The IMP Journal Volume 1, number 1 1

THE IMP JOURNAL

ISSN 0809-7259,
VOLUME 1, NUMBER 1

CONTENTS
Page 4-20 David Ford and Hakan Hakansson
The Idea of Interaction

Page 21-38 Anna Dubois and Luis Araujo

The Relationship between Technical and Organisational
Interfaces in Product Development.

Page 39-70 Enrico Baraldi and Torkel Strömsten

Embedding and utilizing low weight: Value creation and resource
configurations in the networks around IKEA’s Lack table and
Holmen’s newsprint

Page 71-84 Alexandra Waluszewski

Hoping for Network Effects or Fearing Network Effects

Produced in cooperation with

Norwegian School of Management BI
The IMP Journal Volume 1, number 1 2

Papers for this edition were initially presented and reviewed at the first IMP Journal
Seminar in Oslo in May 2005. They were subsequently revised and re-reviewed for
publication.

A Letter from the Editor

Welcome to the first issue of the IMP Journal. We have a number of aims in starting the
new journal: Firstly, we want to provide a location on the IMP website that is freely
available to all for the very best writing within the general area of IMP studies. Secondly,
by making the journal web-based, we have none of the constraints of space suffered by
conventional print journals. This means that we are able to fulfil the aim of publishing
the larger, case-study based work that characterizes much of the IMP output.

However the third reason for establishing the journal is the most important:
For the past thirty years, IMP researchers have been studying what happens between
business companies. These studies have been based on a particular view of the
structure of business that challenges conventional ideas. The conventional view of the
structure of business is of independent companies and anonymous markets. In contrast,
the IMP view has been that new insights can be obtained by viewing the structure of
business as a network of significant relationships between interdependent companies.
IMP studies have also been based on a particular idea of the process of business.
Rather than considering a process based on the actions of independent companies, we
have seen the process of business as one of interaction between interdependent
companies.

It seems that the existence of business relationships has now been well established in
both academia and in business itself. However, many writers and practitioners seem to
view relationships as simply some sort of managerial technique that can be applied or
not, depending on managerial wishes. But the idea of interaction in business is still not
well understood. More importantly, the implications of ubiquitous interaction for the
management of individual business and its wider regulation have received only limited
attention in the literature.

Thus the main reason for launching the IMP Journal is to provide a vehicle for
researchers to publish work on the nature and implications of business interaction in all
its aspects and in its widest contexts.

The first issue exemplifies this approach:

The introductory article by the editor and Hakan Hakansson tries to explore some
aspects of the nature of interaction and to sketch out some of the research issues and
problems in addressing it.

The second paper by Luis Araujo and Anna Dubois is empirically based in a case
company. The paper seeks to demonstrate that product development processes
involving more than a single firm do not consist of privileged, lead firms operating as
“systems integrators” in a hierarchical supply system. Instead they argue that
development processes involve multiple interactions at the level of firms, dyadic
relationships and networks. The paper shows that these interactions are more
The IMP Journal Volume 1, number 1 3

distributed, non-hierarchical and unpredictable in their effects and reach than is

conventionally assumed. These findings have clear implications for the management of
the product development process.

The third paper by Enrico Baraldi and Torkel Stromsten applies an industrial network
perspective to present the innovation and value creation process in a new light. They
stress the importance of resource interfaces in two concomitant sub-processes: value
embedding and daily value production and utilization. This paper is also empirically
based in two different cases.

The final paper by Alexandra Waluszewski contrasts with the previous two. This is a
conceptual paper. It compares the ideas of those who in different contexts have
expounded the ideas of the functionality of networks and the benefits of these for their
members with those who have argued of the problems and dangers of the “network
society”.

I hope that you find the papers in this first issue rewarding and that you will be
encouraged to submit work for review. I would like to thank the contributors for their
support and also the reviewers for their hard work.

David Ford

December 9th 2005

i.d.ford@bath.ac.uk
The IMP Journal Volume 1, number 1 4

The Idea Of Business Interaction

David Ford a and Håkan Håkansson b

a Department of Marketing, University of Bath School of Management, Claverton Down, Bath, BA2 7AY, United
Kingdom, e-mail: I.D.Ford@bath.ac.uk

b International Management, Norwegian School of Management, Oslo, Norway, e-mail: hakan.hakansson@bi.no, Tel:
+47 05730870;

Acknowledgements: The authors are grateful for comments from Ross Brennan and two reviewers.

Abstract

This paper argues that a view of business activity as a process of interaction between active,
individually significant and interdependent actors challenges accepted ideas on both the structure and
processes of business. We argue that if we take an interactive view of business, then it becomes self-
evident that we cannot understand business activity by looking at it from the perspective of a single
company and its aims and actions. Nor can we hope to understand business activity if we view it as a
process directed by companies towards some generalized “other”, such as a market of customers or
suppliers. An interactive view sees business as a world where the actions of a single company are based
on its interpretation of the previous actions of specific others and on its anticipation of the possible re-actions
and re-re-actions of those specific others in the future. This means that in an interactive world, the
companies that surround an actor are heterogeneous in their resources, problems, aims and in their
interactions. These heterogeneous companies cannot easily be categorized into neat, supposedly
homogeneous groups with names like customers, suppliers, competitors, manufacturers or retailers. Nor
can we consider what happens between these heterogeneous companies as a linear flow of goods or
services, coordinated or controlled by any single one of them. Instead, we see a world of single companies,
each motivated by their own problems and each with their own idiosyncratic view of their own resources and
those of the companies that surround them and with which they are interdependent. An interactive view of
business also means that the interaction that we currently see taking place is firmly rooted in the past and
will have effects on many aspects and on the potential directions of interaction in the future. All business
interaction is part of a process that involves resources from far wider in the surrounding network of actors
than from the small numbers of actors that are apparently involved in it. Even more importantly, the tangible
characteristics of business such as companies and their products, sales and purchases are no more
substantial in an interactive world than the apparently ephemeral relationships that exist between those
companies.
This paper examines five issues in interaction: Time; Interdependence; Jointness; Relativity and
Subjective Interpretation. The paper argues that these issues both individually and together are important
areas of research for those attempting to understand business interaction. It also argues that because of
the paucity of our knowledge of business interaction, each of these represent significant problems for the
researcher. The paper attempts to explore these issues as a way of trying to understand business
relationships and as a first stage towards building a theoretical framework for using interaction as a useful
metaphor for economic activity.

