeting in July 2005 the objectives of the network were discussed.699
It was decided to reduce production costs via collaboration, produce higher quality
products and increase production/sales for both players as well as enhance access
to new markets.700 Furthermore, strengths and weaknesses of the potential partners
were analyzed and determined by the Network Coordinator (see table 15).

For October 2005, it was planned that companies visit each other.701 The
organization and its target sectors should be agreed upon in further meetings.
Nevertheless, the main objectives for the second half of 2005 were to create a new
market out of Turkey via joint marketing. In a second step joint production should
be thought about.702

Cf. email MIB to UNIVIE and SFC on 12th and 13th of June, 2005.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006.
Cf. MIB presentation at the final review meeting, 26th of January, 2006.
Cf. VERITAS meeting notes, 6th of October, 2005.
Cf. MIB presentation at the final review meeting, 26th of January, 2006.
The Turkish Case 173

Skills Company 1 Company 2 Company 3

Client Necessities Very good Very good Very good

Communication External relation balance External relation Very good

Skills partly balance partly

Future R&D partly R&D partly Very good

Cohesion Different product variations Very good Very good

Flexibility partly

Stability Weak incitement systems in Weak incitement Very good

the capability level systems in the
measurement, strong capability level
relations among shareholder, measurement
no guarantee of profitability
or liquidity

Reliability Product service standard and Very good Product service

production processes stability standard and
partly, reaching sales point production processes,
satisfaction partly Stability partly

Cooperation Supplier, partner, rival, R&D, Very good Very good

sales, production, service
Marketing distribution
cooperation partly

Table 15: Skill Matrix Super Structure Network703

In November 2005, one potential partner left the initiative so that only company 1
and 2, including one member of the MIB management board, remained for the
network.704 As these two players had got to know each other,705 a further meeting
took place during November 2005, where the two partners exchanged ideas about
expectations and long-term objectives. The following points for a strategy were
- Continuation of cooperation, new partners to be acquired after successful joint
- Technical knowledge sharing
- Joint purchasing of hydraulic cylinders
- Joint production of specific products with specific competencies and
experiences internationally competitive
- Prototype production

Table was established by MIB Network Manager, October, 2005.
Cf. VERITAS meeting notes, 28th of November, 2005.
Cf. VERITAS meeting notes, 28th of November, 2005.
Cf. MIB presentation at the final review meeting, 26th of January, 2006.
174 Empirical Data: Network Formation Processes

- Joint marketing: new brand name, joint fair participation, use each other’s
sales/marketing networks

In order to reach their objective i.e., to go to bigger and different markets, both
stated that they were ready to invest.707 As well, a marketing plan was decided.708

For the Super Structure Network, the sales area was defined as being national and
international with a target sales number of 10 joint items in the first year, 50 in the
second one. The total sales volume should be around $300,000 in year one,
$1,500,000 in year two. As marketing methods, face to face shows709 and factory
demonstrations as well as a joint website and joint participation in tradefairs.
However, the two companies at this stage did not decide, which products to focus
on, which fairs to participate in (they even stated that the list of exhibitions shall be
determined by MIB)710, but rather drafted a rough plan about important items in

On 20th of December 2005, the two Super Structure Network partners met again to
define cooperation subjects and actions. In this meeting it was decided to sustain
the cooperation on joint marketing, joint purchasing, joint R&D, and joint
production, even though the third company did not commit to participate in the
network.711 712

Products Markets
Company 1 Airport Equipments (catering car, water Airports, Airport authorities, airport
and waste water cars, maintenance land services
platform, luggage and cargo cars, stairs,
conveyor, deicing machines), Mobile
Scissors Platforms

Company 2 High Altitude Working Platforms, Lamp Electricity Service Companies,

Maintenance Cars, Tree Pruning Tools Municipalities, Factories, Industrial
and Cars, Mobile Scissors Platforms Institutions, Fire Brigade
Organizations, Construction Fitting
Companies, Marine Organizations.

Table 16: Product-market Matrix Super Structure Cooperators

Cf. Network Manager meeting minutes, 17th of November, 2005.
Cf. MIB presentation at the final review meeting, 26th of January, 2006.
Comment of the author: Originally the manufacturers referred to ““Yüz yüze Gösterim”.
Cf. MIB presentation at the final review meeting, 26th of January, 2006.
Cf. MIB meeting minutes, Super Structure network meeting, 20th of December, 2005.
Cf. email MIB to UNIVIE and SFC, 22nd of December, 2005.
The Turkish Case 175

Based on a product-market matrix (see table 16) it was shown that only a small
intersection in one product was met, but that for example sales of mutual products
could be beneficiary for both.713 It was decided that i) the two partners will support
each other by providing technical knowledge, ii) to define requirements and costs
for hydraulic cylinders in order to thing about possible joint purchasing, and iii) to
study each other’s Articulated Telescopic Lift to find out about competence

On January, 18th, 2006, another meeting took place with the two possible
cooperation partners in order to decide on a very detailed product. It was decided to
jointly construct a man lift, where the main system will be manufactured by
company 2 and the sub-system with the walking parts by company 1.715 Finally, the
two manufacturers decided to jointly produce the man lift by dividing it into a) the
boom and b) walking parts.716 It was agreed to establish prototype machinery
within a maximum of 75 days. In a second step a detailed product construction
analysis and a production plan would be made.

b) The CompressorNet was aimed to support the industry by establishing a small sub-
industry. The compressor manufacturers were somehow “forced” to cooperate as
their production units were on the way to be replaced by national or international
competitors. As well, due to the general industry structure, most of the
entrepreneurs only produced one component and did not obtain high revenues.
According to the industry consultant, cooperation was a necessity for compressors
while the Super Structure Network was easily initiated with a platform on joint

The CompressorNet was carried by six core group members that decided to start
the initiative and to try to expand to ten large compressor manufacturers in the
network.718 However, one of these members obviously was not interested after
some time, as only five core members remained in the network (see table 17). All
of the industry members were competitors. Most important for the network

Cf. MIB meeting minutes, Super Structure network meeting, 20th of December, 2005.
Cf. MIB Super Structure meeting minutes, 20th of December, 2005.
Cf. MIB Super Structure meeting minutes, 18th of January, 2006.
Cf. email MIB to UNIVIE and SFC, 22nd of December, 2005.
Cf. personal meeting notes, VERITAS meeting, 6th of October, 2005.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006.
176 Empirical Data: Network Formation Processes

members therefore was the need to exchange information, which was thought to
take some time.719

Company description Role in the project

Company 1 90 employees, turnover around 12 million $ Project management,
Compressors form the main part of production, coordination, audit
manufacturing of screw processors, oil-free
processors, … ,

Company 2 Company exists since 1960, 40% export, Contribution’s to the

Compressors, water cleaning machines and coordination and management
high vacuum machines. works, manufacturing

Company 3 Founded in 1975, partner of the German group Manufacturing, participation,

“Mannesmann DEMAG” Different kinds of support
compressors, pumps

Company 4 Compressors as core competence Information sharing,

participation, work support

Company 5 Founded in 1968, compressors as core Participation, work support

competence. Additional offices in Russia,
Ukraine, Khasakstan.

Table 17: CompressorNet Participants' Characteristics720

In a first meeting of the core group in July 2005 the different objectives of each
partner were discussed. Different ideas on how to work together ranged from joint
R&D activities tol the creation of a sub-industry.721 Additionally, joint production,
know-how transfer and capacity sharing were discussed. Finally, it was decided to
create a compressor sub-industry – that is to start producing those parts that were
often bought from external (mostly international) suppliers at this point in time.
Compressor parts should therefore not be purchased from non-Turkish companies
but the Turkish component manufacturers should start to produce one component
jointly.722 723 In the experience report724 it was stated that the development of sub-
industries would enable the large compressors to purchase the components in
Turkey, so that they would not depend on import regulations or bottlenecks from
foreign manufacturers.

Cf. MIB presentation at the final review meeting, 26th of January, 2006.
Cf. MIB presentation at the final review meeting, 26th of January, 2006.
Cf. MIB presentation at the final review meeting, 26th of January, 2006.
Cf. MIB presentation “Machinery Manufacturers Cooperative Networks in Turkey”, July, 2005.
Cf. personal meeting notes, 29th of September 2005.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006,
The Turkish Case 177

Components to be addressed could be security valves, absorption regulators, air

tanks, separator tanks or minimum press valves. During autumn 2005, it was
decided to carry out an analysis on which component would best suit a pilot
project.725 In a second step, those production companies that were already involved
in compressor part fabrication would be offered to participate in the
CompressorNet and asked to specialize on this product.

Another meeting took place on the 27th of December 2005, with three companies
participating.726 During the meeting, it became clear that the study on the sub-
industry products had not been documented yet. On the other hand it was decided
the focus of the study and the future product should be on those components that
are either imported and/or produced by compressor manufacturers (no new
products). It was also discussed to hold a price 10% below the price of competition.
Those component manufacturers who should produce the components should be
invited to the next meeting. This means that the idea of establishing a sub-industry
developed to be an idea that had to be imposed on people outside of the network.727

During the meeting, several alternatives were discussed:728 If the creation of the
sub-industry should fail, joint production and/or exporting to different countries
could be increased in order to compete with global corporations like for example
Atlas729. Marketing activities like joint tradefairs, a joint website and a Yahoo-
group were discussed. The final task list included talks with component
manufacturers, and the procurement of lists for fair trades.

On the whole, the compressor manufacturers held two sector meetings and two
meetings with the Network Manager in June, October, November and December
2005. The aim of the network was defined with providing “(…) the best and
highest quality compressors with lower production costs for the international

Cf. MIB presentation at the final review meeting, 26th of January, 2006.
Cf. MIB meeting minutes “Compressor Manufacturers Meeting”, 27th of December, 2005.
Cf. discussion during meeting 28th and 29th of November, 2005 (meeting minutes VERITAS
Cf. MIB meeting minutes “Compressor Manufacturers Meeting”, 27th of December, 2005.
729, accessed in November, 2006.
178 Empirical Data: Network Formation Processes

Although questioned by the VERITAS consortium members,730 the need to

compete with international – above all Chinese companies – led to these
suggestions and was the most important part for the industry. In the interview with
the Network Manager, she said that compressors “(…) have a serious necessity”731
to cooperate as they are on the verge of bankruptcy. “The small ones, the big ones
aren’t. They say ‘If we don’t act now, we will be suppressed from the market (…)’
”.732 Specialization therefore is a possible solution, but requires the involvement of
one big company that can guarantee the amount of purchase. The other reason for
joint work with larger enterprises lies in the possible knowledge transfer from
bigger to smaller companies.733

To summarize the development of these months, two network initiatives were

activated, and provided with a leader.734 The Network Manager describes the
progress as satisfactory.735 Detailed task lists were established and discussed in
every meeting.736

Discussion of Rules and Roles

i) Leading the networks:
The role of the Network Manager was the central role to be confirmed. Since the
Network Coordinator had been responsible for the Turkish initiatives from the
beginning on, the representatives of MIB wanted her to lead the network.737 She
already enjoyed trustful relationships with members of the network and people did not
have to fear her competition, but rely on her loyalty for all members of the network.
She said, “I am not somebody they have to be afraid of. I am young, I am not involved
in the same business, and my business is completely different. Therefore they trust in

Cf. VERITAS meeting notes, 28th of November, 2005.
Cf. interview Network Manager, October, 2005.
Cf. interview Network Manager, October, 2005. Translated by the author. German text (translated
by a bilingual expert): „die Kleinen, die Großen nicht. Die sagen „Wenn wir nicht jetzt etwas
unternehmen, wird man uns vom Markt verdrängen’(...).“
Cf. VERITAS meeting notes, 6th of October, 2005.
Cf. Network Manager meeting minutes 17th of November, 2005.
Cf. VERITAS meeting minutes, 28th of November, 2005.
Cf. VERITAS meeting minutes, 28th of November, 2006; MIB CompressorNet meeting report and
document ”Toplanty Notu”, 27th of December, 2006.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006.
Cf. interview Network Manager, October, 2005. Translated by the author. German text (translated
by a bilingual expert): “Ich bin ja auch niemand, vor dem sie Angst haben brauchen. Ich bin jung,
ich mache nicht dasselbe wie die, ich mache etwas ganz anderes. Deshalb vertrauen sie mir.“
The Turkish Case 179

Before the Network Manager issue had been discussed in the meeting in May 2005,
two other suggestions came up. One was to select a Turkish Network Manager and
train him or her by sending him or her to other (international) networks and workshops
in Europe.739 The Network Coordinator, instead, previously suggested hiring an
international expert who would be able to present personal experiences and success
stories.740 During a telephone conference in May 2005 it became clear that the
manager of Swiss Microtech Network741 would be a good option. Nevertheless, the
representative of MIB also thought of having a charismatic, strong leader that regards
the network as its own success story and completely identifies with the network, so
that the integration of existing Turkish networks would be an option.742 On the other
hand, they also thought of an internal leader who was a well-established representative
of the MIB management board.

However, during the meeting on 27th of May 2005, just ideal characteristics of a
Network Manager, but no potential persons were mentioned.743 Finally, the Network
Coordinator herself was chosen as the Network Manager by recommendation of both
network leaders and by MIB on October 6th, 2005.744

The network leaders for the Super Structure Network and for CompressorNet had not
been elected or appointed officially, but they were both advanced members of the MIB
management board, and in a leading function of their own companies. The leader of
the Super Structure Network, however, did not take over the position of a leader on
purpose, but the role was attributed to him because of his position. In an interview he
explained that he thought it would be better to have one leader in the network that
takes over responsibility and guides the others towards a solution.745 In the
CompressorNet, the member of the MIB management board took over responsibility
and sees his main tasks in creating the awareness of the need to find good partners by
highlighting industry problems in personal talks and by bringing people together.746
Both reflect reliable, sophisticated businessmen that are trusted by other people.747

Cf. email UNIVIE to MIB, 23rd of May, 2005.
Cf. VERITAS meeting minutes, 27th of April, 2005.
741, accessed on 23rd of October, 2006.
Cf. VERITAS telephone conference meeting minutes, 25th of May, 2005.
Cf. personal meeting notes, MIB network meeting 27th of May, 2005.
Cf. MIB presentation at the final review meeting, 26th of January, 2006.
Cf. interview number 5, October, 2005.
Cf. interview number 7, units 02071300ff, October, 2005.
Cf. interview Network Manager, October, 2005.
180 Empirical Data: Network Formation Processes

ii) The Network training

At this point of time, training in new concepts and learning became increasingly
important in Turkey and was nationally funded. Special activities for SMEs were
highlighted in the SME strategy document of KOSGEB.748 As decided in April 2005,
training activities on the network topic were seen as essential for the Turkish
participants. An official tender749 was distributed to six institutions, asking for an
informal offer for a two-day training seminar in Istanbul in September 2005. The
addressed companies were either involved in similar research projects or had long
experience with accompanying networks or cooperative enterprises. The final selection
took place on the criteria of price, understanding of soft factors, industry
(manufacturing) knowledge, training skills and availability on the suggested dates.750
While the Turkish Industry Representative voted for the best practice example Swiss
Microtech Network751 752 because of having already met involved people and because
of their knowledge about the industry. UNIVIE and SFC put the focus more on the
training capabilities and on the experience with setting up a different types of
networks. Finally, ISA Chemnitz,753 a spin-off of the Chemnitz University of
Technology, was chosen.

The training took place from 29th till 30th September 2005.754 The meeting agenda was
quite comprehensive755 containing a section on business motivation, another section on
the start of a Cooperative Network, a third on rules and roles and a final part on errors
and pitfalls.756 Interactive, moderated sessions were planned to be alternated with
theory sections. The manual included checklists, explanations and was structured like
a workbook.757 The Network Manager reported the process as follows: “The first day
the participants had been informed about the concept of networking, the advantages of
Cooperative Networks and about the roles and rules in networks. Trainers also gave
concrete examples of Cooperative Networks coming from their previous experiences to
trainees. The second day, trainees were informed on the roles in the network and on

Cf., accessed on 16th of
August, 2006.
Cf. ARMD document “Official Invitation to Tender Training”, 18th of July, 2005.
Cf. VERITAS training evaluation table, August 2005.
751, accessed on 23rd of October, 2006.
Cf. personal meeting notes, telephone call with MIB representative, 17th of August, 2005.
Cf., accessed in November, 2006.
Short description on:, 28th of July, 2006.
Cf. personal meeting notes, network training 29th of September, 2005.
Cf. training manual, 29th and 30th of September, 2005.
Cf. training manual, 29th and 30th of September, 2005.
The Turkish Case 181

the coordination of the network. The participants had also discussed what kind of
Network Manager can be appropriate for their sector and the trainers transmitted
their experiences on the subject.” 758

The participation rate for the training was quite low. Although at least 10 companies
had been expected,759 only seven people from six companies attended the meeting on
the first day, five people on the second day.760 One of the participants was a
representative of the Super Structure Network, while all the others were from the to
compressors industry.761 Only one of the companies producing compressors was part
of the core group that had participated in meetings before.

During the introduction, participants partly reported their background in English,

partly in Turkish. Starting with around one hour delay (because of the traffic situation
in Istanbul), the Network Manager began with a general welcome session762 and then
the trainers talked about the agenda and what they planned for the day. Participants
immediately said that they did not know a lot about networks. Only during the
introductory session in the training, it became clear that the companies had difficulties
to adapt to the interactive moderation style763 and that they needed much more
information on the concept. Hence, the introduction was a little bit too quick and some
explanations and graphics were not completely understood.764

Around 12:00 o’clock a chapter on the business motivation for cooperation was
started. As the discussion switched to Turkish language, the trainers were not able to
learn about the companies’ concerns. The Network Manager started translating that the
companies needed more best practices and more examples in order to understand the
training content.

758, accessed on 28th of
July, 2006.
Cf. email MIB to VERITAS partners, 9th of September, 2005.
Although the official documentation reports 13 participants, the author only counts those people the
training was designed for, excluding participants of the VERITAS consortium.
Cf. MIB presentation at the final review meeting, 26th of January, 2006.
Cf. VERITAS Diary, 30th of September, 2005.
Cf. personal meeting notes, network training 29th of September, 2005.
Cf. personal meeting notes, network training 29th of September, 2005.
182 Empirical Data: Network Formation Processes

The two following examples illustrate the atmosphere and process of the training in a
better way:765 On the first day after lunch, the trainer explained the “Walt Disney
Idea”. In three steps, the participating companies were to think about i) ideas how to
precede, ii) next steps and iii) current challenges. The three steps correspond to i) an
ideal, ii) a realistic and iii) a critical point of view. The trainers wanted to put them
into groups but they refused and stayed in the plenum. The discussions were not only
about the content but also on the question itself. It took some time to get ready, as the
specifications were unclear to the participants. Finally a lot of good ideas arose,
starting from producing parts of compressors instead of importing them, to innovation
tasks and global networking. In the “realistic” setting, participants thought of the
selection of one coordinator, of visits and organizing meetings. The final result
revealed that the most problematic challenge was the growing import figures from
China that could possibly lead to vanishing of the small companies. The answer to
these challenges was clearly seen in cooperating with each other.766

On the second day, the participating companies were asked to think of the cooperation
preparedness in the training group and the cooperation preparedness outside the
training group. Answers were given to a rather extreme level: The group believed to be
100% prepared for networking, whereas other companies – although not present at the
meeting – were rated to have zero considerations of entering a cooperation.

Three things were of special interest during the training. First, companies were waiting
for more information, asked a lot of questions to the experts (which were in their view,
the trainers). Even the representative of MIB asked a lot of questions although he
could be seen as an expert as having been involved in the project from the beginning
on.767 The training style that did not match to the companies’ expectancies. One of the
participants expressed it as follows: “(…) but those people (…) they more catechised
us. Maybe they thought they could use us to expand their own experiences.”768
Therefore, it was very uncommon for the participants to be trained interactively. In
contrary to the original idea of having a “network meeting” with knowledge exchange

Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006;
personal meeting notes, network training 29th and 30th of September, 2005.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006.
Cf. VERITAS Diary, 30th of September, 2005.
Cf. interview number 5, unit 02050924, October, 2005. Translated by the author. German text
(translated by a bilingual expert): “(...)aber diese Personen, (...) Die haben mehr uns durchlöchert.
Vielleicht haben die sich gedacht, dass sie durch uns auch ihre eigenen Erfahrungen erweitern.“
The Turkish Case 183

and best practices,769 the training increasingly developed into a school classroom
lesson. Second, the small companies waited for the bigger ones to talk first and then
committed to the main arguments.

On the other hand, the participants had very high expectancies for the two days,
learning “how to establish a cooperation, how to manage a network, how to be a
network“.770 The final evaluation at the end of the training revealed an ambivalent
picture.” On the one hand companies were quite satisfied with the content, material
and skills of the trainer, On the other hand they stated that they had few new ideas
about how to cooperate.771 Companies also expressed their continued will and interest
to cooperate. 772

The objective of the training session was to allow participants to learn about how to
start a network. Unfortunately all sessions that dealt with “get ready to operate” were
left out because of time restrictions.773

iii) The Network Manager Meeting

In November 2005, the Network Manager meeting took place. Again, the Turkish
Network Manager provided comprehensive material on all activities and showed her
positive adjustment about recent developments.774 She mentioned that the turning
point was a meeting on the 27th of August 2005, where the involved companies
recognized that “we can do as well”.775

She reported about both the Super Structure Network and the CompressorNet and
explained that the cooperation between compressors was more difficult because of the
fact that the big companies just want to include more small ones and bring the small
companies to cooperate with each other.776

The target for the Super Structure Network was defined with joint marketing as a
starting point that helps the companies to learn how to cooperate. In a second phase
projects from foreign customers that lead to joint production should be started. Joint
Cf. VERITAS telephone conference meeting minutes, 6th of July, 2005.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006.
Cf. Network Managers meeting minutes, 17th of November, 2005.
Cf. email UNIVIE to MIB, 3rd of October, 2005.
Cf. personal meeting notes, 17th of November, 2005.
Cf. Network Manager meeting minutes, 17th of November, 2005.
Cf. Network Manager meeting minutes, 17th of November, 2005.
184 Empirical Data: Network Formation Processes

production should finally aim at becoming an innovative network with sophisticated

R&D activities.777 For the CompressorNet, the creation of a sub industry was seen as
the most important objective, followed by the creation of different groups that create
new products after a timeframe of two or three years.778 The main challenges, were
seen in i) keeping the cooperation core group consistent, ii) acquiring national funding
mechanism for cooperation, iii) the increasing power of the Chinese manufacturers and
iv) the rising number of foreign investment. At the same time, the following ideas to
deal with the challenges were presented:779 i) Motivate and help leaders, organize
training; ii) stimulate association and networks and governments, iii) organize EC
project (helps also for i) and ii)). iv) Exchange ideas, knowledge, conduct some
projects together.

The Network Manager provided good knowledge about the situation and showed
possible solutions to overcome the problems or at least to find ways how to continue
the steps towards cooperation.780

Handling Conflicts
Although no obvious conflicts had been reported during the project time, the following
aspects were observable for the project team:

i) Different perspectives of how to establish a network by the Network Manager and

one of the MIB representatives: The brother of the Network Manager was part of
the potential network members during the first meetings in January, March and
May 2005, but finally decided to refrain from the VERITAS network initiatives.
His ideas were based on cooperative purchasing781 and the joint organization of
trade fairs.782 The majority of the other companies wanted to focus on joint
production, so that this manager started his own cooperation. In the interview he
mentioned that weekly meetings took place and that a joint vision was

Cf. Network Manager meeting minutes, 17th of November, 2005.
Cf. Network Manager meeting minutes, 17th of November, 2005.
Cf. Network Manager meeting minutes, 17th of November, 2005.
Cf. personal meeting notes, Network Manager meeting 17th of November, 2005.
Cf. interview number 6, 02060997ff., October, 2005.
Cf. personal meeting notes, MIB network meeting 27th of May, 2005.
Cf. interview number 6, 02060997ff., October, 2005.
The Turkish Case 185

ii) One of the critical and most-discussed points was the selection of the Network
Manager. Like in any other country, the discussion focused on whether the
responsible person should be an industry expert or not,784 but in Turkey, the
participants did not agree on one solution. The competencies they though a
Network Manager should have included industrial know-how, professionalism,
reliability, communication abilities, knowledge on Cooperative Networks and on
consulting as well as the preparedness to work on a full-time basis.785 Obviously –
and referring to the non-cooperative history of manufacturers – such a person was
difficult to find. Based on that, the Network Coordinator thought of an external,
foreign expert786 so that this person could train the Turkish participants a few days
per month, and guide them but also invite them for visiting other networks.787
Nevertheless the participants’ requirements for a strong leader788 did not match the
selection of a foreign person. Finally, the leading roles were somehow separated:
The Network Manager was more seen as the coordinator or moderator of the
network and the leading person in the network was the one to talk with others and
convince them about the ideas. Nevertheless, task sharing was not very clear. The
Network Manager finally reported a situation of more being a secretary,789 but also
had to push the companies to come together again, whereas the leading companies
acted in a rather passive way. The role attribution of a Network Manager that acts
like a Broker (Schuh et al., 1998) was therefore not assigned to anybody.

iii) Lack of knowledge in English: The project VERITAS and the related activities
were carried out in the English language. This for example led to a problem during
the training where simultaneous translation throughout the whole day would have
been too expensive.790 In the whole European Union791, the portion of those people
that are able to hold a conversation in English is 31%. For Turkey, the percentage
is 10%. The language problem might therefore have been a special disadvantage
for the very small manufacturers and might explain the VERITAS participation of
mainly bigger or medium-sized enterprises.

Cf. personal meeting notes, MIB network meeting 27th of May, 2005.
Cf. Turkish network meeting minutes, 27th of May, 2005.
Cf. personal meeting notes, 22nd of April, 2005.
Cf. VERITAS telephone conference, personal meeting notes, 25th of May, 2005.
Cf. interview 5, unit 02050831 or 0205913, October, 2005.
Cf. interview Network Manager, October, 2005.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006.
Cf. Study on the knowledge of foreign languages in the European Union (April 2006) at, accessed on 17th of August,
186 Empirical Data: Network Formation Processes

iv) During the Network training, the questions that arose were not only attributed to
the current steps of setting up a network, but also to the meaningfulness of the
concept. The companies questioned that such a cooperation would work, and
expressed that they did not understand. They said that they knew that the concept
was beneficial, but wanted to have more successful examples. An example of the
compressor industry could have served them as a blueprint for their own network.
They were looking for a detailed guideline and a step-by-step plan how to set up
this network. On the one hand, this can be attributed to a need for structure or
hierarchy (cf. Hofstede and Hofstede (2005), that still attributes medium power
distance to the Turkish culture) but on the other hand this could also be interpreted
as a typical resistant behavior during the Storming phase.

v) Trust: The importance of trust was present during all phases and revealed to be an
important issue during the Storming phase. The interviews (see table 18) that were
carried out during October 2005 were full of the topic of trust, also revealing that
the Turkish participants knew that trust was important, but did not know how to
establish it – especially between competitors. Trust was the first-mentioned topic in
two Turkish interviews and the topic appeared during the first part of the
conversation in two other interviews. Network participants also discussed negative
effects, but never stated that there was mistrust between companies.792 In all
interviews there was only one person that mentioned that it was better to rely on
contracts than on personal trust between people (Kutucu, 2006). Trust was often
related to friendship and main additional problems were the exaggerated self-
presentations on the one hand and reservation of detailed information on the other

Cf. VERITAS D51: The importance of trust in the phase of network formation, January, 2006.
Time/Place Atmosphere Main topics Trust related issues Frequency Point of time
1 48:02 10 minutes late. Need for leaders in Trust as prerequisite for solving Topic is discussed First sentence
Company Friendly and relaxed, a network, need for problems, reciprocity of trust, eleven times (two times deals with trust.
office did a lot of effort to trust. Need for institutionalized trust of a leader, trust trust as general Keeps on talking
answer the questions, relationships. Later as personal attitude, trust as attitude), once out of about it during
The Turkish Case

was interested himself more business- prerequisite for fairness, trust based eleven the interviewee the whole
in the interview. Private oriented arguments on rules cannot work, but does not responds to a question conversation
conversation at end of eradicate the need for rules. Personal related to trust. term
the interview. trust leads to cooperation with “trust” used 33 times.
competitors, trust and open infor-
mation exchange, trust can be passed
on to third people, trust is tough.
2 46:23 Interviewer 15 minutes Cooperation is a Mistrust. Mistrust is based on bad Topic is discussed four Last third of
Company late. Friendly, but new concept. examples where big companies times, one time interview.
office stressful due to 45 Business related absorb small ones, Trust comes from interviewer posed the
minutes of time. Short need for joint experiences, trust and contracts question term “trust” is
answers to the cooperation: high disagree. used six times,
questions interchangeability, “mistrust” four times.
3 42:50 Kept working for a few Business. Personal trust as prerequisite for Topic is discussed six Starts with trust
Company minutes after Professionalism in cooperation. If everyone benefits, no times, but twice as an in the first
office interviewer arrived. Business, joint trust is needed. Trust cannot be answer to a question. sentence. Does
Glanced at the screen collaboration is enforced or trained. Trust can be Term “trust” in is used not really focus
of his computer time to necessary. enhanced by joint collaboration. Trust 15 times. on the topic
time. Short answers to cannot be measured. Lack of trust led
the questions. to failure of a cooperation.
4 52:28 Very comfortable. Benefits of Trust depends on personal friendship. Topic is discussed six First trust issue
Privat house of Interviewee showed networking, friends Trust takes time, Trust does not allow times (two times on first page.
interviewee interest in the can easily mistakes, Trust depends on friendship), term “trust” Mentions it time
conversations, cooperate, former companies’ reputation. is used five times by time
answered openly. experiences
M 1:02:39 Very friendly and open. VO, current state of Personal trust between key people, Topic is discussed .12. Trust plays a role
Company Talked a lot about project, cultural Institutional trust in a leader, trust can times (three times trust in the whole
office cooperation. Private issues, leadership be passed on, trust is reciprocate, and leaders, two times interview, at the
conversation at end of trust in Turkey, trust and experience information exchange), beginning less
the interview trust yourself, trust and information term “trust” is used 29 than in the end.
exchange, trust and fear times, “mistrust” once.
Table 18: Interview Description Turkey
188 Empirical Data: Network Formation Processes

Summary and interpretation: The Storming phase lasted from July 2005 until
January 2006 (the end of the project time) – seven months. Generally, this phase is
characterized by conflicts, resistance and disagreement between partners (Tuckman,
1965). The two groups of networks (Super Structure Network and CompressorNet)
evolved during that time and established first roles and ideas how to work together.
However, the plans differed widely from the concrete action that was carried out: First,
quite ambitious objectives were set – on the one hand to enter new markets within a
very short time frame, but also strong sales increases in the next two years (300,000$
for the Super Structure Network). Secondly, the plans were vague and did not include
which concrete businesses and products to focus on, but at the same time referred to a
“marketing plan” and a joint website. The project of the two Super Structure Network
sounded quite difficult for a non-expert as it was agreed to divide a machine into an
upper and a lower part which could – to the author’s opinion – lead to severe
difficulties in the joint production and assembling process.