Keywords: Interaction, networks, interdependence, time, heterogeneity, jointness, subjective perception,

relativity.
The IMP Journal Volume 1, number 1
1. Introduction
Interaction is an interesting
phenomenon both in real life and as a
theoretical construct. In real life
interaction is important when trying to
understand how individuals behave and
how companies or organizations
influence each other. As a theoretical
construct it is, for example, central in
market theory. It is the interaction
between market actors that provides the
market with its central mechanism.
However, the use of interaction in this
context has been criticized as being too
restricted, or too “thin”, with too much
emphasis being placed on price alone
(Swedberg 1994). One exception is in
studies of business-to-business markets
where there have been attempts to find
a more multidimensional, or a “thicker”
way to describe and characterize
interaction by introducing the idea of
business relationships. In this paper we
will try to build on this research in order
to identify some of the key
characteristics of business interaction in
order to raise a number of research
issues, which we think will have to be
approached in the future, in IMP
research and elsewhere.
2. The Imp Group And Interaction
The IMP Group started out thirty
years ago by making a number of
challenges to the views that prevailed at
that time about how suppliers and
customers behave in business-to-
business markets and to how these
activities were conventionally examined
by economists and others. In retrospect,
these challenges can be combined into
two: Firstly, a challenge to ideas on the
structure of business and secondly, a
challenge to ideas on the process of
business. In this article we will revisit
these challenges as a starting point for a
discussion of some of major
weaknesses in existing research. In this
5
discussion we will not make explicit
references to research within the IMP-
tradition, simply because there would be
too many of them. The IMP webpage
gives a good starting point for all those
who are unfamiliar with this research.
However, we will make references to
important related fields.
2.1 The Challenge to Structure
The first challenge of the IMP
research was to the prevailing idea that
the structure of the business world is
comprised of companies that are more
or less independent of each other and
which are each able to build and
execute their own strategy. Instead, we
suggested that an alternative view of an
economic world consisting of networks
of inter-connected relationships between
interdependent companies could
provide useful insights. Much of the
work of the group has been concerned
with examining this structure and the
nature of these supposed relationships
between individual companies and the
ways in which they may form part of
wider networks. This work suggested
that business relationships comprise a
dimension of the dealings between
companies that transcends the actions
and characteristics of individual
companies in both time and space. The
idea of business relationships also
suggests that we cannot make sense of
what happens in business by examining
single transactions, as if they take place
in isolation. Nor can we confine our
attention to the single relationship of
which these transactions form part. Nor
can we aggregate those transactions or
relationships as if they were part of a
generalized and anonymous collectivity
that is conventionally called a “market”.
Instead, we must face the more complex
reality of a network that consists of
individually significant interdependent
companies and the particular, but
interconnected relationships between
them.
The idea that business relation-
The IMP Journal Volume 1, number 1
ships may be important has become
widely recognized by many managers
and business academics. However, this
recognition has frequently led to
relationships to be some sort of
managerial approach or technique that
is currently available for managers, but
which may be applied or not, at their
discretion. This contrasts with the view
in the IMP research where business
relationships are neither a technique,
nor are they owned or controlled by a
single company, but are in some way an
intrinsic part of the empirical reality of
business.
2.2 The Challenge to Process
The second challenge of the IMP
Group was to the predominant idea that
the process of business consists of the
independent actions of individual
companies, directed towards a view companies as if they lived in a
generalised group of “customers”,
“suppliers” or “competitors” and
intended to have an effect on that group
as a whole. In contrast, we observed
that the process of business is one of
interaction that takes place within
business relationships between
individually recognized, inter-dependent
actors and which has particular
outcomes for each of those involved.
The word “interaction” is now
frequently used in academic discussions
about business. There have been many
papers that refer to interaction, or to its
apparent outcomes, or to the
implications that it may have for
business management. But there have
been only limited attempts to examine
the characteristics and dimensions of
interaction itself in an economic setting.
We are still a long way from having a
clear understanding of the process of
interaction from an economic
perspective. We even lack an agenda
of issues and problems that need to be
addressed in order to develop such an
understanding. The lack of attention to
the nature of interaction is unfortunate,
as during the past twenty-five years
6
there have been systematic changes in
the empirical world of business that
have made interaction more important1.
Increasing technological intensity and
the associated pressures of cost have
led companies to become more
specialized and hence more inter-
dependent with each other. This
increasing interdependence has led to
ever-more complex interactions,
facilitated by improved communications
between companies with an ever wider
variety of resources and ways of
operating.
Despite these developments,
neither the idea that interaction is the
predominant business process, nor the
implications of ubiquitous interaction for
the practice of management seem to
have been widely accepted. Managers,
consultants and academics still seem to
world in which they are free to take
independent action. Hence, the aim of
this paper is to build on some of the
earlier ideas on business interaction and
its role in relationships and networks
and to try to move one stage further
towards a theoretical framework for
examining interaction as a useful
metaphor for economic activity. We will
do this by identifying some of the key
problems that we believe that we face in
trying to understand interaction in an
economic world.
3. Key Problems In Understanding
Interaction
The interaction that concerns us
here deals with economic matters and it
takes place between business
companies, each of which face different
problems and which have different
1 For example, the consultants Mckinsey estimate that
in today’s economy more than 80% of jobs involve
participating in interactions rather than extracting raw
materials or making finished goods (BC Johnson, JM
Manyika and LA Yee, The Next Revolution in
Interactions. Mckinsey Quarterly, 9th December, No 4,
2005.
The IMP Journal Volume 1, number 1
goals. Interaction isn’t just a set of
conversations that lead to some abstract
agreement. Nor is it something that
takes place alongside “real” business.
Interaction has a substantial and
physical form. Interaction does include
interpersonal communication. But
companies also interact through the
delivery of physical products and
services, information and payments and
also through more one-sided
observations. All interaction has
specific meanings for those involved
and for those affected by it. All
subsequent interaction will be based on
these interpretations of that meaning by
all of those who are affected by it. All
interaction is concerned with the