In the VERITAS project consortium, the three associations were asked to set up
mission statements and marketing plans for their networks.793 The Turkish partners
did, but maybe because of the same reasons as mentioned during several interviews:
People tried to present themselves and their business background better or more
strongly than they actually were. Discussion intensively took place through all
meetings. Alleman (2004) mentioned that a characteristic of the Storming phase is the
fact that participants are arguing even when they agree. This matches to observations
during the meeting: People always discussed a lot, which could also be a
demonstration of power. Real disagreement or splitting of the group (Kauffmann,
2000) was not observed, although at least two companies left the VERITAS initiative
because of having diverging objectives. However, during several meetings, discussion
level was rather superficial (in terms of detailedness) and decisions were often delayed
to later points of time.

Another problem with strategy or plans could be detected from the CompressorNet:
The strategy affected “external” people. In the meeting of 27th of December 2005, it
was decided that the component manufacturers should produce new products to a price
10% below the market price – this decision was definitely taken without the ones that
will bear the costs.

Cf. personal meeting notes, 22nd of April, 2005.
The Turkish Case 189

High uncertainty was still present during the Storming phase – an expert was needed
whom the involved parties could learn from. Therefore, the training in September 2005
was crucial for the network formation. The need for guidance is not a typical aspect of
the Storming phase, but a lot of emotional issues came up during the meeting.

At the training session, discipline was quite low and although the training took place in
English (it was agreed from the beginning on that only English-speaking managers
could participate in the meeting because of extraordinary high translation costs794)
discussion always switched to the Turkish language. The participants had to be
interrupted several times because of the fact that the trainers missed important parts of
the participant’s concerns.795 At this point of time it became also clear that the
companies involved in the project did not see themselves as being part of a network
but as being the leaders of an industry which was quite comprehensive as all of them
were associated with the management board of MIB.

The author nevertheless attributes the training activities to the Storming phase as
companies started to work with each other – in terms of starting to form a network –
during this phase. Kauffeld (2001) also mentions that during Storming it is agreed how
work will be carried out in the team, although performance is low. Although
agreement on tasks was underrepresented at the meeting, this “rebellion” against the
concept could be interpreted as resistance to establish a network on their own, and the
need to ensure reasonability from outside. The meeting furthermore was characterized
by the refusal to talk English, but also by a task resistance: During the second day,
people were asked about their “wish for cooperation”. No discussion was allowed, but
all participants started to discuss. Furthermore, the Storming phase was characterized
with, not obviously between each other, but also against the trainers – some people
even thought that the trainers wanted to take advantage of them for expanding their
own knowledge.

5.3.4 Norming

Establishing Rules or Regulations how to Work Together

No rules on how to work together were agreed. Most of the organization, including
moderation and external communication depended only on the Network Manager.

Cf. VERITAS telephone conference meeting minutes, 14th of September, 2005.
Cf. personal meeting notes, network training 29th of September, 2005.
190 Empirical Data: Network Formation Processes

Establishing Roles
During the project time, only a few roles were initiated. Most of the organization,
including moderation and external communication depended only on the Network

Finalizing First Projects

No joint working had been initiated during the VERITAS project time.

Summary and interpretation: The Norming phase represents the point of time where
positive cooperation between partners begins, including working standards and the
increasing mutual acceptance (Tuckman, 1965; West, 2004). In the Turkish networks,
there had not been any problems with mutual acceptance in the earlier phases, though.
Therefore, no changes in behavior were recognized. On the other hand, joint projects
or joint business had not started yet. Tuckman (1965) also mentions the establishment
of clear and accepted leaders, but also in this case, the situation had not changed in
comparison to earlier phases. A clear reason why the Turkish participants had not yet
entered Norming can be seen in the high dependence of the leader. According to
Alleman (2004), groups in the Norming phase do still need direction from a leader, but
start to organize themselves on their own. At the moment, the companies largely
depended on the Network Manager’s activities.

5.3.5 Performing

Strategy Alliance between Network and Companies

For the two networks, plans were formulated several times, including the marketing
plan at the end of the project.796 As well as in other documents, the vision for the
Super Structure Network was formulated as creating “(…) new markets worldwide by
producing special internationally competitive products together”.797 Although no
products were decided it was agreed to manufacture them within a maximum of 75
days in a quantity of five pieces in order to carry out a detailed product cost analysis.
Concerning the CompressorNet, the idea was to establish a platform of compressor
manufacturers that are able to develop a sub-industry in Turkey.

Cf. VERITAS D4.4: Marketing plans of the four Cooperative Networks, January, 2006.
Cf. VERITAS D4.4: Marketing plans of the four Cooperative Networks, January, 2006, p.9.
The Turkish Case 191

Nevertheless, there was no alliance between strategies recognized, nor did the
companies talk with each other about their business strategies.

Systems (ICT, Controlling)

Although ICT support was planned for the different network groups, the discussions
did not reach that far during project time. Besides the website of MIB with its
members, Yahoo information groups had been established for the two network
initiatives.798 However, the use of those groups was not observable by the research

Results of Joint Cooperation

No joint cooperation activities had been carried out at the end of the VERITAS

Summary and interpretation: Performing describes the stage where clear joint
projects are carried out at a continuous level and successful outcomes are observed
(West, 2004). Flexibility and interactive help in issues external to project tasks
characterize this phase (Francis/Young, 1989). Normally, performing teams become
highly effective and innovative (Kauffeld, 2001). In the Turkish networks, none of
these aspects were noticeable.

Figure 13 displays the network formation process on the time line.

Initiation Forming Storming…

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

01/07/04 31/01/06

Figure 13: Formation Process Turkey

During the Initiation phase, the focus was based on the selection and information of
potential partners but also on creating awareness on the topic of networks and VOs.
The industry consultant expressed it as follows: ”Even though the Turkish culture has

Cf. MIB meeting minutes Super Structure meeting, 27th of December, 2005; MIB meeting minutes
CompressorNet Meeting, 18th of January, 2006.
192 Empirical Data: Network Formation Processes

been based on cooperation for more than 100 years, business is based on individual
successes and competition.”799 Therefore, extensive information had taken place,
including interviews of the Network Manager in industry magazines and broadcasting
the first meeting in television. The companies were interested in the concept and
participated lively at discussions. Especially the first meeting was recognized and
showed a good attendance. Forming lasted five months, and went easily because of the
same industrial background of potential network partners. Typical problems of the
Forming phase like strong politeness and antipathy (Kauffeld, 2001) could not be
observed, but – referring to Alleman (2004) – excitement and optimism marked the
first meetings. No special cautiousness (Francis/Young, 1989) was recognized. On the
other hand, the questions posed at the beginning can also be attributed to a subtle form
of anxiety (West, 2004): People wanted somebody to answer their questions. Abstract
discussion took place, but on the other hand, nearly at the same time, a lot of ideas and
plans came up. The regular meetings were continued during the Storming phase and
included informal parts, even if it was just a business lunch. Storming was
characterized by increased discussions, ambitions plans of partners and self-confident
presentations of everyone’s own business. According to Tuckman (1965) this can be
attributed to high rivalry and positioning of the own company in a group. Concerning
the network approach, high uncertainty was present at this phase and the concept was
very much questioned, especially during the network training. Storming normally
starts when people start to work with each other. Although the Turkish Manufacturers
did not start joint business, the goal and the vision of the network were developed and
the Network Manager as other leaders have been established. One of the major
differences to the other networks was the open discussion culture of Turkish
participants that has even been included in training on networks. What was missing up
to this point was the implementation of working groups as well as the set-up of joint
projects. Although mutual acceptance was noticeable, the Norming phase with aspects
like joint working standards and established rules has not been entered, nor has the
Performing phase.

Cf. MIB presentation at the International Conference on Strategic Partnerships: Managing
Technology in Networks, Istanbul, September, 2005, p.19.
6 Comparative Analysis

In this chapter, the formation processes of the three countries are compared to each
other. The aim of the qualitative, historical comparison is to highlight the patterns of
formation over time. The specific development of the three cases is interpreted i) in the
specific formation phase, and ii) in a macro-perspective over the whole VERITAS
project phase.

6.1 Result of Network Formation

In the following, the resulting networks are described and highlighted including
characteristics of ties and nodes and the planned activities for the future.

6.1.1 Network Description and Visualization

For Austria, at the end of the project time a loose network of small project groups from
the surface treatment industry is viewed. The project groups attempted to build up
business together little by little, allowing external institutions to participate in the
projects if necessary.800 The Network Manager acted as a Broker and intermediary,
identifying business needs and bringing those companies together that could be able to
jointly solve a problem or enter a project. The network’s boundaries could not be
clearly defined and no vision had been identified yet.801 No joint (brand) name or
websites existed at this stage. The Austrian network was thus not based on a stable
basis or breeding environment, but on a 40-institution interest group.802 Figure 14
represents a model of the established network: The dark node in the middle represents
the Network Manager who disposes of contacts and relationships to nearly all partners,
on the one hand the official members of the group, represented in gray and on the
other hand to the external interested parties, represented in white. Bilateral
relationships are represented by an arrow with two laces.

For a detailed description compare for VERITAS D4.1: Report on the Experiences with Setting up
a Virtual Enterprise, January, 2006.
Cf. VERITAS D4.1: Report on the Experiences with Setting up a Virtual Enterprise, January, 2006.
Cf. email of surface industry responsible to VERITAS partners, 5th of December, 2005, including
business contacts of 37 VERITAS members.
194 Comparative Analysis

Figure 14: Model of the Austrian Network

In Belgium, at the end of the project, the sector was defined as the metalworking
subcontractors, but no clear member base had yet been identified, nor has there been
agreement on a vision and on future objectives. Visualization was impossible at this
stage of development. Neither the cooperation partners, nor the boundaries of the
network were clear, as they never got so far as talking about structure or roles. Even
the Network Manager could not be referred to as a central actor.

As far as the Turkish network is concerned, two small networks – each disposing of a
joint name and several core group members – had been established at the end of the
project time. The Super Structure Network contained two companies and
CompressorNet five core members. In total, 16 companies were classified as being
part of the VERITAS project team and the network activities in October 2005.803 The
official reporting at the final review mentioned eleven enterprises that are part of the
CompressorNet804 while former reports had also shown higher figures. In total, the
whole MIB platform was somehow involved in the project and all companies were
continuously informed. The questionnaire on Social Network Analysis had been
distributed to 19 people involved. The blurring boundaries became clear as only three
questionnaires were returned, most of them without concrete answers and a lot of
questions omitted so that no results could be derived.805 806

Both Turkish networks at this stage brought forward a leader or at least someone who
took over responsibility for the network, but on the other hand, both initiatives still
Cf. MIB document competence description, October, 2005.
Cf. MIB presentation at the final review meeting, 26th of January, 2006.
Cf. VERITAS D51: The importance of trust in the phase of network formation, January, 2006.
Comment of the author: The alternative interpretation would be more linked to a general refusal to
answer questionnaires by the Turkish network participants.
Result of Network Formation 195

depended on the Network Manager’s activities. The two networks had a name and
both groups already developed a joint vision and a marketing concept at this time.
Figure 15 represents the model of the established networks: The gray circle at the
bottom represents MIB, the industry association. Based on MIB members, two small
networks had been established, both depending on the function of the Network
Manager, represented in dark. Like for the Austrian network, the size of the dark node
is attributed to its importance. The small gray circles describe the two networks and
indicate mutual relationships between involved actors.

Figure 15: Model of the Turkish Network(s)

The finally-resulting structures reflect a loose network around a single coordinating

entity in Austria, two industry-driven smaller networks on a stable collaboration
platform (which already existed before) in Turkey and no network in Belgium. In
comparison to the original strategy, none of the three networks established a Virtual
Industry Cluster (VIC) as it was planned in the beginning. All three countries had
difficulties to define the target group of the Cooperative Networks. While there had
been low action and low creativity as well as only a few (business) ideas in Austria,
the Turkish participants had a lot of ideas and showed more activity with setting up a
structure. Nevertheless, the activity level seemed not to have influenced the final
outcome of the networks. In Austria the development followed an iterative process,
while in Belgium the attempts were extended several times in order to include other
business concepts and ideas of innovation. In Turkey the process was driven by a
hierarchical top-down strategy, involving the most important people of the industry to
convince the others.
196 Comparative Analysis

Taking a closer look at the characteristics of and relationships between the involved
actors (Wassermann/Faust, 1994), in Austria, the network involves 23 companies
embedded in the surface industry, one industry association, one cluster expert, four
technical consultants, one business consultant (the Network Manager), and four
research institutes.807 The nodes can to a large extent be described as individualized
actors that enter joint projects – or meetings – if they perceive a certain benefit. In
Turkey, the current network is formed of a basic collaborative platform with 171
companies,808 and established two different smaller cooperations with a) three actors
and b) six actors. According to Wassermann and Faust (1994), in a) there are two
companies and one business consultant (the Network Manager); in b) there are five
companies and one business consultant involved. The two cooperation initiatives can
roughly be seen as groups, who meet continuously and communicate with each other.

Formal roles were externally established in all countries. In Austria, the star-structure
of the network reflects the high dependence on the central node, which is the Network
Manager. His rule was crucial for the project as people tended to rely on him and
attributed the responsibility of the network to him. For the same reason the leading
companies in Turkey have not been highlighted in the graph, as the interaction between
partners to a large extend depended on the role of the Network Manager and not on the
role of the designed leaders.

As far as the relationships between the involved people (Knoke/Kulinski, 1982) are
concerned in Turkey, interactions between potential network partners were on the one
hand close to friendships or at least to long established business contacts. In Austria, it
was difficult to observe individual evaluations in terms of friendship, liking or
sympathy, but the companies always treated one another with respect and reservation.
In Belgium attitudes, roles and transactions (Wassermann/Faust, 1994) or individual
evaluations based on friendship or sympathy (Knoke/Kulinski, 1982) could not be
determined at this stage of the network.

In the Austrian network, the transaction of resources was based on non-material

resources, i.e. information and knowledge exchange. No transfer of material resources

Cf. FMMI business contacts, December, 2006.
Cf. actual members at the beginning of the VERITAS project, MIB presentation at the kick-off
meeting, July, 2004
Result of Network Formation 197

– for example lending, borrowing, buying or selling809 or exchange of human

resources – took place. This was different in Turkey, where transaction between
partners (Wassermann/Faust, 1994) was non-material at this stage, but information
exchange based on products, current markets took place during a lot of meetings. In
Belgium, no resources had been changed.

6.1.2 Planned Activities

In Austria, a positive response to future cooperation activity was recognized during the
final meeting in January 2006. Based on the question if and how to continue the
network,810 a meeting took place in March 2006, but only a few companies showed
interest in joining.811 The ideas to continue the network initiative ended in talk as no
company was willing to take over responsibility for the network as a leader or
manager. The Network Manager expressed it as follows. ”There are no further
activities in terms of a network, nobody showed interest in coordinating the
network.“812, but at the same time mentioned that bilateral activities had been
continued and mutual contacts were still beneficiary for the involved companies seven
months after the end of the project. In November 2006 – that is nine months after
finalizing the project – the FMMI website still provided the same information on the
VERITAS project as 18 months previous, including a short project description and an
information sheet.813 At the same time, the website of the interest platform surface
treatment contained 20 contributions on the forum, none of them attributed to
cooperation topics.814

Like reported in the marketing plan, the network initiative was planned as a long-term
project for Belgium.815 On the one hand, the meetings that were agreed in December
2005 were continued as scheduled.816 In September 2006, the Belgian Network
Coordinator reported that people were still “interested” but that joint projects were

Comment of the author: The Austrian project B aimed at selling a certain machine to network
partners but remained without success till the end of the VERITAS timeframe.
Cf. FMMI meeting minutes, final network meeting 18th of January, 2006.
Cf. FMMI email to UNIVIE, 16th of March, 2006.
Cf. email Network Manager, 19th of July, 2006. Translated by the author. Original text in German:
“Es gibt keine Nachfolgeaktivitäten im Sinne eines Netzwerkes, niemand hatte Interesse die
Netzwerkkoordination zu übernehmen.“
accessed November, 2006.
814, accessed November, 2006.
Cf. email AGORIA to UNIVIE, 13th of September, 2006.
Cf. email AGORIA to UNIVIE, 13th of September, 2006.
198 Comparative Analysis

hard to find. Partly, the slow-going progress was attributed to the Network Manager’s
performance. On the other hand, ideas like the joint purchasing of electricity or
insurance were not followed because of the fact that nobody wanted to take the lead.817
Nevertheless, AGORIA kept supporting its members with benefit programs and with
establishing initiatives in research and the website still included invitations for
networks and partnerships. 818 No information about the VERITAS initiative and the
potential network could be found on the AGORIA website or at other Belgian forums

For Turkey, the two initiatives have to be looked at separately: For the CompressorNet,
the final decision on the first component to be produced should have been taken
immediately at the end of the VERITAS project.819 Super Structure Network partners
also committed to establish and test the prototype during spring 2006.820 The network
marketing plan revealed that further activities would be carried out during the time
after the VERITAS project finished.821 CompressorNet decided on the screw
compressors, piston compressors and high pressure compressors822 as the main
products to jointly perform production and Super Structure Network was looking for
new partners.823 The awareness-creating approach was extended to other sub-sectors of
the manufacturers, as a presentation was held at the pumpers' conference on the 26th of
May 2006.824 In the online-report of this “EUROPUMP & CEIR Joint Annual Meeting
2006” it was highlighted that some “(…) small compressor manufacturers started to
give up producing compressor, but concentrated to produce compressor parts.”825

Six months after the end of the project, the former Network Manager stated that
companies kept working together, and that especially the Super Structure Network was
still in progress. However, she did not specify which activities were carried out and on

Cf. email AGORIA to UNIVIE, 13th of September, 2006.
818, accessed November, 2006.
Cf. VERITAS D41: Report on the experiences with setting up a Virtual Enterprise. January, 2006.
Cf. MIB Super Structure meeting minutes, 18th of January, 2006.
Cf. VERITAS D4.4: Marketing plans of the four Cooperative Networks, January, 2006.
Cf., accessed on
21st of August, 2006
Cf., accessed on
21st of August, 2006: There was a call to take part of the network via superstructurenetwork-
Cf., accessed on
22nd of August, 2006.
Cf., accessed on
22nd of August, 2006.
Result of Network Formation 199

which level.826 The CompressorNet was reported to have had difficulties, but the
Network Manager stated that the participants were waiting for national funds to keep
working on joint cooperation. Problems and concrete activities were not further
detailed.827 Dissemination about the project continued828 and the Network Manager
confirmed that “(…) "Cooperative Networks" is proposed as a future business model
for the Turkish manufacturing industry in the official report of 9th Development Plan
of Turkey.”829 Seven months after the end of the project, the leader of the
CompressorNet expressed the progress as follows: “Regarding the project,
manufacturing of some components locally going very good. One company already
manufactured safety valve the other one inlet regulator (sic!)”. 830 He also mentioned
that both products were to be tested at this point of time and that tests work out
successfully. The leader of the Super Structure Network also mentioned a joint
working project with the other company, which involves the establishment of the
prototype that should be finished within August 2006.831 He admitted that the progress
was slow, but mentioned the strong daily business of both companies involved.

Austria Belgium Turkey

Network Description Loose network of 30-40 No network, one Two small sector specific
institutions, one central coordinator, one networks of 2-5 core
Network Manager “Network Manager” members, each with a leader,
additional Network Manager

Actor Description Small and medium Rather Medium enterprises, mostly

enterprises, heterogeneous group export-oriented
heterogeneous group of suppliers
including research

(Future) Activities ƒ Bilateral know-how ƒ Ongoing meetings ƒ Ongoing meetings in the

exchange ƒ No future networks
ƒ No future activities activities planned ƒ First projects in progress
planned ƒ Looking for

Table 19: Network Description

Cf. email MIB to UNIVIE, 3rd of August, 2006.
Cf. email MIB to UNIVIE, 3rd of August, 2006.
Cf. for example,
16th of August, 2006.
Cf. skype conversation protocol between UNIVIE and MIB, 11th of August, 2006.
Cf. email leader of CompressorNet to UNIVIE, 15th of August, 2006.
Cf. email leader of Super Structure Network to UNIVIE, 16th of August, 2006.
200 Comparative Analysis

To summarize (see table 19), the formation process of the networks in Turkey was still
in progress in autumn 2006 and was planned to be continued – as least as long as the
Network Manager kept her effort high. For Belgium, the result of the formation
process was not a network but an initiative or a project. The network failed as it did
not accomplish the Forming phase and was still in a set-up process half a year after
completing the VERITAS initiative. The formation process in Austria failed as well,
but at least helpful mutual contacts between companies had been established.

6.2 Comparison of Phases

Having introduced the development of three cases in chapter 5 and highlighting the
final results of the networks in the above section, the author now compares the phases
of network formation in the three countries.

Initiation Forming Storming


Initiation Forming

Initiation Forming Storming

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
01/07/04 31/01/06

Figure 16: Comparison of Length of Phases

Initiation phase
While the starting phase of the network took seven months in Austria and Turkey, it
took double the time in Belgium to select and invite the potential partner companies. In
relation to the total project time of 19 months, the preparation phase in all three
countries, but especially in Belgium, was rather long. The extended preparation phase
can be related to the fact that associations saw themselves as service units for their
member companies. Before they started inviting the companies to a certain event or
cooperation, they thought in detail about the inherent added value and how to address
the requirements of their members. Evidence was given in Belgium, where the
preparation of the invitation letter was carried out in a very sophisticated manner,
Comparison of Phases 201

referring to current statistics and inquiring current business challenges of the

manufacturers. In Turkey, information was prepared and explained in a very detailed
way, too, reflecting the learning preparedness of Turkish companies. In Austria, the
idea was more to present the concept to companies and let them decide about the
potential and impact of cooperation, which means that the potential project partners
were more seen as experts of their own business who should decide on their own
whether such a concept would be helpful for them or not.

The three countries followed different strategies, which networks to build, and which
companies and people to involve. In Austria, the future type of the network was based
on concrete (financial) benefits for the participating companies, while Belgium aimed
at establishing long-term cooperation for their member companies. In Turkey,
however, one of the main motivations was to learn about the network concept and to
get to know European business partners. Therefore, the Austrian network structure was
planned to be determined by the members based on the provision of the discussion
platform, while the Turkish Network Coordinator thought of a more centralized model.
In Belgium, the approach to establish cooperation between suppliers was favored.

The selection of partners was related to the motivation of the network initiative: While
for the Turkish association the network itself had high priority and was seen as a
service to be provided for all members of MIB,832 for example the Austrian
considerations about networking were mainly driven by potential business
opportunities and concrete projects. In respect to the motivation, a different attitude
towards networking could be observed: While the Turkish people obviously wanted to
gain know-how, and wanted to learn about new concepts, the Austrian attitude towards
cooperation was more characterized with skepticism. In Belgium the long preparation
phase also showed a need for detailed consideration and reflection of the concept and
the requirement to only provide the association’s members with an elaborate concept.

The attitude had to do with knowledge about the concept: While networking and
cooperation was quite common in Austria and Belgium – which means that people
were aware not only about successful partnerships, but also of the related risks – the
Turkish always thought they were one step behind and showed preparedness to learn.

Comment of the author: Of course the approach to include all members was only possible for
Turkey, as there were only around 130 companies registered in MIB, while the other associations
include much more members.
202 Comparative Analysis

During the Initiation phase, it became clear for all three countries that the companies
should have at least a joint background or industry. The awareness of this necessity
was clear to the Turkish people from the beginning on, but needed a lot of discussions
for example in the Austrian case, where the strategy had to be revised two times. For
Belgium, it seemed to be clear from the beginning which companies should be
included; nevertheless the process went in circles till the “right people” should come
together. This can be partly explained by the Belgian coordinator waiting for a strategy
to be prepared by the VERITAS project team.

The main difference in the Initiation phase was the commitment and involvement of
the associations in the three countries. While in Austria, the work in the first phase was
mainly seen as administrative work and therefore delegated to non-experts, the Belgian
Network Coordinator’s was the only person in AGORIA who was involved in the
project. His involvement declined over time. In Turkey, there was strong involvement
of the industry people, to the point of personal talks with companies CEOs and the
integration of the head of the association as the first speaker of the presentators.
Whereas the associations had to face a very low participation rate in Austria and
Belgium, the high involvement of the Turkish association obviously led to higher
participation rates in the informative meetings. This was crucial for the network set-up,
as the next phase could only be carried out with interested partners. It means, that the
Turkish network had a more promising starting position than the other two countries.

Forming Phase
With the first encounter of the potential network members, the Forming phase was
started. People were brought together and started to interact with each other. In
Austria, the phase lasted seven months, while in Turkey; five months were needed
until next steps were taken. In Belgium, the phase started in October 2005 and was still
in progress at the end of the project, i.e. after four months.

The meetings that were held during the Forming phase (two in Austria and Turkey,
one in Belgium) were characterized with high fluctuation and people that registered for
the meetings, but in the end did not show up. The boundaries of the networks were
indistinct in a way that the participants nominated new potential cooperation partners.
This, however, followed a different approach in Turkey, where the core group of the
Forming meetings were mainly members of the MIB management board, who were
responsible for a certain sub-industry and therefore nominated companies of the
Comparison of Phases 203

related sector; while the Austrian and Belgian companies discussed the integration of
companies they had had contacts before.

During the Forming phase, Network Managers were assigned. The commitment of the
Network Coordinators in this stage mainly stayed the same as in the first phase: The
activity level of the Belgian association did not change with the nomination of the
Network Manager who also had restricted capacities. In Austria, commitment reached
a low, but at least stable level with the installation of the Surface Industry
Representative and the Network Manager. For the Turkish network the situation was
different as the former coordinator took over the rule of the Network Manager,
whereas in the other two countries two external consultants were nominated. The
Network Managers were assigned with the task to set up and develop the networks in
the respective countries and were therefore seen as the coordinators and leaders.

Additionally, leading companies and leading people emerged in Austria and Turkey in
form of “opinion leaders”. In Austria, the most successful and innovative company
attracted most of the attention as a technology leader while in Turkey the leaders were
clearly identified as the managers of the association. This means that the Austrians
oriented their selection on whom to follow more on the most advanced company of the
sector while in Turkey, the already established hierarchies were proceeded. The
dependence on the leading roles was noticed in a way that people did not take the
initiative but waited for instructions in all three countries. This is a typical
comportment in the Forming phase (Alleman, 2004).

During the project, the VERITAS emphasis of this phase was put on finding a joint
strategy in every country. From a business perspective, the idea was to let them decide
on their own strategy, which was seen as the most beneficiary solution for companies
that would like to stay in a network. From a group perspective this is definitely not
possible in this very first phase because of high dependence on guidance (Tuckman,
1965). It therefore even resulted in more insecurity among the networks, as they were
not able to develop sophisticated ideas at this early stage of formation. However,
participants behaved in different manners during Forming: While the Austrian network
members were calm and observant, people in Turkey were discussing a lot, defined
different positions and talked with each other – although without getting to a concrete
point. The behavior of not to give too much information to outside and either stay calm
or discuss general issues reflects protective behavior which is typical in this phase (e.g.
204 Comparative Analysis

West, 2004; Tuckman, 1965). In Turkey, the questioning was much stronger than in
the other two countries, which is probably related to low the experience with the
networking concept. They wanted the association and Network Manager to give
answers and lead them, while in Austria and Belgium the reservation was mostly
driven by general doubts on the networking process.

In all three countries, skepticism was either noticed with the network members, the
Network Manager or both. While in Belgium, the Network Manager had increasing
doubts about the initiative; the Turkish companies also posed a lot of questions and did
not believe that such cooperation could work. In Austria, both – members and
management – behaved in a distrustful way. Skepticism of members in this phase is
quite common and reported in the literature as a typical aspect in group theory (e.g.
Kauffeld, 2001). What is astonishing is the fact that the Austrian as well as the Belgian
Network Manager and the Belgian Network Coordinator behaved in the same manner.
On the one hand, they might have felt like being a member of the group and therefore
had being subjected to a phenomenon similar the “going-native” problem of
researchers.833 On the other hand, they might have been skeptical from the beginning
on. While the first attitude is a human reaction in order to deal with problems of an
outsider, the second alternative could be an indicator that the people that have been
consigned to carry out the work as network facilitators might not have been strong
enough to oppose negative or problematic questioning. However, testing the leader
during this phase is quite common (e.g. Tuckman, 1965; West, 2004).

On the whole, skepticism and questions were much more detailed discussed in Turkey
than in the other countries. The author for example observed a talk between two
manufacturers where they rated the initiative as a welcomed idea, but asked
themselves how to establish trust among each other in business issues. In Belgium, the
early emotions of the Forming phase (like politeness or respect) were noticed, but
anxiety or insecurity could not be observed during the short timeframe and the single
meeting. Interestingly, the Austrian network members even asked for more structure in
the anonymous preparedness-questionnaire, but did not articulate this need during the
meetings. Information among each other was withdrawn in Austria and Belgium,
where the discussions were held on a very general level. In Turkey, the general

“Going native” refers to the fact that a researcher has to become a member of his research field if
he wants to get inside insights, but on the other hand must not become a member of the research
field, as he might than adopt typical characteristics and oversee problems because being part of the
problem (cf. Lueger, 2000)
Comparison of Phases 205

discussion preparedness was high, which can be attributed to the fact that the bigger
part of the manufactures of the core group knew each other before. On the whole, the
emotions in Austria can be described as skepticism and reservation in form of
observation, whereas the Belgians were interested and polite and the Turkish
participants skeptical and insecure.

The Forming phase was characterized by a need of orientation and testing, before
participating companies could start to work with each other. Turkey, however,
managed to accomplish this phase faster than the other countries,834 which is an
indicator that the relationships were more stable than in the other countries. Besides
the already established contacts between participating companies (and the Network
Manager as the former coordinator), this might also be attributed to the fact that the
more centralized and hierarchical concept seemed to work. In contrary to the other two
countries, first ideas for cooperation were developed at this stage in Turkey.

Storming Phase
The Storming phase was entered when partners started to work with each other either
on the joint goals of the network or on concrete joint projects. In Austria, it started
with the organization of a network meeting at the leading company’s manufacturing
site. In Turkey, the phase was entered when the two networks Super Structure Network
and CompressorNet were defined. While in Belgium, this phase was not started during
the project time, both other networks spent several months with trying to overcome
conflicts and clarify roles positions. After seven months for Turkey and five months
for Austria, the end of the VERITAS project was reached.

As far as the tasks are concerned, in Turkey a lot of planning took place. It was even
decided that there should be training before joint projects could be started. The need
for the training reflected the preparedness to ask other people for support, but also the
wish to get concrete and detailed concepts in order to overcome insecurity and
knowledge deficits. The companies discussed how they could proceed and which
profit they would like to gain of the cooperation. In contrary to the Austrian partners,
who moved to concrete projects in a “trial and error”-manner, in Turkey planning was
never accomplished during Storming.