physical world. The economic effects of
interaction appear in the physical world
and the outcomes of interaction are
within the constraints of that physical
world. Interaction can be seen as the
interplay between different actors, but
also as the interplay between the
abstract ideas of those actors and the
physical constraints that surround them.
In this way, interaction provides the link
between technology and economy.
In this paper we use earlier IMP
research to suggest that there are at
least five related issues in interaction
that may help to provide a key to
understanding it. These five issues are
embedded in interaction and have to be
handled by those who are involved in it.
The issues provide important starting
points for theoretical and empirical
examination of business interaction.
Also, because of our limited
understanding of interaction, these
issues each constitute a key research
problem that is worthy of future
attention. Finally, we suggest that these
five issues and the connections between
them may also provide insight into some
of the structural aspects of business that
should continue to concern us.
The five issues have different
starting points. One starts from the
perspective of the single actor and its
7
“subjective interpretation” of its
interactions and of the world around it.
Another issue starts from the interaction
between two or more actors and is
concerned with the issue of “jointness”.
A third issue has its basis in the
surrounding structure and is about
“interdependencies” between actors. A
fourth issue is concerned with the
consequences of interdependencies and
interaction and is termed “relativity”. The
fifth is the most basic issue in interaction
and the one with which we will start.
This is “time”. These five issues seem
to us to be at the core of what we have
been struggling to understand during the
last thirty years. Of course the issues
are not new and we are in this paper
extensively building on the work of all
other IMP researchers who have been
struggling with these or similar ideas in
the past.
4. Time
Time is the first and probably
most important issue when analyzing
interaction. Time comprises a major
problem for all of those involved in
interaction, whether as participants or as
researchers. Time largely defines the
nature of interaction as a process in
which sequential events are related to
each other. History matters in interaction
and so do future expectations. In fact,
interaction is difficult to delimit in time. It
has no easily identifiable beginning or
end. The interaction that takes place
between single actors at any one time
as well as the characteristics of the
actors themselves are the outcome of
their previous interactions, as well as of
their current interactions with others and
their anticipation of future interactions.
No matter when or where we look at
interaction, what we see is the
continuation of things from before. This
applies just as much to the interactions
surrounding the start up of an
apparently entirely new company as it
does to the interactions involved in the
The IMP Journal Volume 1, number 1
latest delivery of a continuously
purchased component to a long-
established customer.
One important consequence of
the importance of time in interaction is
that it is difficult to suggest that there
can be such a thing as a new network. If
we observe a network for the first time,
then what we are actually doing is
isolating part of a pre-existing and wider
network. Similarly, a new actor or newly
developed relationships do not create a
new network. Instead, new actors and
new relationships always emerge from
something that pre-exists them and
there is always a history behind them.
Each new actor or relationship is always
related to others that already exist. A
new actor will have some, but probably
a rather limited effect on the existing
network. The new actor’s interactions
with others will be affected by and will
affect the continuing and future
interactions of those around it. A useful
analogy here is of the introduction of a
new product into a supermarket. The
supermarket is not constructed around
the new product, nor is there empty
shelf-space waiting for it. But other
existing products will have to move
sideways to accommodate it, although
the effect on each one may be small.
Some of these existing products may
benefit and others may lose because of
the entry of the new product. In the
same way a new actor’s interactions will
affect those around it, but they will be
built upon the previous experiences of
those involved in the interaction and
those of the others around it. Each actor
brings its own baggage from the past.
This phenomenon is familiar from
technological studies where path-
dependence has been identified as a
key issue, but here that path-
dependence is within a wider context.
Path dependence means that
researchers need always to look behind
current patterns of interaction to what
has preceded them and framed their
evolution.
8
In the same way, it is difficult to
identify a final end for an interaction.
Each interaction will affect subsequent
interactions between the participants
and others. But the problem of
predicting these future directions is
multiplied because the characteristics of
each interaction can affect that
subsequent interaction in multiple
directions.
Another problem for the
researcher studying interaction is that it
is not evenly distributed over time.
Interaction is likely to be “lumpy”, so that
there are periods of more intense
episodes of interaction than others. It is
also difficult to characterize what defines
a single “episode” of interaction or to
find a neat way to identify its boundaries
or when it starts or finishes. There is
likely to be an important element of
interdependence over time between
single episodes, but these episodes
may also be very important to
understand as units in themselves.
Many of the preoccupations of
managers are in trying to manage
effectively within a particular episode,
whether that episode is defined in the
form of a meeting, an order, a delivery
or a financial transfer. One way for
researchers to deal with “lumpy”
interaction is to identify “significant
events” or “critical incidents”. This
approach clearly provides historical
information, but has similar boundary
problems to those of “episodes”. More
importantly, the idea of critical incidents
also involves assumptions about the
causality of outcomes that are likely to
be unwarranted in a situation of
complex, multi-party interaction.
The interaction between two
actors will evolve over time through
processes of learning and experience.
But interaction at any one point in time
is not pre-determined by what has
happened before. Interaction will also be
affected by the concerns or problems of
the actors as they arise and by
influences on them from their parallel
The IMP Journal Volume 1, number 1
interactions or those from elsewhere in
the network. However, an interaction
episode is not just an island of
significance in a sea of ordinariness, if
for no other reason than that its
significance will be impossible to assess
at the time. Most interaction episodes
are each relatively insignificant among
many others, such as deliveries,
payments, communications etc. These
episodes may be interrelated in an
obvious or in a confusing way, but taken
together they comprise the relationship
between the participants. A single
episode will affect each of those
involved in it differently. A single
episode is also likely to be interpreted
differently by each of them and by
others around them.
A series of episodes will in many
cases simply be continuous or “normal”,
such as a normal flow of orders, normal
terms of payment, normal products etc.
These episodes are part of everyday life
for those involved in them and existing
business relationships and routines play
an important role in providing a basic
structure to business activity. Most
interaction episodes are not critical
incidents. Many are not significant in
themselves at all, although each may