Although the Belgian Formation phase lasted only 4 months until the end of the VERITAS project,
it can be concluded that they are still in an early phase. In section 6.1, the development after the
end of the project shows that companies did not enter the Storming phase 8 months later.
206 Comparative Analysis

The outcome of the joint work was low, which is quite normal in the Storming phase
as the group members are self-absorbed in this phase (Tuckman, 1965; Francis/Young,
1989). This holds for Turkey as well as for Austria: although Austrian “projects” were
established, the majority of them were based on simple know-how exchange between
either network members or external people. Task refusal was therefore noticed in both
countries. While Austrian project partners showed no ideas or initiatives during the
network sessions, the Turkish people had a lot of ideas of what to do. On the other
hand, projects in Austria were organized “offline” – but at least happened – while in
Turkey activity was restricted to planning.

According to the structure of the network, in both countries no progress was noticeable
during Storming. Joint behavior or joint decisions was not observed and the networks
were still a conglomerate of individual companies with no cohesion: In Turkey, the
structure and boundaries were mainly driven by the Network Manager, in Austria
structural settings were completely neglected. No exchange of core competencies was
carried out in any of the countries, and the suggestions to have self-presentations
during the meetings were not followed. Documents that should investigate core
competences of the companies were answered with a very low return rate.

It is quite common that the leaders and their authority are questioned in the Storming
phase (West, 2004), which did not happen in the two countries. Interestingly, the
Network Manager in Austria developed more and more into a member of the group
and obviously represented the group in revolting against the VERITAS project and the
consortium. This can be explained by the fact that – although his role was designed as
an external role from a business perspective – from a social point of view he simply
became a group member. This means that he had to establish himself in the group
(Forming) and take over his position (Storming). In Turkey, such integration was not
necessary as the Network Manager was the former Network Coordinator who already
established her contacts and position.

The Storming phase is generally characterized by strong emotions (e.g. Tuckman,

1965; Kauffeld, 2001). Hidden conflicts or politeness are generally redeemed by
action and confrontation characterized with emotional resistance. The two countries
that reached this phase, however, behaved in a completely different way: While the
Austrians largely behaved very individualistically, without giving any information to
the whole network, the resistance to group influence was in Turkey much more
Comparison of Phases 207

characterized by the demonstration of power. This can, for example, be deduced by the
marketing plans that included very optimistic business ratios. By accepting such
forecasts, Turkish companies were expressing their financial power and showed that
they were ready to invest and did not fear to lose because they have strong market
power. This means that mutual relationships of the participants were in Austria
characterized by defensiveness and retention of information, in Turkey by strong
competition: Enterprises wanted to present themselves at their best.

While in Austria the Storming phase was characterized by small group-building and
anonymity towards the bigger network group, the Turkish people preferred to sit
together at one place jointly and discuss ideas. Therefore the sitting positions during
the meeting can be described as leaning backwards with crossed arms for the Austrians
and leaning forward, and gesticulating for the Turkish people. Meetings in general
were rather quiet in Austria and quite lively in Turkey. While the Network Manager
talked all the time in the Austrian network meetings, the Turkish Network Manager
had to interrupt discussions several time in order to go on with the agenda.

On the whole, the behavior has to do with the attitude of the two countries. While the
Austrians think that the concept of networking does not work, Turkish people wanted
to know how it works, but on the other hand could not come to a conclusion how to

The attitude of the Turkish participants could be expressed in via the following

A: “We should do something.”

B: “Yes. It is important.”
C: “Why don’t we do it like this?”
B: “Oh, and why don’t we do it like that?”
A: “But how to establish a network? How to you build up trust?”
B: “We have to ask some expert. We don’t know where to start.”
C: “We have to carry out analysis where to start.”
A: “Who could carry out such an analysis?”
B: “We have to have a meeting in order to decide who will carry out the study.835

As a reference for such discussions, compare for personal meeting notes of different meetings, but
also the meeting notes of discussion UNIVIE and bicultural expert, 1st of June, 2006.
208 Comparative Analysis

The “fight for positions” (Tuckman, 1965) was underlined with a lot of arguments in
Turkey, whereas in Austria it seemed to be most important to stand by one’s own
position. This is to be explained with the different level of individualization behavior
in the two countries: Hofstede (2001), Trompenaars (1995) and Adler (1997) describe
individualism as one of the most discriminative attitudes of national cultures. From the
behavior in the network it can be derived that the Austrians put the individual before
the group, whereas Turkish people come together in order to discuss the issues
between the whole group and are therefore more collectivist than the Austrian
partners. Good relationships between the actors were important for Turkish network
participants836 while the Austrian members put all their argumentation on their own
business benefits.

Norming Phase
Norming is to be entered when the establishment of rules and roles starts. By
overcoming conflicts of the Storming phase, openness and honesty increase (West,
2004), and new forms and attitudes how to deal with each other emerge
(Francis/Young, 1989). Nevertheless, none of the countries started interaction in this

The problems with entering the Norming phase were most of all observable in Austria.
Although several times, including November 2005, the VERITAS consortium had
suggested to change the structure and to take a concrete decision where to go with the
network,837 the status remained the same as in the beginning. No formal network was
established. As the surface treatment representative and the Network Manager argued
that this might be due to not having a need for a formal network,838 the typical resistant
behavior of group members in the Storming phase also affected these two people. Both
resisted implementing suggested workshops or events that had been suggested by the
project team. Although norms could also develop implicitly (Kauffeld, 2001), because
of the short time frame and few contact points, the most important tasks to accomplish
the Storming phase would have been to establish commitment between partners, to
build up trustful relationships and to start establishing roles. The questions of structure
and finance were not brought up before the last meeting.

Cf. interview Turkish network members, October, 2005.
Cf. VERITAS meeting minutes, 28th and 29th of November, 2005.
Cf. personal meeting notes, FMMI network meeting 15th of June, 2005.
Comparison of Phases 209

In Turkey, the Norming phase was not entered, either. The representatives of the
manufacturing industry went in circles several times and would not have proceeded
without the Network Managers initiative to push them. On the one hand, several steps
towards the establishment of networks took place. On the other hand, no rules and
joint behavior was established.

Performing Phase
Once the Storming phase would have been accomplished and joint working procedures
had been developed in Norming, the criticalness of network success declines. After
establishing joint norms, first results would have been possible. Participants should
have acted openly, flexible and helpful (Francis/Young, 1989). This phase was not
entered during project time by any of the countries.

To summarize, it was observed that in none of the three countries a group identity had
been established during the 19 months. Relationships between project and network
partners seem to not have changed since the beginning of the project; the loose
structure and individualization still dominated relationships between actors at the end
of the VERITAS project. Even in Turkey, where basic relationships had already been
established before the project start, social progress between partners was only
observed to a very small extent. On the one hand, the fact, that people knew each other
helped them to keep the level of mutual acceptance high during all project phases. On
the other hand, they did not “grow” in a group context. On a social level, they did not
get closer to each other or establish a specific level of trust during the project time.

All three cases failed in establishing coherent and compact groups. A well-performing
group that already has passed through the formation processes and started to perform
is generally characterized by joint targets, mutual dependencies and an organizational
structure or identity (Kauffeld 2001). Relationships between group members are
characterized via attraction and coherence (Sader, 1998). Apart from presumed
established relationships that in the project groups or at least bilaterally established
contacts in Austria, the relationships were far from being stable at the end of the
project. This holds for Belgium as well. In Turkey, relationships had not changed
either, but remained as stable as they were in the beginning.

While the boundaries of a group are often unclear (Sader, 1998) and membership with
a group is not always ascertainable from outside, most important is the sense of
210 Comparative Analysis

belonging by the group members themselves, as well as joint norms and objectives.
Tajfel and Turner (1986) describe a group as two or more individuals, sharing a joint
social identification of them or perceive themselves as members of the same social
category. The following indicators show that in none of the countries such groups have
been established successfully:

i) First, the majority of network participants did not fill in the network analysis
questionnaires or stick to the guidelines provided, which reflects that the
participants either could not or did not like to judge themselves as being important
or not.839

ii) Second, well performing groups are not only based on stable, positive
relationships, but also on frequent interaction and mutual support and concern
(West, 2004). The mutual interaction and frequent meetings combined with higher
communication are thought to lead to stronger cohesion of a group (von Rosenstiel
et al., 1995). The more interaction would have taken place, the stronger personal
relationships or even friendships are believed to develop over time (Homans,
1950); which means that sympathy correlates with the frequency of mutually-
desired interaction. The members of the VERITAS networks did not establish
frequent interaction between them, nor was mutual support and concern observable
– on the contrary, especially the Austrian network was characterized by egocentric
and individualistic behavior. The idea is that the group members have to interact
with each other in order to reach the goals (Kauffeld, 2001). This on the other hand
also requires an organizational identity or kind of specific structure (Kauffeld,
2001; Alderfer, 1987), which was not obtained in the three networks.

iii) Another (although not always positively-judged) aspect of group cohesion is the
dependence of group members (von Rosenstiel et al., 1995). This can completely
be neglected in the VERITAS networks – no company was dependent on another
one, neither were there mutual dependencies.

The author agrees that network analysis as a method often leads to controversial arguments and that
it is indeed difficult to carry out such a study because of the lack of anonymity. People involved in
joint work and joint organizations could be irritated by such procedures as they fear to lose their
job or friendship of someone else. On the other hand, the questionnaire was explicitly designed for
cooperation, and only included questions based on business relations (cf. appendix). Sympathy and
antipathy was an implicit assumption behind the questions but was not requested to be determined
from the participants.
Country-specific Behavior 211

All the indicators show that the three networks have definitely not reached the status of
groups and are still in the process of configuration. While Austria and Turkey would
have to overcome the difficult Storming phase, the Belgian network stopped in

6.3 Country-specific Behavior

Except from the final result, nevertheless the three different cases developed in a
different manner. While an Austrian participant might have said, “Don’t tell me
anything, it doesn’t work.”, a Turkish participant might have said: ”Tell me how to do
it!”. The Belgian network members would probably just listen and say nothing, or say,
“That’s interesting. I have to think about it.”

In particular, quite an unequal activity level of the three countries characterized the
process. In Austria, the activity level of the whole group was rather low. Neither did
one of the companies take over responsibility, nor did the participants really involve in
discussions or the development of joint ideas. This behavior was not restricted to the
participants, but was the same for the industry association where the low preparedness
and commitment to participate actively (as it was mentioned in the Initiation phase)
was kept throughout the whole project. While the Belgian commitment can only be
evaluated from the association’s side, – which reflects an equally or even lower level
than in Austria – in Turkey high commitment of the Network Manager and the
representative at MIB was recognized in every phase. Indicators can be found in the
organization of big events, the presence in all media, enhanced marketing activities on
the VERITAS web page.840 Individual talks with interested members took place
several times, the need for training was enforced by the Network Manager and the
MIB representative himself was present during all meetings and the training. There
was also high commitment of responsible for example the Network Coordinator
always read emails immediately and gave feedback to VERITAS questionnaires or

The aspect of commitment can be extended to the role of the leader. An essential
aspect of a group is that at least one person takes over the lead of the team by taking

Cf., accessed in November, 2006.
Cf. email MIB to UNIVIE on evaluation questionnaires, 26th of April, 2005; email MIB to UNIVIE
on Network Analysis, 7th of December, 2005.
212 Comparative Analysis

the responsibility for decisions and by looking for consensus in case of conflicts. As
far as Austria is concerned, although the Network Manager officially held the role of
the leader, he never intervened in the process: Strictly speaking, it would have been his
task to guide the companies out of the Storming phase by establishing a structure or at
least by helping the members to jointly define a strategy or direction.842 Instead, he
comprehended his role as being a moderator and established a support structure for
companies that formulated a certain need.843

In Turkey, the leading companies even put pressure on the potential network members
by demanding their contribution, threatening the membership in the network. The
Network Manager for example reported the intervention of the leading network in the
context of filling questionnaires: “He told me that he is going to warn the group to fill
the questionnaires otherwise they will be out of the group since they are not
contributing”844. On the other hand, the strong commitment of the Network Manager
and the leading group was opposed a lower level of commitment from the companies.
During the network training, for example, the companies could not agree on who
should carry out next steps and called another meeting than to appoint one person
responsible for a specific task.845 The preparedness to cooperate was high at an
abstract level – for example, the companies’ commitment to participate in interviews
was high – but the current steps were slow.

For Belgium, the problems of establishing a network could also be related to

managerial shortcomings as there was obviously not enough time and priority for the
project VERITAS. The repeated cancellation of meetings because of low participant
figures might have been overcome by earlier announcements and strong marketing or
personal advertisement. Unfortunately, the Network Coordinator was involved in a lot
of other activities, for example the organization of a large industry conference together
with MIT,846 and also the Network Manager was reported to have a full agenda.847 The

The tasks of the Network Manager were agreed by contract and defined the role of the Network
Manager as the central role of making the network run. More details in the VERITAS document
“Contract for the Network Manager”, September, 2005.
Comment of the author: From a group perspective, his comportment was comprehensive. Based on
his official assignment, however, his role should have to push the potential members and encourage
networking between them. This would have implied a more active and commitment behavior.
Cf. email MIB to UNIVIE, 5th of January, 2006.
Cf. interview Turkish Network Manager, October, 2005.
accessed in October, 2006.
Cf. personal meeting notes, VERITAS meeting 6th of October, 2005.
Country-specific Behavior 213

slow-moving network initiation could therefore also be attributed to an association that

was not committed to the project.

To further explain the behavior, attitudes of the network participants were examined.
In Austria, the defensive and noncommittal approach was not only based on protecting
everyone’s resources but was also influenced by the idea that no external entity should
tell the manufacturers what they need. Especially CEOs saw themselves as the
business experts and because of former difficult experiences or failures of networks
they were skeptical, since they had had their own expertise.

Belgian companies as well had several good – but also bad – practices in the industry
and were even more cautious about entering a network. The Belgian Network
Coordinator even said that the “hype of networking” was over at this point of time.848

In Turkey, the general expectation towards future cooperation was very high: Most of
the business people stated that networking would be a necessary concept for them in
order to survive. Their attitude therefore was much more positive, active and interested
than that of the other two countries.

On the one hand, the attitude might come from the experience with cooperative
concepts that not only the individuals, but also the industry holds to a different level in
the three countries. On the other had, the attitude might be related to the reasons why
an association participated in the VERITAS project. The motivation in Austria was
based on creating immediate business for the association’s companies, while the
Belgian association wanted to establish strategic concepts that help the whole industry
for the future and Turkey was mainly driven by the need to establish contacts to EU-
companies and learn about modern cooperation concepts. In this context, Austrian
companies measured the success of the network with concrete figures and reacted in a
more retentive, negative way to every meeting – which was, in their eyes, not relevant
for business –, while for example the Turkish people were enthusiastic about the
concept itself, without evaluating its outcomes on first sight.

Different behavior might also be related to the country-specific economic and cultural
background. Generally speaking, Turkey differs from the two other countries not only

Cf. personal meeting notes, VERITAS meeting 28th and 29th of November, 2005.
214 Comparative Analysis

because of its size849 but also provides significantly lower economic figures. In Turkey,
the GDP per head is estimated to reach 7,400€ in 2007, whereas for Belgium or
Austria, the figures are estimated to be four times higher.850 In contrast to this, the
economic growth rate in 2004 was 9.9% in Turkey, compared to 2.7% in Belgium and
2.0% in Austria851. From this point of view, the preconditions for the Turkish network
were different than in the other two countries, reflecting a weaker position for the
Turkish industry. Regarding the network concept, involved Turkish people and
organizations did not feel like being experts. Terms like “network”, or “virtual
organization” were completely new,852 but also the term “SME” had to be explained
during the network training.853 Although, for example, the representative of MIB
participated in the project from the beginning on, he himself did not feel like being an
expert and asked a lot of questions during the Network training in September 2005.

On the other hand, regarding the preconditions of the participating companies there is
a slightly different picture. Although the Belgian companies cannot be judged as they
were still not fixed at the end of the project, the companies in Turkey showed – in
contrary to the core group in Austria – strong market power and in higher turnover and
number of employees.854 Although the network members in both countries can be
summarized as SMEs, at least half of the Austrian participants can be characterized as
micro-enterprises while the Turkish enterprises were mainly medium-sized
international (or at least export-oriented) players. Although this does not encompass all
the related companies, it describes the core group that was present at the meetings and
was involved in the decisions and discussions. The different starting position could
have influenced the formation process in a way that the Turkish companies focused
more on the concept and the structure of the network that they could also use in the
future, while the smaller Austrian enterprises were more attracted by short-term
benefits that help them deal with the current business situation.

Austria: 8.2 Mio. Inhabitants on 83.871km², Belgium: 0.4 Mio. inhabitants on 30.528km², Turkey:
72.8 Mio. inhabitants. on 779.452km²
Accessed on 18th of October, 2005.
Compare for
Further details about all three countries at, below “profiles of
countries”. Accessed on 18th of October, 2005.
Cf. interview Turkish Network Manager, October, 2005.
Cf. personal meeting notes, VERITAS meeting 29th of September, 2005.
Cf. table 8 and table 9 in section 4.
Country-specific Behavior 215

Additionally, cultural implications also may have played a role in the VERITAS
context. As the formation took place in three different countries and therefore in three
different cultural environments, different context factors may have influenced the
behavior of actors. Although the formation process followed the typical group
development progression, characteristics of behavior were sometimes shaped
differently. While for example the Austrian partners were looking for business
partners, business relationships were closely linked to friendships in the Turkish case
(Kutucu, 2006). Although in Austria as well as in Turkey, people were late for
meetings or did not inform the project team if they decided not to come,855 Turkish
participants did not leave meetings before they were over. One point that differentiated
the Turkish formation process from the other countries in the formation process was
the strong need for leaders and structure in Turkey, most important the trustful
relationships between the participants in the network and the management. An external
person was only accepted as somebody who brings in good concepts, who teaches the
participants, but not as a member of the group.856 During the network training in
Turkey, for example, instead of the open approach, it would have been better to hire
somebody who provided the companies with stronger direction. Hierarchical concepts
were also found in the structure of the core group that consisted in large part of the
MIB management board.

A factor that differentiated Belgian participants from the other two countries could be
stronger reaction to uncertainty than in other countries. The “(…) Geert Hofstede
analysis for the whole of Belgium shows a very high Uncertainty Avoidance Index
(UAI) ”857 which is generally being related to risk-averse societies that like to stick to
their traditions. This might explain the questions of the Network Coordinator and the
need for a concrete strategy from the beginning on and could even lead to the
conclusion that the establishment of a business and a related social network would take
more time and planning than in other countries.858

To sum up the results:

i) The Initiation phase was difficult for all three cases, mainly because of having to
decide on a general structure and strategy of the network without network
Cf. interview Turkish Network Manager, October, 2005.
Cf. interview Turkish Network Manager, October, 2005.
857, accessed in November, 2006.
Cf. VERITAS D51: The importance of trust in the phase of network formation, January, 2006,
216 Comparative Analysis

participants. Selection of partners and preparation of informative workshops went

completely different in Turkey, disposing of high involvement, in Austria, where a
very open approach was selected and in Belgium, where several attempts for a
meeting were carried out.

ii) During the Forming phase, a democratic approach on a heterogeneous group was
followed in Austria and Belgium, whereas in Turkey, a homogenous group was
selected in a top-down strategy. All countries were characterized with skepticism,
with calm and restraint behavior in Austria opposed to an active, discussion-
oriented attitude in Turkey.

iii) The Storming phase, only entered by Austria and Turkey, incorporated each a
group of people that questioned the concept and its outcomes on the one hand and
an enthusiastic group full of long-term visions on the other hand. However, task-
resistance was noticed in both countries, in Austria related to the structure of the
concept, in Turkey towards starting joint business activities.

iv) Neither Norming nor Performing was reached by one of the cases. In the end this
led to the non-establishment of groups, with unclear boundaries and without
cohesion and/or dependence of members. No joint identity was established and
involved people did not feel responsible for the network. While the Austrian
network was a loose platform with small project groups, and Turkey showed two
cooperation initiatives, and Belgium could not reveal a structure similar to a

v) Nevertheless, phases were comparable to each other and showed significant

indicators of group processes. Although the development in the three countries was
unequal, all cases followed the same “social direction”, i.e. the group formation

vi) Cultural and economic pre-conditions influenced the attitude and commitment of
the involved network participants, no matter if it was people or institutions. The
influence shaped the characteristics of typical processes in the formation process,
but did not change the process itself.
7 Conclusions and Outlook on Further Work

The aim of this work was to investigate social processes that emerge when people
work together in the context of an SME Network.

Although cooperation is seen as a main solution for SMEs to cope with problems
attributed to their size, the adoption of the concept remains challenging. SMEs enter
networks or cooperation initiatives because of the need to survive in the market and to
be able to compete against larger corporations. In comparison to large enterprises that
can easier test cooperation projects (and partners), SMEs have to bear higher social
and economic risk, thus they want to develop stable and trustful partnerships.

In the network literature (e.g. Miles/Snow, 1992; Provan/Milward, 1995; Gulati et al.,
2000), there is a tendency to concentrate more strongly on structural issues and
environmental conditions, and neglect relationships or social interaction among actors.
West (2004) expresses that benefits of team working need both, i) improved task
performance and ii) emotional well-being for the members of a group (Carter/West,
1999). Despite extensive research on critical success factors for cooperation (e.g.
Jägers et al., 1998; Sherer, 2003; Sieber, 1998), the author claimed that the problem of
network formation might not (only) be related to the often cited factors of ICT,
business opportunities or similar, but on factors related to the group processes.

The study encompassed three main parts, i.e. a literature review on VOs, an empirical
analysis of VO best practices, and the observation of three real-life cases.

After having investigated the theoretical background (section 2.1) and having
compared the structure and success of 30 best practices (section 2.2), it became clear
that two main forms of such organizations exist. On the one hand the “emerged” VOs,
similar to supply chain models and on the other hand, “initiated” VOs, supported by
national or international institutions. The latter were then called Cooperative
Networks, i.e. stable and long-term oriented platforms of cooperation that incorporate
equalized – mostly SME – partners combining their business activities. This – new –
form of cooperation was characterized with a joint strategy, and agreed rules and roles.
The establishment of such cooperative structures was seen as a promising future
concept for SMEs (Huber et al., 2005).
218 Conclusions and Outlook on Further Work

Next to the anticipated social aspects, a process-oriented view on the formation of

Cooperative Networks was integrated in research. The author extended (Virtual) Life
Cycle models to classic social theories on group development (e.g. Tuckman, 1965;
Bion, 1961; Bradford, 1964; Francis/Young, 1989) and formulated a qualitative phase
concept including five stages of network formation. Four of the five phases resemble
Tuckman’s group formation model (Tuckman, 1965), as this model unifies various
attempts to explain sequential stages in groups, encompassing for example studies on
therapy-groups (e.g. Bach, 1954; Bion, 1961; Abrahams, 1949), or training groups
(e.g. Bradford, 1964; Miles, 1953). The framework was applied to three real-life cases
of network formation over a period of 19 months.

The research on the three case studies revealed the following results:

i) The 5-phases model was applied to the three case studies in Austria, Belgium and
Turkey (see section 5). Behavioral patterns in all three countries could be classified
as typical group behavior. This means that group theory is a useful tool to
understand processes in networked organizations. Considering the aspects of group
theory (e.g. Olmsted, 1974; Froschauer/Titscher, 1984), it is concluded that the
establishment of a well-performing group is a prerequisite for establishing
beneficiary networks.

ii) The most similarities in people’s behavior were detected in the Initiation phase,
where all three countries showed a testing of the initial situation, and dependence
on the leaders or initiators. Although unequally articulated, all three networks
displayed a strong need for leadership: While in Austria and Belgium, politeness
and reservation led to the fact that no network participant took over responsibility
for actions, in Turkey the leading roles were more requested by asking continuous
questions and putting pressure on the industry association. The lack of a leader on
the one hand, and the existence of a structural headman on the other hand is
probably one of the main problems in the Cooperative Network setting. Schein
(1980) highlights the need for a leader in a group and that no group can exist
without leading people.

iii) Main distinction among the three cases could be observed during the Storming
phase. Whereas Turkish network participants showed power and activity, the
Austrian network members’ behavior was mainly driven by skepticism and
Conclusions and Outlook on Further Work 219

passivity, not to say resistance. On the other hand, Austria started first, mostly
bilateral, projects whereas Turkey restricted activities to discussions and planning.
Although there seemed to be cultural differences how to behave in the Storming
phase, both countries showed characteristics described to be typical for this phase.
In the end, Turkey managed to enter the next phase earlier than Austria, which is
hypothesized to be driven by the formerly established friendships and by the well-
known Network Manager. People who already know each other are expected to
accomplish the group formation processes faster than others who meet for the first
time (West, 2004).

iv) In order to enter the Performing phase, generally the Storming phase is seen as the
critical phase to be accomplished (e.g. Tuckman, 1965; Kauffeld, 2001; West,
2004). In the network context, however, the very first phase proved to be even
more relevant. The pre-analysis (section 2.2) showed that the way in which
networks emerge was decisive for structure. In the Cooperative Network context it
seems that the effort and commitment in the Initiation, and partly in the Forming
phase are quite important as the selection and information of potential network
members is crucial for the advancement. In this context, the Turkish network
initiatives were more likely to survive than the others, as commitment was stronger
and the focus clearer. The strong importance of the early phases is an aspect that is
also discussed in cluster theory (Payer, 2002).

v) In contrary to the necessity of leaders and network facilitators, the successful

application of group theory on Cooperative Networks reveals new challenges for
the initiators: The networks cannot be forced into a certain timeframe, but – on the
contrary – develop according to specific interactive group processes. A project plan
like it was designed in the VERITAS context is difficult to fulfil and the implicit
linear process of VLCs (Loeh et al., 2003; Katzy/Dissel, 2001) are not able to meet
SME Networks’ requirements in respect to certain timeframes, nor in respect to
certain content-wise requirements.

vi) From a business perspective, critics might point out that the VERITAS networks
simply did not manage to identify and exchange their resources. This is, of course,
true, but the group-related perspective provided a lot of additional and new
insights, since the model differs widely from other formation and set-up models in
the area of Cooperative Networks. While the non-preparedness to exchange
220 Conclusions and Outlook on Further Work

detailed information about resources and production procedures could be related to

either the general fear of losing know-how as SMEs, or to the lack of trust and
openness, a much more detailed, process-related explanation is given from the
group context: The problems of open information exchange can be explained by
the fact that Storming was not accomplished at this point in time. This means that
power struggles had not been overcome yet and the stability phase of cooperation
had not been reached yet. Additionally it becomes clear that the network formation
process was in an earlier stage in Belgium and that the Turkish network was most
advanced although in Austria projects had been carried out.

The 5-phases model based on the group development stages of Tuckman (1965) does
not represent a counterpart to original life-cycle models, but can be seen as an
extension with a focus on social aspects. The former “homo oeconomicus” in Virtual
Organizations has now been embedded in social relationships. The model therefore
extends the existing literature by the additional aspects of social and process-related
factors in (Cooperative) networks. It indicates that the group formation process has to
be accomplished before a network is able to create benefits.

This research shows that networks can be seen as groups. Based on group theory, the
phases Forming, Storming and Norming are necessary (Alleman, 2004; Kauffeld,
2001; Tuckman 1965) in order to arrive at Performing. Only by jointly overcoming the
challenges of every phase, will a group develop its own strength and start to generate
efficient results.

The contribution of the 5-phases model is twofold as it i) develops to a prescriptive

model and ii) shows that besides economic factors that ensure the attractiveness and
basis of cooperation, social factors ensure that participants identify and stay with to the
cooperation chosen.

i) By developing a framework that is able to differentiate between developmental

stages in a network formation process, the author managed to establish a
prescriptive model. Based on the observation of specific behavior of network
participants, the current group development phase can be identified and analyzed.
Typical problems of this phase can be anticipated and a Network Manager or
coordinator is able to react respectively. Conventional VLCs would, for example,
require information exchange at a certain point of time. According to people’s
Conclusions and Outlook on Further Work 221

reaction – let us say a very emotional response to the task – the network
management is now able to notice that the group is situated in the Storming phase
and that the point of time where information can be exchanged among potential
partners has not been reached yet. For the management this means that typical
problems of Storming have to be addressed and, for example, conflicts have to be
moderated. Additionally, interventions based on Organizational Development
approaches (cf. Schreyögg, 1996, p.481ff.) can be used to enhance the process.

Thus, network promoters should not expect that the process of network formation
could be planned and followed like described in economic or project-management
driven time plans. Instead, they have to anticipate social interactions that lead to
deadlocks or backstrokes. An intervention can be well-structured and elaborately
designed, but the objectives will fail if it was used at a wrong point of time. This
conclusion is concordant with Quinn and Cameron (1983) who state that during
phases where the development of cohesiveness come to the fore, less emphasis
should be put on rational goal criteria (like efficiency or productivity), while in
formalization stages, those interventions can be expected to be placed successfully.

Based on the last aspect, the author is able to present a framework that helps
network management to support the Network Coordinator or manager to guide the
team through the formation stages until s/he will no longer be needed. The detailed
description of the model and the three cases in this context helps to better identify
the phase the network group currently is engaged and provides insights how to
proceed during the formation process. The management team has to take enough
time and be aware of the fact that every group behaves differently. The process of
group formation can be analyzed and observed, but can only be influenced
restrictedly. There is no predefined time frame in which a group will be able to
perform together as the performance of every group is hard to predict and follows
its own paths (West, 2004).

ii) Based on a more social argumentation of networks, and the successful match of
market-oriented business units with groups of human beings, it became clear that
relationship building is very important – especially in the context of SMEs or
micro-enterprises, where the CEO represents the institution . On the other hand,
former research (e.g. Jägers et al., 1998; Sherer, 2003), but also the pre-study of
Haas et al. (2007) revealed structural and economic factors that have to be ensured
222 Conclusions and Outlook on Further Work

in order to enter cooperation activities. The author therefore summarizes that two
sets of success factors exist in the context of Cooperative Networks: On the one
hand, it is important to be capable to cooperate with each other and assure that
there is a certain match among core competencies, and that business opportunities
are to be reached within a conceivable timeframe (Payer, 2002; Haas et al., 2007).
Closely related to basic economic factors is a certain structure of the network like
agreements on cooperation or joint quality labels. These criteria are seen as
prerequisites of cooperation: without the expectation of business and an
intersection with potential partners, no institution or individual would consider
joint projects. On the other hand, relationships and social embeddedness of actors
play a role.

Based on group theory, a member of a group wants to stay a member if s/he had
been a member before (Hosmer, 1995). People remain in groups as they notice that
the inclusion in the group is of more value than being outside of it, so that they are
prepared to invest time, skills and energy (Luft, 1984). These factors are mostly
related to the aspects of group belonging and group cohesion and therefore the
well-being of a group member.