include some new element. But these
interaction episodes, together with
various actors’ interpretations of them,
define the life of the individual or
corporate actor.
Each single element of newness
in an interaction episode simultaneously
restricts and expands the opportunities
for future interactions both of the
participants in it and of others. In fact
each single element of newness may
have multiple sequential effects in many
directions. These multiple processes of
restriction and expansion produce at
least two problems for both actors and
researchers:
The first problem is that it is
difficult to make sense of these
alternative possible outcomes. Thus,
actors may not be aware of how their
9
options may have been broadened or
narrowed by these outcomes. Similarly,
researchers will find that the multiplicity
of simultaneous interactions, both
between and outside of any dyad make
it effectively impossible to construct
distinct causal links between particular
episodes and outcomes in interaction.
The second problem for the
actor is how to anticipate and cope with
the chain of events in interaction. It is
difficult for both actors and researchers
to understand interaction because
things happen in a causal, but unknown
sequence. Also, each actor will have a
view of a preferred or probable
sequence and will interact today with an
eye on subsequent interaction in the
future. These subjectively preferred or
predicted sequences mean that a
researcher seeking to explain interaction
over time will have to be more interested
in the evolving views of the actors,
rather than attempting to model the
sequence of cause and effect in a
supposedly “objective” way.
The problematic characteristics
of interaction over time and of the ways
that subsequent interaction episodes
are related to each other have been
conceptualized in several different ways:
The easiest way is to assume
that there is no effect between episodes
by assuming that each episode or
exchange is independent of all other
episodes, as is done within transaction-
costs economics. On this basis, each
interaction episode may be analysed
and managed separately. The
assumption of independent exchange
situations means that the best total
result for actor will appear if each
situation in itself is handled in the best
way (with the lowest transaction costs).
An alternative approach is to
consider that episodes are related
together over time in a process of
development that comprises a life cycle
consisting of a number of different
stages. This approach sees episodes
as part of a process of learning,
The IMP Journal Volume 1, number 1
adaptation, commitment and distance-
reduction over time. However, this and
similar stage models tend to infer that
the development of relationships is a
deterministic, unidirectional and linear
process. This does not relate well to the
much more complex empirical reality of
change, decay or re-development.
A third way is to assume that the
process of interaction over time has a
cumulative effect. One way of doing this
is to consider the economics of
interaction over time as an investment
process. In this interpretation, the
companies are considered to be
investing in each other within their
relationship. One consequence of an
investment view of interaction over time
is that these experiences and processes
must be taken into account when the
value of a company is assessed. An
investment view also indicates that a
company’s activities should be steered
in ways that develop and capitalize on
these investments.
Yet another approach to
understanding the process of interaction
over time is to take a longer-term
historical view. In this approach, by
using contemporary records it is
possible to examine the commonalities
within interaction that may only become
apparent over an extended period.
This last example can be used
as a starting point for giving some
connections to other research fields that
struggle with the time dimension. Some
of those that also have been used in
IMP research are those dealing with
history such as the history of technology
(i.e Hughes 1983, Lindqvist 1984),
history of science (i.e. Galison 1997),
science in action (Latour 1987, 1996,
Law 1994) and economic history
(Rosenberg 1994 and David 1985).
Another type of research that has been
used is those studies where change,
growth or evolution have been central
such as Nelson & Winter (1982),
Pasinetti (1981), Penrose (1959),
Nonaka (1994), and Kauffman (1995). A
10
third type is organizational studies
dealing, for example, with organizational
learning (such as March 1991 and
Powell 1998).
However, it is clear that if time is
an important aspect of interaction, then
we do not have a well developed model
for handling it. However, we do have a
number of issues to face. These issues
centre on the need for the systematic
study of the precursors of observable
interaction episodes and of the
sequences of subsequent episodes as
observed and interpreted by
participants. Furthermore, we have to
find ways to link the interactions to
technological and organizational
changes as well as to how strategies
are formed and developed by and
between companies.
5. Interdependence
The interdependencies between
actors form the second issue when
trying to understand interaction. These
interdependencies are partly, but not
solely related to time. Thus, the
development and change of
interdependencies are an important
consequence of interaction over time.
Interdependencies are also an important
precursor of interaction and are an
inherent characteristic of the context of
interaction. Pre-existing interdepen-
dencies are built into the prevailing
technological and economical structure
in which companies have specialized in
performing particular activities. These
interdependencies, in turn are parts of
larger interacted patterns of activities. In
this way, interdependencies provide an
important link between the technological
and economic dimensions in the total
structure. Different technological
structures will include different types of
interdependencies and will have
different consequences for the internal
organization of actors as well as for the
business model, which is employed
within them. There are interesting
The IMP Journal Volume 1, number 1
connections between these issues and
studies in the organizational and social
consequences of technological
interdependencies (Thompson 1967,
Scott 1992, Bijker 1997), the strategic
consequences of technological
interdependencies (Stabel & Fjeldstad
1998), the logistical consequences of
technological interdependencies
(Håkansson & Persson 2004, Omta
2004), effects on the production
structure ( Rogers & Larsen 1984,
Saxenian 1991, Storper 1997, Womack
et al 1990), effects on product
development (von Hippel 1998) and the
consequences for economic theory
(Alchian & Demsetz 1972, Richardson
1972, Dosi et al 1988, Dosi 1997).
Resources are at the heart of
interdependence. The interdepen-
dencies between actors relate closely to
the fact that their respective resources
are not isolated but are related to each
other. This has at least two aspects:
Firstly, an actor’s own physical,
financial, human and technological
resources form the basis for its
operations. But it is the interactions of
that actor that provide access to and
activate the actor’s resources. It is only
through interaction that the actor’s
resources can be transformed into
capabilities that are of value to others
and hence form a basis for
interdependence. Indeed, capabilities
can only realistically be said to exist
interactively. Secondly, it is through
interaction that the existing resources of
other actors can be activated as
counterparts to an actor’s own
resources. Interaction may lead the
resources of the two actors to “co-
evolve” and be added to by further
investment. In this way, their resources
may become even more useful to the
actors as their relationship develops and
the two actors become more
interdependent.
Capabilities are more properly
regarded as characteristics of
relationships rather than of the actors
11
involved in them. Thus, the value and
usefulness of an actor’s internal
resources will be different under the
specific interdependencies of particular
relationships. Relationships are a
powerful multiplier of the respective
internal resources of the participants.
Together, the internal resources and
relationships of different actors create
their capabilities, their interdepen-
dencies and their capacities to influence
each other.
The problems of actors, whether
positive or negative are drivers for
interaction. Most problems for an actor
arise from the juxtaposition of its
resources and its interactions. Actors’
problems lead them to interact with
others to gain access to the resources
of these others. In this way, companies
that seek to cope with their own
problems have to do so by coping with
those of their counterparts.
Interdependencies are an
inherent characteristic of interacted
structures. The complexity of these
structures and their evolution over time
and distance may mean that actors are
not aware of the existence of some
interdependencies nor may they
appreciate their implications.
Dependence on others is often
considered as a negative consequence
of interaction. This is easy to understand
within the classical market view. Actors
may often seek to avoid dependence on
others. But in an interacted world, actors
have to accept their dependence on
others, in order to cope with their own
problems. In fact, an actor is likely to
seek dependence on others as a way of
minimizing the need to invest in its own
resources. At the same time, the actor’s
counterparts become dependent on it
for coping with their particular problems.
These interdependencies provide a way
for both actors together to capitalize on
the specific investments that they make
in their own and in each other’s
resources.
The IMP Journal Volume 1, number 1
The interdependencies in an
actor’s existing relationships simultan-
eously empower and constrain its ability
to achieve change and growth. Thus an
actor’s dependence on the resources
and the problems of others increases its
freedom to invest its own resources in
more productive areas within that
relationship or elsewhere and provide
the basis for it to develop in new
directions. But at the same time, an
actor’s existing relationships restrict its
freedom to act in the directions of its
own choice and require it to invest
resources in interaction within its
existing relationships. A key aspect of
business interaction is the building,
managing and exploitation of
interdependencies over time. But
interdependencies seem to create both
problems and opportunities for actors.
The difficulty for researchers as
well as managers is that we have few if
any research tools for analyzing this
multifaceted aspect of economic reality.
But again, we do have a number of
research issues. These centre on the
need to understand the apparent
precursors and the evolution of
interdependencies over time, how these
interdependencies are built into the
economic and business models that
companies use and how they are part of
and built on in the wider network.
6. Relativity
One obvious characteristic of an
interactive world that includes time and
interdependencies is that it is relative.
Actors employ their resources differently
in interaction with different counterparts
and develop their interdependencies
differently with each of them. We have
also argued, above that the value of an
actor’s resources is different, depending
on the particular relationships in which
they are employed. This relativity
applies to everything when business is
conducted in a network. Thus we cannot
describe or understand a single
12
interaction in isolation, but only in
relation to others that exist in parallel or
in sequence with it. The importance of
relativity in interaction raises two
important issues, as follows:
The first issue concerns what are
the appropriate dimensions of inter-
action in a particular setting. A
consequence of relativity is that there
are no simple or stable rules to enable
us to determine what interaction is
appropriate. What is good in one
situation may not work in another and
what is right for one company may be
wrong for others. But even worse, what
is right in the short run might be wrong
in the long run and what is perceived in
a positive way by one counterpart might
later be changed to a negative view.
Furthermore, the appropriateness of any
interaction will be viewed differently by
different actors, depending on their
relative positions in the network. But
individual actors have to survive and
succeed in this world of relative
interdependencies. Because of this, it is
likely that actors will seek some stability
in order to handle these relative
interdependencies economically.
However, this stability is unlikely to be
fixed over time and the direction of the
change of interdependencies becomes
a key issue for actors. This direction will
be the outcome of all the interactions
that take place and hence relativity is a
result of those interactions.
The second issue of relativity
concerns the ways in which the
dimensions of interaction change over
time. Interaction always involves relative
movement over time. Thus, some
companies may systematically adapt
towards each other and away from
others through their interactions,
resource investment and increased
interdependence. But at the same time
that a particular company may be
moving toward some counterparts those
counterpart companies are also moving
in relation to others, who also are
moving. It is a case of movements within
The IMP Journal Volume 1, number 1
a moving world! This relative movement
is apparent in all development
processes involved in the interaction
between companies. Consequently,
relativity is a key aspect of interaction
when we are concerned with the
possibilities if particular counterparts
adapt towards each other. This is part
of the obvious question of who an actor
should prioritize in its interactions and
who it should not?
Interaction creates a relative and
dynamic structure over time where
actors are related to particular others
who in turn are also related to particular
others. In this way, every actor in a
network has a specific position and its
interactions reflect this. In the short term
these positions provides the multiple
and relative contexts for interaction. In
the long term, continuing interactions
successively change these positions
and this structure.
Dynamic interaction between
single actors and how this relates to the
development of the total structure of a
network is not a theme that has been
focused in many areas of research.
Exceptions to this are studies of artificial
life which in turn are related to ideas on
the edge of chaos (Waldrop 1992).
Others exceptions are in some of the
innovation studies such as Van de Ven
et al 1999.
Again, there is an obvious lack of
theoretical models and concepts for
examining relativity in an economic
setting. But there are a number of
interesting research questions about the
connection between relativity and
specific interactions and about the
implications for actors of multiple
relationships. The most exciting issue
might be research into the possibilities
for interacting companies to create a
specific structure based on an economic
logic that is positive for them.
7. Jointness
13
Jointness is probably one of the
key elements in an interactive world.
The combination of interdependencies
and relativity creates opportunities over
time for companies to take part in
directed, collective or joint interaction
with specific others. This jointness may
be conscious or not. An important
manifestation of jointness is that when
companies interact with each other, their
individual development will be affected
by that interaction, rather than simply be
in line with their own intentions. Another
aspect of jointness is that the
interactions of any two companies
together will be affected by their
respective interactions with third parties.
Jointness reduces the importance of an