In this context, a final hypothesis is that of the two factor groups, the former are
seen as prerequisites for SMEs to enter cooperation, while the latter describe
factors that make SMEs stay with a certain cooperation. Similar to Herzberg (1966)
– who investigated the motivation and satisfaction of workers – a dual-factor model
consisting of “hygiene factors” and “motivators” could be used as an analogy.
Hygiene factors describe those aspects that make the cooperation work, i.e. ensure
the basic requirements of the business partners and therefore minimize their risk.
This factor group encompasses the protection of rights or the assurance of joint
markets and joint interests. The factors are believed not to motivate companies, but
to lead to dissatisfaction if not provided. If, for example, there were no business
opportunities, partners would quit the cooperation. The motivators on the other
hand, are those that add value to the cooperation partners on a more intrinsic level,
including personal advancement and recognition, which finds its expression in the
establishment of mutual relationships.

Although Herzberg (1966; 1968) has been criticized because of his methodical
approach (House/Wigdor, 1967), his dual-factor strategy was applied to several
Conclusions and Outlook on Further Work 223

research fields, among others tourism, manufacturing or education (Zhang/von

Dran, 2000). The distinction between satisfaction and dissatisfaction as two
dimensions seems applicable in the context of Cooperative Networks as well,
above all because of the focus on human beings and as working conditions of
Herzberg (1966) might allow a coherence with “working” conditions in

Having established a prescriptive model of social formation building, the author

showed that when economic considerations and social aspects are integrated , deeper
insights in network processes are possible. However, the study is restricted to the
following limitations:

i) During this research, group theory was discussed in a rather single-sided or even
normative way in order to relate social aspects with network theory. While positive
aspects of groups refer to a strong cohesion of the group, interest in the same
activities, and conformity of communication (Kauffeld, 2001; Froschauer/Titscher,
1984), there exist negative aspects of groups as well. Indeed, group-think, group
pressure or risk-shifting (Schein, 1980; Froschauer/Titscher, 1984) might even
impede successful cooperation activities. The future model should therefore not
only strengthen those aspects that influence the performance of the group in a
positive way, but also try to avoid those aspects that might hinder successful

Referring to different working groups, the Performing phase – reflecting that the
optimal conditions for group performance are set – is rarely met (Schneider, 1975).
The framework therefore represents an analysis model based on the ideal
development of a certain group, i.e. Cooperative Network. Nevertheless, several
circumstances or renewals might lead a group back to a starting point and make the
group members launch the process again.

ii) As the analysis of the three network cases was carried out in three different
countries, it might be argued that the cultural implications led to the different
formation process in the three countries. Of course, the national background
influences the behavior of the inhabitants and therefore the communication pattern
or the attitudes of described group members. Nevertheless, the research perspective
in this study was based on the social structure of network members and disregarded
224 Conclusions and Outlook on Further Work

cultural influences. Although the model proved to be applicable in all three

countries, and only certain characteristics of participants’ behavior differentiated,
cultural aspects are to be included in further research activities.

iii) Qualitative research aims at investigating certain cases on a rather detailed level.
For the complex idea to investigate social structures of Cooperative Networks, case
study research proved to be the right method of investigation. Despite the often-
cited problems with qualitative research (e.g. Kelle, 1994; Diekmann, 1995), the
triangulation method and the extensive inclusion of different data sources allowed
a deep insight in the social complexity of network formation. However, the
problem in these (real-life) cases was the fact that all three cases got stuck during
their formation. Unfortunately an inclusion of other networks in this research
would not have been feasible because of low comparability, and an extension of
project time was either possible.

Future work should therefore concentrate on further applying the model to other
Cooperative Networks. The suggested 5-phases model should be further investigated
and turned into a concrete diagnostic instrument. The model fit can be tested with new
cooperation platforms but maybe an additional retrospective view, investigating in the
point of time where networks failed or started to perform, would also lead to
interesting results.

In future research, the idea of having two different sets of factors could be further
perpetuated to a coherent dual factor model. This would allow quantitative testing and
could lead to further research activities in the field of effective networking. However,
the qualitatively developed framework is seen as a starting point for further research
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Project Description and Work-Breakdown-Structure
Project summary859
VERITAS overall objective is to increase the dynamics of European Industrial
Enterprises by transforming them, where appropriate and possible, to more flexible
and re-active companies that use the Virtual Enterprise concept in a manageable and
effective way. The ambitious goal is to help manufacturing companies with high
production-related costs to understand and implement the concept of virtual enterprise,
enabled through smart organization and process restructuring and supported by the use
of Information Technology, cross-organization Work Management solutions in
particular. We refer to the combination of these elements as the VERITAS concept.
The project will target the machine tool industry in particular, but will try to keep the
findings and output abstract to an extent that will make a similar usage of the results
possible in other industries.

VERITAS’ primary activity will be the permanent creation of three stable virtual
industry clusters. VERITAS will not force a VE initiative within its time horizon, but
will provide all the necessary prerequisites and knowledge to form a VE in the future.
This includes comprehensive training of the target companies in configuration, co-
operation and competence management for VE as well as the development of tools to
monitor and manage VEs. In addition, VERITAS will produce an agility evaluation
method for companies to test the potential applicability of the VERITAS concept to
their organizations and an implementation guide, which will provide step-by-step
instructions for forming a virtual enterprise. A multilingual portal solution will be set
up and implemented to reach the target industrial organizations on a large scale. The
portal will enable the target companies to learn about, understand, test and implement
the VERITAS concept, supported by interactive tools.

Approach and Objectives860

VERITAS861 is a Specific Support Actions (SSA) project, combining elements of
analysis, fact finding, monitoring and evaluation with trans-national knowledge
transfer and take-up related services. Its overall objective is to increase the dynamics
of European manufacturing companies by supporting their transformation towards
agile enterprises. The ambitious goal is to actively help machine tool companies with
high production-related costs to understand and implement the concept of virtual
enterprises, enabled through business process orientation, a new business culture and
supported by the use of Information Technology, in particular cross-organisation Work
Management solutions. As a European research project, VERITAS will aim to close
two identified gaps between industrial requirements and academic research in the area
of virtual manufacturing systems research.862 These are the lack of multidisciplinary

taken from: VERITAS, Contract for Specific Support Action, Annex 1- Description of Work, p.4.
taken from: VERITAS, Contract for Specific Support Action, Annex 1- Description of Work, p.5-6.
Veritas: the truth (Latin).
Shi, Y. and Gregory, M. Global Manufacturing “Virtual Network (GMVN): Its dynamic Position in
the Spectrum of Manufacturing Collaborations”, in Franke, U. “Managing Virtual Web
Organizations in the 21st Century”, Idea Group Publishing (2002).
242 Appendix

cooperation and the lack of knowledge transfer from theory to practise. The first will
be tackled by a diverse consortium, including an ICT consulting company, a strategic
management consulting company and an academic partner with a research focus on
trust building and negotiation mechanisms within and across organizations. The whole
project approach is developed to satisfy the second shortcoming, the knowledge
transfer from theory to the manufacturing industries and beyond. The three industry
associations from Austria, Belgium and Turkey in the consortium will significantly
facilitate reaching the target industry and disseminating the project findings to
industrial organisations on a large scale.

The VERITAS VE formation approach will be based on the “Global Framework for
Virtual Business” model (GFVB), using the practical experience from a number of
European and Worldwide projects on VE to turn this framework into a practicable
approach. Among these initiatives the “Euroregio Bodensee (Virtuelle Fabrik)” and
the “Agile manufacturing” projects have been particularly well documented and will
serve for a valuable guideline for VERITAS. For understanding different aspects of
configuring virtual networks and enterprises VERITAS builds on other applied
projects like COSME, VEGA, VIRTEC and PUSH and the theoretical expertise of
academic network partners.

The theory on VE is diverse; however it shows a number of common elements. First of

all, it is agreed that virtual enterprises (VE) require a stable network (larger pool of
companies) sharing a common vision, infrastructure and trust. Only when such a
network exists, sub-groups of its members will be ready and able to configure flexible
temporary VEs when specific market opportunities arise. The creation of these
networks (also referred to as virtual industry clusters - VIC) often is a time and
resource demanding process, where goals, strategy, rules and trust are being
developed. With a limited time frame and given the fact that VE initiatives – though
proactively pursued – depend on external factors and demand, VERITAS’ concrete
and verifiable objective will be the permanent creation of three stable networks.
VERITAS will not force a VE initiative within its time horizon, but will provide all the
necessary prerequisites and knowledge to form a VE in the future. This includes
comprehensive training in configuration, co-operation and competence management
for VE as well as the development of tools to monitor and manage VEs.
= Interviews
List of investigated Best Practices
Industry Main characteristics Classification
N° Name Reference Website Country
(acc. to OECD)

Beep Knowledge System 20 SMEs, supported by the Ben Virtual Enterprise

29 Manufacturing Franklin Technology center.
1 Agile Web Inc. USA of Machinery and
wCase.asp?CaseTitleID=134&CaseID=61 Claims to be the first recognized
0 virtual enterprise in the world.
343 Manufacture of Automotive supplier group, Focal virtual
parts and operating with 20 production network
Fraunhofer IAO - Virtuelle UN in Baden
2 Behr Germany accessories for locations (licensed partners)
motor vehicles and around the world.
their engines
Wüthrich, Hans A.; Philipp, Andreas F.; Formed between several Virtual Enterprise bzw. 353 Manufacture of
Frentz, Martin H.(1997): Vorsprung durch companies and persons in order
3 Cargo Lifter Germany aircraft and
Virtualisierung: Lernen von virtuellen to establish an innovative product. spacecraft
Pionierunternehmen, Gabler, Wiesbaden.
Network of 3 small enterprises Virtual Enterprise
292 Manufacture of
producing machine tools,
4 eMMEDIATE Internet research Austria special-purpose
Established due to a funded
18 manufacturers. Founded in Virtual Enterprise
Wüthrich, Hans A.; Philipp, Andreas F.;
1996 as one of the first virtual
Euregio Frentz, Martin H.(1997): Vorsprung durch Switzerland /
5 D Manufacturing enterprises. Changed and
Bodensee Virtualisierung: Lernen von virtuellen FL
developed management structure
Pionierunternehmen, Gabler, Wiesbaden.
over time.
Goranson, H. I. (1999): The Agile Virtual 30 firms sharing risk and know- Virtual Enterprise
6 Flexcell N/A USA D Manufacturing how, fixed pool of partners
Enterprise : Cases, Metrics, Tools.
742 Mechanical 40 companies, structured into Virtual Enterprise
precision three entities. The network engineering, developed out of the Mexican
7 IECOS COVE news 5 Mexico machine Industry cluster.
ault.htm engineering and
IMPRO Network in precision mechanics Virtual Enterprise
(Interessenver that started with 4 companies and
bund Metall- Industrie Fachmesse 2003 29 Manufacturing grew up to 18 SMEs. Was funded
8 und http://www.messe- Germany of machinery and during the first two years but now
Präzisionstech equipment finances all its activities with
nik member contributions
7 small companies that cover the Virtual Enterprise
29 Manufacturing whole value chain from
9 KFSnet Internet research Germany of machinery and engineering to manufacturing.
equipment Project funded by the German

Scheer, August-Wilhelm / Kocian, Claudia X Cooperation

(1996): kiesel – Das Virtuelle 7421 platform

10 Kiesel Umweltkompetenzzentrum: Theorie und Germany Environmental
Praxis der Virtuellen Unternehmung in: consulting services
Management & Computer, 4, 4, 221-228
5 handicraft furniture producers Virtual Enterprise
Konkraft 361 Manufacture of combining their expertise for joint
11 BEEP Germany
Manufacturen furniture offers and share plans and
drawings in real time over Internet
8 companies with a strong focus Virtual Enterprise
29 Manufacturing on R&D, located in the same
12 metalnet Internet research: Germany of Machinery and technology park. Was funded and
Equipment supported as a project of the
722 Software 40 researchers, developers and Virtual Enterprise
mobile publishing, software experts (as well firms as
13 solution Germany consultancy and single persons) in telecom and
supply multimedia
myteq 15 SMEs founded the micro- Virtual Enterprises
Industrie Fachmesse 2003 29 Manufacturing
(microtechnol technology network in 2002.
14 http://www.messe- Germany of Machinery and
ogy Equipment
921 Motion picture, One central company with an Focal virtual
Wüthrich, Hans A.; Philipp, Andreas F.; Japan,
radio, television international, supplier network. network
Frentz, Martin H.(1997): Vorsprung durch Headquarter
15 Nintendo and other Only the Software Development
Virtualisierung: Lernen von virtuellen .jsp in
entertainment and Sales distribution are done
Pionierunternehmen, Gabler, Wiesbaden. Washington
activities centrally.
Originally founded to produce an Virtual enterprise
René Bultje, Jacoliene van Wijk: automatic milking system.
292 Manufacture of
Taxonomy of Virtual Organisations, based
16 Prolion Netherlands special-purpose
on definitions,characteristics and typology.,
KPN Research, The Netherlands

Only brand management and Focal virtual

Wüthrich, Hans A.; Philipp, Andreas F.; administrative issues are done network
Frentz, Martin H.(1997): Vorsprung durch centrally. All other services like
17 Puma Asia, Great 51 Wholesale trade
Virtualisierung: Lernen von virtuellen product development, R&D etc.
Pionierunternehmen, Gabler, Wiesbaden. are outsourced to different
partners and even countries
921 Motion picture, Team of virtual people. 150 Virtual Enterprise
Wüthrich, Hans A.; Philipp, Andreas F.;
radio, television freelancers.
Rauser Frentz, Martin H.(1997): Vorsprung durch
18 Germany and other
Entertainment Virtualisierung: Lernen von virtuellen .html?
Pionierunternehmen, Gabler, Wiesbaden.
Internet research and Goranson, H. I. 353 Manufacture Established as a virtual team of Focal virtual
19 Sikorsky (1999): The Agile Virtual Enterprise: USA of aircraft and experts in order to design and network
Cases, Metrics, Tools. spacecraft manufacture advanced helicopters
29 Manufacturing 156 member companies. Network Cooperation
20 Internet research: Germany of Machinery and was formed to support the platform
Equipment competitiveness of the region
7421 Architectural Founded in 2001. Collaboration Virtual Enterprise
Schiefer, Peter (2002): Kooperation und
and engineering initiative of 8 SMEs. Failed.