actor’s own intentions and increases the
importance of the combined intentions
of interacting parties in relation to
others. Jointness provides important
opportunities for the participants in
interaction, but it is also important to
note that these opportunities can always
be disregarded by those involved.
Suppose two actors start to
interact with each other. In order for this
interaction to develop, some explicit or
implicit “joint” agreement is required for
each to do something to or for the other.
This may include the agreement to
contribute, exchange or simply to
communicate. This interaction is both
joint and relative. Each actor gives the
other time and attention that it cannot
therefore devote elsewhere. Their
interaction will be based on the hope by
both of the actors that together they may
achieve something of value to
themselves in the future in relation to
the world around them. Thus jointness is
related to the actors’ willingness to
continue to interact over time. If their
interest in each other continues then
their interaction is likely to develop many
aspects of jointness in investment,
commitment and intentions. This does
not mean that interaction is a
deterministic process leading to ever
more “closeness”. Each of the actors will
The IMP Journal Volume 1, number 1
also be interacting with others in parallel
and each will therefore retain its own
uniqueness. However, over time the
evolving jointness between the actors
may make it increasingly difficult to
identify a clear boundary between the
two actors as independent entities.
Jointness is one reason why
interaction may appear to be dyadic, but
is unlikely to be so. The interaction
between two actors is related to
interactions with others and it may be
influenced, mediated or facilitated by
these others. At the simplest level, any
actor is unlikely to have the resources
by itself to interact with others, let alone
solve their problems. An actor depends
on the resources of a counterpart and of
others to which it is related. In this way,
all interaction is joint. This is seen
clearly in the context of a so-called
distribution channel or supply-chain. In
both of these cases it is the
interdependencies and interaction
between the actors, rather than the
plans or control of any one of them that
jointly allow goods and services to flow
between them.
The existence of jointness
fundamentally questions the
meaningfulness of analyzing a single
actor alone or a single action in itself.
We cannot separate and isolate any
action from the corresponding reactions
of counterparts. All are part of the
interaction between multiple actors.
Similarly, an actor’s resources cannot
be defined by what it is inside it. An
actor exists in the context of its network
and is defined by its relationships and
through its interactions in that network.
An actor’s interactions effectively
determine its characteristics, its
capabilities, its scope, its freedoms, its
obligations and its restrictions. Each
actor and each interaction will depend
on and be based on the actor’s own
resources and those of others who
stand with it, behind it and against it.
Interaction is based on the previous
experience of all those involved. It is
14
also based on their anticipation of the
reactions of counterparts and hence it
depends on the resources of those
counterparts.
A frequent manifestation of
jointness is mutuality. Mutuality occurs
when common aims are explicitly
pursued by the interacting parties.
Jointness may also involve reciprocity,
in which activities that are
conventionally considered to be
individual, such as design or
development are actually carried out in
cooperation between companies.
However, it is important to emphasise
that interaction is always joint, whether
or not there is tacit or explicit
agreement, cooperation, or whether it is
against the wishes of others or without
their knowledge.
The importance of cooperation
and different suggestions to how it can
develop has been discussed in other
marketing studies such as Achrol 1991
and Achrol and Kotler 1999, in general
network based studies such as Castells
2000, Jarillo 1988, and Freeman 1991,
in strategic alliance studies such as
Gulati 1998, Gulati et al 2000 and
Spekman et al 2000, interorganizational
studies (Powell 19990, Powell et al
1996) and can also be related to
research in political science and game
theory such as Axelrod (1984), but also
to research based on social network
studies (Nohria & Eccles 1991, Podolny
1994).
From a research point of view
we need better ways to conceptualize
jointness. In one network model we tried
to examine the jointness of interaction
by analyzing the actor bonds, activity
links and resource ties between
companies. However, this can only be
seen as a first step and much is still
unexplored.
8. Subjective Interpretation
Subjective interpretation is the
final issue that we identify in
The IMP Journal Volume 1, number 1
characterizing interaction. Interpretation
is an outcome of the bounded rationality
of an individual actor (Simon 1957,
Cyert & March 1963). At the simplest
level, subjective interpretation means
that the actions of actors will be based
on their individual interpretation of the
actions of others and of the world
around them. One important
consequence of this for the researcher
is that subjective interpretations
separate the reasons for actions from
their effects. These effects will relate
more to how actions are interpreted by
actors than to the original reasons for
those actions. Interpretation means that
the subjective dimension becomes
important, as there will be variation
between the interpretations of different
actors. Subjective interpretations are not
random but are a consequence of
actors’ previous experiences of actions,
re-actions and re-reactions.
Interaction is certainly not all
planned or even conscious. But each
actor will consciously or unconsciously
interpret the meaning of their own
interactions and those of others
elsewhere in the network. Their own
subsequent interactions will be based
on that interpretation. An actor’s
interpretation of a counterpart’s action
will almost certainly be different from the
interpretation of the counterpart itself.
Both interpretations may be different
from how the counterpart would like to
be interpreted. There will also be
multiple and different interpretations
within the same company and between
different actors in the wider network.
The interpretation of interaction will be
based on a number of factors, including
the actor’s previous experience and its
view of the multiple contexts that
surround the interaction. It is these
interpretations rather than “reality” that
are the basis for interaction. This will be
the case even though in practice, these
interpretations are unlikely to be
articulated by the actors. It is also the
case that an actor doesn’t need to have
15
a view with any particular level of
completeness in order to interact.
For the researcher, there is likely
to be an interesting and important
variation in the subjective interpretations
of different actors (including the
researcher his self) in such things as
how far and how much each actor sees
and in how each actor sees itself. For
example, a small shopkeeper may only
have a narrow view of the companies in
immediate geographical proximity to
him, such as his current customers,
competing small shopkeepers in the
same street and perhaps one or two
local wholesalers. This shopkeeper may
consider himself as a hub of influence in
the retail world. Another shopkeeper in
the same street may have a much wider
view of the world that includes other
types of retailers in the town, the local
government, mail order companies,
websites and a much wider range of
suppliers. This retailer may have a much
more modest view of his influence and
centrality in the network. An interesting
issue for the researcher is how useful
are different types of views. For
example, there is no reason to believe
that a wider view is necessarily better
from the perspective of an actor’s