Koordination in Virtuellen Unternehmen am

21 Solarplexx Austria activities and
Beispiel SolarpleXX, Master Thesis,
related technical
University of Vienna
Founded in 1989, cooperation due Focal virtual
Wüthrich, Hans A.; Philipp, Andreas F.;
29 Manufacturing to the establishment of security network
Frentz, Martin H.(1997): Vorsprung durch
22 Startek Taiwan of Machinery and systems
Virtualisierung: Lernen von virtuellen htm
Pionierunternehmen, Gabler, Wiesbaden.
Swiss Starting with a core team of 4 Virtual Enterprise
29 Manufacturing
Microtech SMEs in 2000. Developed into a
23 4th IFIP Working conference on VE Switzerland of Machinery and
Enterprise best-practice VE
29 Manufacturing 30 SMEs. Funded by the state in Virtual Enterprise
24 Team22 Internet research Germany of Machinery and order to promote the region
A Broker sets up consortia to Virtual Enterprise
tender for public construction
25 Tectonet Internet research Germany 45 Construction
works, thereby choosing from a
core pool of 40 SMEs
ICE2004, 10th International Conference on 341 Manufacture of Founded to enhance collaboration Focal virtual
26 V-Chain Spain in the Ford Automotive Industry network
Concurrent Engineering motor vehicles
Sieber, Pascal Griese, Joachim (1998): Emerged out of a project aiming at Virtual Enterprise
Organizational Virtualness and Electronic supporting management know-
Commerce; Proceedings of the 2nd how in SMEs
27 VIRTEC N/A Brazil D Manufacturing
International VoNet-Workshop, Zurich,
September 23-24, Vol. 1, No. 1, Simowa
Verlag Bern
35 members form a collaborative Virtual Enterprise
Virtuelle Wüthrich, Hans A.; Philipp, Andreas F.;
network. 8 years of experience,
Fabrik Frentz, Martin H.(1997): Vorsprung durch,
28 Switzerland D Manufacturing further increase in sales figures
Nordwestsch Virtualisierung: Lernen von virtuellen
and cooperation activity
weiz Pionierunternehmen, Gabler, Wiesbaden.
Automotive supplier network. 1996 Focal virtual
Wüthrich, Hans A.; Philipp, Andreas F.; partners formed due to a special network
Volkswagen Frentz, Martin H.(1997): Vorsprung durch 341 - Manufacture
29 _companies/volkswagen/vw_marke/ Brazil business need of VW
Resende Virtualisierung: Lernen von virtuellen of motor vehicles
Pionierunternehmen, Gabler, Wiesbaden.
Highly flexible network in the Virtual Enterprise
Walden sports industry (Kayak). Founded
30 Internet research USA D - Manufacturing
Paddlers in 1993
246 Appendix

Interview Guideline of Pre-study

Structure and composition of the network

1. Could you please tell me briefly how the network emerged and what its
membership structure looks like? When was it created? Who initiated it and
why (external public/private funding/support)? How many members does the
network have? How did the membership develop over time (increase, decrease,
stable from the outset, etc.)? What is the structure of the membership
(employees and turnover)?

2. Did the members cooperate before? If yes, in what form? Did they know each
other in person? Were they direct competitors? How cooperative is the industry
in general? Are there other clusters, networks etc.? Is there international

3. Does your network have a vision, a strategy and/or annual goals? If yes, who
sets them and how? Can you outline the vision, strategy and goals? Were there
any non-commercial principles from the outset?

4. Are there defined rules and agreements for the network? If yes, can you give an
overview of the different rules and roles?

5. What common activities do the network members have (training, workshops,

mutual visits, regular meetings, etc)? Do you think such activities increase the
flexibility of the members and their level of interactivity?

6. How important and how strong is trust between your members? Is there a
difference between the original members and those who have joined later? Or is
there an inner and an outer circle? Are you undertaking trust building activities?
Please describe them.

7. Do you think the network should and will be extended in the future? If yes, in
what direction?

Role of the Broker/Coach

8. Can you describe what exactly are your role and activities within the network?
Since when are you the Broker/coach? How do you judge this role? Has your
role changed over time? Do you work for other networks?

9. Could you briefly explain how you as a Broker/coach are financed? Is there a
fee to be paid by each member, a bonus allocation for VO acquisition, direct
participation of your organisation in commercial projects or a mix of the
Appendix 247

mentioned elements? What percentage of your revenues is related to the

Brokering/coaching activities for this and other networks?

10. Do you select the partners for the VO project? If yes, how do you proceed and
how do you avoid rivalry between partners? Do you pre-select for the network?
Do you use any tools, techniques for the selection (of the core competencies)?
Do you attempt to create a virtual value chain?

VO project cooperation and commercial benefits

11. Could you please give an overview of how many and what type of commercial
VO projects have been initiated in your network? What volume do they
normally have? How many partners tend to be involved? What is the average
duration of a VO and what are the factors influencing it? Who acquires the
projects? Are there patterns of cooperation (companies take same position in
value chain, repeating partnerships, type of work, etc.)? Do such patterns
change over time?

12. Why did the network partners cooperate in these specific cases in a VO and in
others not (business case, size of the contract, degree of specializations
required, etc)?

13. Can you please describe the process of setting up a VO in terms of legal
responsibilities, division of work, etc? What is in general the purpose of the VO
(product, service)? What legal form does the co-operation take (one key partner
who subcontracts, ARGE, etc.) and why?

14. Can you please describe the process of implementing a VO project? What types
of problems arise and how did you deal with them? How do you deal with
(avoid) tensions of competition and co-operation among your network
members? Has the (competitive) relationship between them changed over time?

15. Can you describe the closing of a VO?

16. How often do you meet the partners physically in each phase?

17. Did you optimize the whole process over time?

18. How do you think the members of the network judge the added value of their
membership and VO participation? Have their expectations been met? Have
they gained financially? Have they improved their flexibility, time to market,
innovative capabilities or increase their product range? Have they intensified
cooperation with other members?
248 Appendix

ICT Infrastructure

19. Could you please describe the general IT infrastructure used for the network
(Email, Internet, Intranet, database, etc)? Is there is a specific system common
to the network? If yes, who is responsible for designing/maintaining the
system? If yes, could you specify your requirements when designing and
perhaps up-grading the system? Is the infrastructure adequate and used (number
of active users and frequency)?
20. Do you use any collaborative tools in general or for a VO project? If yes,
describe briefly what for?

Trust Index Yamagishi/Yamagishi (1994)

ƒ*Most people are trustworthy.

ƒ*Most people will respond in kind when they are trusted by others.
ƒ+One can avoid falling into trouble by assuming that all people have a vicious
ƒ-In this society, one does not need to be constantly afraid of being cheated.
ƒ+There are many hypocrites in this society.
ƒ+People are always interested only in their own welfare.
ƒ*Most people are trustful of others.
ƒ*Most people are basically honest.
ƒ+Only very few people are convinced that telling a lie is wrong.
ƒ*I am trustful.
ƒ*Most people are basically good and kind.
ƒ+People usually do not trust others as much as they say they do.
ƒ+In this society, one has to be alert or someone is likely to take advantage of you.
ƒ+When someone compliments you, it is because they want something from you.
ƒ+Most people inwardly dislike putting themselves out to help others
ƒ- In dealing with strangers, it is better not to be suspicious of them unless there is
good reason for it.

* general trust items, positive responses are trustful

+ caution scale items, positive responses are cautious
- caution scale items, negative responses are cautious
Appendix 249


Please comment on the following statements:
What do I think about cooperation? Fully Partly Fully
disagree agree agree
I am familiar with risks, advantages, restraints and legal possibilities of
cooperation forms from previous experience and additional information.
I know several examples of effective cooperation.
To form an economically viable cooperation, one of the necessary
conditions is that partner contributions are economically calculated
I am prepared to provide financial as well as personal resources in
order to set up cooperation.
In the cooperation partners take it for granted to share confidential
information with the other companies.
Competition between partners cannot be avoided.
Competition between partners has to be discussed and resolved in an
open way.
I would bring my own customers into the cooperation.

What do I expect from a new cooperation?
Which aspects do I consider as the most critical when I think of Fully Partly Fully
cooperation? disagree agree agree
Forming a viable and efficient cooperation requires well-established
trustful relationships between the partners.
Cooperation is of no use, if no common business opportunities or joint
product innovations emerge.
Open and honest communication between cooperation partners must
also include any recurrent problems of and challenges for the individual
partner companies.
The commitment of every single partner company and its management
board is a basic requirement for establishing a network.
No network will work without predefined rules and roles.
Cooperation is a strategic decision and therefore must be an integral
part of every company’s strategy.

Reasons for cooperation: Which aspects are decisive for me and Partly Highly
Not relevant
my company to participate in a cooperation network? relevant relevant
- the professionalism of the partners in their competence field
- the trustworthiness of partners
- the existences of quality certificates like ISO 9001 or 14001
- that I know the other companies from previous common activities
- the utter commitment of every single firm
- that every partner takes over responsibility
- detailed rules and roles
- a Management Board of the network
- a Network Manager who detects market chances for the network
- a loose cooperation agreement clarifying the most important issues
- a legal (general) agreement or contract
- clear defined and documented processes
- a clearly formulated vision and strategy
- the technical sophistication of the partners (especially in the context of
- commonly identified and agreed business activities
250 Appendix

- an identified and defined market of the network

- regular meetings between all the partners
- stability of the network
- the partners’ preparedness for innovation
- the partners’ preparedness to take over risks
- the geographical proximity of the partners
- open discussions and direct communication between partners
- common marketing
- common events like e.g. trade fairs
- training activities
- a common database including all the competencies of the partners
- common intranet and collaboration tools

Reasons for leaving the network: Which factors would Partly Highly
Not relevant
immediately lead me and my company to leave the cooperation? relevant relevant
- unprofessional partners
- the impression of negative trustworthiness
- not knowing the other firms and partners from previous experiences
- partners without quality certificates
- no commitment of some firms
- not all partners take over responsibility in the network
- rules and roles are missing
- a Management Board is missing
- a Network Manager who detects market chances, is missing
- no cooperation agreement
- no legal (general) agreement or contract
- the lack of defined and documented processes
- no common vision or strategy
- the technical backwardness of partners (especially IT)
- no common business activities or product innovations can be
- there is no defined market for the cooperation products
- no or just a few meetings take place between the partners
- the network is instable, partners continuously leave
- no preparedness to innovation
- no preparedness to take over risks
- regional spread of partners
- secrecy, no open discussions
- the lack of common marketing activities
- the lack of common activities and/or events like trade fairs
- no professional training
- no database including the core competencies of the partners
- no common intranet or collaboration tools

According to your opinion, which action has to be taken in order to …

… establish trust between the participating companies in a network?

… enhance open and direct information exchange between partners?
… identify common business activities?
… only include firms that are committed to the network activities?
… develop optimal network management structures?
… combine the firms’ strategies with the strategy of the network?
Appendix 251

Please comment on the following statements according to your personal opinion.
Statements Not at all Always
Most people are trustworthy.
Most people will respond in kind when they are trusted by others
One can avoid falling into trouble by assuming that all people have a
vicious streak
In our society, one does not need to be constantly afraid of being
There are many hypocrites in our society
People are always interested only in their own welfare
Most people are trustful of others
Most people are basically honest
Only very few people are convinced that telling a lie is wrong
I am trustful
Most people are basically good and kind
People usually do not trust others as much as they say they do
In our society, one has to be alert or someone is likely to take
advantage of him/her
When someone compliments you, it is because he/she wants
something from you
Most people inwardly dislike putting themselves out to help others
One should not be suspicious of strangers, unless there is a good

Cooperation so far
The following questions focus on any kind of cooperation your company has been engaged in so far. By
cooperation we mean any kind of collaboration with other companies or organizations.

What are our objectives when we cooperate with others?

Aims / Objectives Not at all Always
Share costs
Share risk
Acquire know-how from outside
Short-term use of a market chance through cooperation
Long-term mutual support through collaboration
Access to new markets
Satisfying individual customers’ needs
Increase of flexibility and adaptability
Widening capacities
Synergetic combination of core competencies
Higher efficiency throughout the supply chain
Reduction of „time to market"
Avoidance of additional coordination effort
Establishing a uniform customer interface
Statements Not at all Always
The end product is a combination of the different inputs (core
competencies) of the cooperation partners
The products/ services can be produced cheaper in the cooperation
than without it
The work is done by interorganizational teams
252 Appendix

We have a strong readiness for outsourcing

Our employees share their office with employees from our cooperation
The cooperation is dissolved after work is done
The customers can influence the composition of the cooperation
The value creation takes place in different locations
The business processes are coordinated among the partners for the
value creation
Statements Not at all Always
Our strengths differentiate us from our competitors
It is hard for our competitors to imitate our strengths
When economically feasible, we use external competencies
The value creation process (producing goods and services) is carried
out time-independently by the cooperation partners
Each organizational unit is only active in its field of competence
Our internal units sell their strengths on the external market
Features Not at all Always
We cooperate frequently with other companies (persons or freelancers)
A fixed pool of cooperating organizations exists, from which we select
our cooperation partners
The cooperation has a uniform face towards the customer
The cooperation has a uniform logo
The cooperation offers the customer a complete solution
The success of one cooperation unit is positively related to the others
We trust our partners that they keep to the agreements
We try to implement trust-building measures among our cooperation
partners (e.g. workshops, seminars etc.)
The value creation in this high quality and short time period can only be
done with the help of the cooperation partners
Features Not at all Always
We do without contractual agreements
We only finalize general agreements and verbally agree on the details
We only have verbal agreements
We finalize only detailed contracts
Our cooperation partners are legally independent from us
A central coordination unit exists, which coordinates the work within the
cooperation (e.g. Network Broker)
We always try to include everyone involved in the decision making
Very low high
Generally the extent of contractual agreements is
Statements Not at all Always
We have a clear idea of what we are able to do
It is important to concentrate on our own strengths
The cooperation has its own legal form (e.g. Corporation, Joint Venture,
There is only one contact person for the customer in the cooperation
The selection of the cooperation partners follows strict guidelines
The cessation of one partner threatens the whole cooperation
Appendix 253


Statements Not at all Always
It is a fundamental principle of our company that colleagues support
each other
We trust in each other
Everybody can rely on each other
We have an atmosphere of honesty, openness and trust
The cooperation is configured after the customer has placed his order
All partners enjoy equal rights in the cooperation
We always try to carry our interests through
Statements Not at all Always
We keep to verbal agreements, even if it brings us an economic
We keep to rules of games, even if it brings us an economic
We keep to our corporate guidelines, even if it brings us an economic
We keep to written agreements, even if it brings us an economic
Is available Usage
Very Very
Communication systems Yes No
Face to face
Shared access to knowledge databases
Video conferences
Groupware (e.g. Lotus Notes)
Common standards for data interchange (e.g. EDI)

ICT and Collaboration

Please answer the following statements in the view of your company:
Statements Not at all Always
We extensively use ICT (Information and Communication Technology)
in our daily work.
We use ICT for the conduct of business between our organization and
our permanent partners, suppliers, customers
We use Collaboration Tool software in our cooperation network.

Do you know which elements “Online Collaboration

Tools“include? Please give a definition of your comprehensibility:
254 Appendix

Please answer the following statements in the view of your company:

Statements Not at all Always
An “OnlineCollaboration Tool“ software is necessary for the operation
of the network.
An “OnlineCollaboration Tool“ software will speed up the processes of
the cooperation network.
We (would) allow the “OnlineCollaboration Tool“ software to
automatically access to data in existing software of our organization.
The usage of the “OnlineCollaboration Tool“ software would facilitate
the communication and the trust-building between the members of the
cooperation network.
The usage of the “OnlineCollaboration Tool“ software would enhance
the transparency of cooperation within the network.
The usage of the “OnlineCollaboration Tool“ software would speed up
the selection of partners that will form a Virtual Enterprise.

Please answer the following statements in the view of your company:

I don’t
Statements No Yes
A Document Management System (Online Document Repository) is
useful for collaboration.
A common online calendar where all cooperation partners can suggest
and reject meetings and create meeting agendas is useful for network
An Issue Management System (To-Do List) where all cooperation
partners can enter and monitor issues is useful for network
A Meeting Management Tool is useful for collaboration.
A Risk Management Tool is useful for collaboration.
A Contracts Management Tool where all cooperation partners can
enter and monitor contracts is useful for collaboration.
An online Competencies Database where all partners can publish their
core competencies, their knowledge, their products and services is
useful for collaboration.
A Brokering Tool is useful for collaboration.
I would use the Collaboration tool software for everyday cooperation.
Our company would allow such a tool for automatic access data in
existing software of our organization.
Statistical information:
Region / Country Austria Turkey Belgium
Annual turnover 2004 (in Euro) 2 mill, 2-9 mill.Mio 10-49 mill. >49 mill
Number of employees <10 10-49 50-249 >249
Number of operating countries 1(inland) 2-5 6-19 >19
Number of current cooperation partners 0 1-2 3-19 >19

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