economic performance. All views are
inevitably incomplete. Thus an actor
may have a view that is limited to a few
other actors, but it may be able to
benefit from their wider perspective of
the surrounding network. This actor may
be better equipped to cope with the
network than an actor who attempts but
inevitably fails to construct a “complete”
picture for itself. Using the views of
others is of course the approach
adopted by companies that work with
retail distributors or overseas agents in
order to capitalize on their knowledge of
the network.
There are two main ways that
subjective interpretations are formed.
One is through business experience,
where managers successively learn to
deal with each other. The other is
The IMP Journal Volume 1, number 1
through theoretical metaphors or
stereotypes such as “markets”,
“clusters”, “alliances”, “industry”, “supply
chain”, “distribution channel”, “network”
etc. The more the same type of
stereotype dominates in a particular
field, the more likely are companies to
interact in accordance with the
stereotype, or some “approved” way of
working. However, these stereotypes
inevitably involve simplifications of
reality. Over time it is likely that small
variations in the views and approach of
actual or potential participants will lead
to wider changes in approach amongst
many participants in the network.
We have previously suggested
that its view of the surrounding network
can be referred to as an actor’s “network
picture”. A network picture is a
descriptive construct that can be used
by researchers to encompass a
particular actor’s view of the surrounding
network and its scale, structure and
interactions, as well as the evaluative
dimensions it applies to them. The term
network horizon has been used to
indicate how wide or all-embracing a
picture is. The idea of network picture
builds on earlier sense-making and
framing concepts such as those of
Weick (1995), Czarniawska & Joergers
(1996).
Network pictures introduce a
systematic bias into the views of actors
on which their interaction is based.
Network pictures are not neutral and
may have a strong normative element.
This may include an actor’s
idiosyncratic, partial and biased view of
its own actual and “rightful” position in
the network. A picture is likely to be
based on an actor’s view of its own self
interest, or the interests of others, or of
the network as a whole. A picture will
include a view of what the network as a
whole or individual actors within it
actually do and should do. A network
picture can form the basis for a blueprint
of how an actor plans to “build” a
network, whether or not that plan is
16
feasible or realistic. Examples include
the building and management of a
supposed “supply network”, or the
attempts by an actor to become the
“hub” of what it sees as its own
individualized network, irrespective of
the limitations or unreality of such a
view.
9. Some Implications Of The Idea Of
Interaction
This paper was prompted by the
realization that interaction is frequently
talked about, or at least mentioned in
the IMP literature and elsewhere, but
that the nature of interaction and its
implications for a view of business
activity are less commonly discussed.
This is despite the fact that interaction
seems to be at the heart of the
processes of business and despite of
the limits to our understanding of it.
In this paper we have suggested
that time, interdependence, relativity,
jointness and subjective interpretations
are important issues for researchers in
trying to make sense of interaction
between business companies. We have
also suggested that the limits to our
understanding of these issues and their
interconnections inhibit our
understanding of interaction. A useful
illustration of these limits may be given
by trying to apply them to the key
phenomena of business relationships.
The term “relationship” is widely
and loosely used in business theory and
practice to describe a wide range of
different states between having some
contact to being “close friends” or
“strategic partners”. But we have argued
in this paper that interaction is relative.
So on that basis, a useful starting point
to understanding business relationships
is to say that all of the actors in a
network have relations with each other,
in the sense that they are directly or
indirectly related to these others. Thus
in the business networks with which we
are concerned, the interactions of an
The IMP Journal Volume 1, number 1
actor are relative to specific others and
relative to those around it. Relativity is
an outcome of the varying
interdependencies that exist between
different actors. These
interdependencies provide a structure
within which interaction takes place. But
interdependencies are also an outcome
of the relative interaction between
actors. Interaction is based on the
subjective interpretations of actors.
Because of this, relativity can often exist
without being necessarily identified as
such by the participants. Relativity may
not be identified because of limitations
in an actor’s network picture and also
because it has developed over time and
at a distance. Hence it may be taken for
granted as a part of the overall jointness
that comprises the normal structure of
business. Jointness pervades the views
of actors of their own and others
resources and their interactions. These
interactions are also conditioned by the
actors’ interpretations of what has
happened in the past and by what they
want to happen in the future.
Companies can choose if and
how they want to do something
particular relative to a specific
counterpart. But they cannot choose
whether or not to have relations with
others, including with their suppliers and
customers. However, they can choose
the particular content they wish to have
in those relations. However, the actual
content of those relations will be
affected by many actors. But it is
beyond the absolute control of any of
them, whether the company itself, its
immediate counterparts or of others to
which it is related, but with whom it does
not interact directly.
Thus on the basis of this
analysis, a business relationship is a
particular manifestation of the relativity
that is a universal characteristic of
business networks. Most obviously, a
business relationship is likely to have
some physical manifestation that makes
relativity explicit. This is likely to be
17
some specific problems of each of the
counterparts to which overt attention is
applied employing the resources of both
of the companies. We would also
suggest that the term relationship
should refer to situations where there is
substantial relativity, involving a number
of parallel and sequentially related
interactions and interdependencies that
have developed over time. But we
should bear in mind that many of these
interactions may not in themselves
appear significant or worthy of attention
to the participants or to the researcher.
This is because they form part of
established interdependencies and
hence are automatic. Many interactions
in a relationship may be marginal. But
slight variations in these may be
significant or be seen to be significant at
some later time, or if they are additive,
they will affect the relationship over
time. A pattern of interaction may be
observable in a relationship and
episodes within it may be standardized
or formalized, more so than between
relatedness elsewhere. In this way, the
episodes within a relationship may
cease to be considered as separate
entities in themselves. We would also
suggest that a relationship will be
identifiable by others, even if not by the
participants as possessing significant
jointness, whether overt or covert. A
relationship may also represent a
significant proportion of the
interdependencies of an actor and so
will affect its other interactions. Finally, a
relationship may also be likely to have
been around for some time and is a
significant element of the company’s
history and experience.
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The IMP Journal Volume 1, number 1 21

The Relationship Between Technical And

Organisational Interfaces In Product Development

Anna Dubois* and Luis Araujo **

* Industrial Marketing Division, Department of Technology Management and Economics, Chalmers University of
Technology, S - 412 96 Göteborg, Sweden, e-mail : anndu@mot.chalmers.se

** Department of Marketing, Lancaster University Management School, Lancaster LA1 4YX, U.K., e-mail:
L.Araujo@Lancaster.ac.uk

Acknowledgments: We gratefully acknowledge the cooperation of Fredrik von Corswant who allowed us to use
empirical material from his PhD thesis in this paper. We are also grateful for comments and suggestions from Analisa
Tunisini, Asta Salmi and participants at the 1st IMP Journal Seminar in Holmsbu (June 2005). The usual disclaimers
apply.

Abstract

The purpose of this paper is to look at product development as a distributed activity, embedded in complex
network of relationships combining technical and organizational interdependencies. Rather than privileging
the role of lead firms as systems integrators in hierarchical supply networks, we argue that interactions at
the level of firms, dyadic relationships and networks are more distributed, non-hierarchical and unpredictable
in their scope and consequences than conventionally assumed. The paper introduces an empirical case,
embedded in a larger product development project undertook by Scania trucks, to demonstrate the
interaction between technical and organizational interfaces at the level of firms, relationships and networks
of connected relationships.

Keywords: Distributed activities, networks, organisational interdependencies, product development,

technical interdependencies.

relationship and the network of

1. Introduction connected relationships. In an insightful
remark, Pavitt (1998) observed that the
This paper examines the Smithian process of division of labour
interaction between technical and has led to products and firms being
organisational interfaces in product based on an increasingly wide range of
development at multiple levels of technologies. In advanced economies,
analysis, namely the firm, the dyadic Pavitt argued, innovation failures can
The IMP Journal Volume 1, number 1
more often be attributed to deficiencies
in organisation, namely coordination and
control than on the absence of
technological knowledge. This paper
addresses one of Pavitt’s concerns: how
do technical and organisational
interfaces interact in real time during the
development of new products?
We use the term interface to
refer to the interconnection between two
or more entities at a shared boundary.
Our focus is thus on technical interfaces
(e.g. how to connect a gear box to an
engine?), organisational interfaces (e.g.
how do different teams coordinate their
activities?) and their interaction. During
product development projects, the link
between product and organisational
architectures has been investigated
mainly from the product side – i.e. how
do product architectures influence the
division of labour and interactions
amongst development teams? However,
existing product architectures leave
imprints on resource structures and
modes of organising which, in turn,
influence subsequent product
development efforts at both the
technical and organisational levels (von
Corswant, 2003). In summary, the
relationship between technical and
organisational architectures as they
occur in product development projects
requires further investigation.
The paper is organised as
follows: in the first section we discuss
the literature on technology and
organisation and propose a broad
framework for understanding their
interaction at multiple levels. In the
second section we focus on technical
and organisational interfaces before
introducing our empirical case in the
third section. Our case deals with the
development of a new truck by Scania
and the role of one its suppliers, Dayco
in the development of a low-tech but
essential component for the new truck
model. In the fourth and final section we
analyse the empirical material before
22
setting out a number of conclusions in
the final section.
2. The Interaction Between
Technology And Organisation
This relationship between
technology and organisation has been a
pervasive theme in the innovation
literature. However, many of these
approaches have taken a static and
unidirectional view of this interaction.
One such example is provided by
transaction cost economics (TCE). In
TCE the role of technologically
separable interfaces is fundamental to
the choice of a governance structure
(Williamson, 1981). TCE assumes that
for a given state of technological
knowledge, separable interfaces
emerge between different stages of
production:
“A transaction may thus be said to occur
when goods or a service cross a
technologically separable interface. One
stage of processing or assembly activity
terminates and another one begins. […]
A well working interface like a well
working machine can be thought of as
one where these transfers occur
smoothly” (Williamson 1981, p. 1544).
Englander (1988) criticised
Williamson for this minimalist definition
and for downplaying the
interdependence between technology
and institutional design. Williamson
(1999, p. 1103) goes as far as
conceding that pre-existing specialised
investments made by the firm and its
suppliers with underutilised capacity can
have an important bearing on the choice
of governance structure. In this limited
sense, Williamson concedes that
technology influences organisation.
Baldwin and Clark (2003) take
Williamson’s approach one step further
by asking “where do transactions come
from?” Their reply is that transactions
can be located at the points in an
The IMP Journal Volume 1, number 1
activity chain where the cognitive
division of labour is greatest and the
mundane costs involved in setting up
transactions (standardising, counting,
measuring) are the lowest. If mundane
transaction costs are high, coordination
should take place through transfers
rather than transactions. Similarly, in
Richardson’s (1972) seminal
contribution, the choice of coordination
mode (firm, market or interfirm
cooperation) depends on the degree of
complementarity of activities.
Systematic close complementary of
activities will require hierarchy in case
activities make use of similar capabilities
and cooperation if dissimilar capabilities
are involved (Richardson, 1995).
Markets can be relied upon to
coordinate complementary but dissimilar
activities. Again, the degree of
complementarity of activities is
presumed known given the state of
technological knowledge.
More dynamic approaches seek
to distinguish between types of
innovation based on their impact upon
organisational arrangements. Teece’s
(1986) distinction between systemic and
autonomous innovation relies on the
extent to which an innovation can be
contained within one stage of an activity
chain or has an impact elsewhere in the
chain. Langlois and Robertson (1995)
use Teece’s notion of autonomous and
systemic innovation and extract
organisational implications based on the
notion of dynamic transaction costs,
defined as the real-time costs of
persuading, negotiating and teaching
outside suppliers. Systemic innovations
are best pursued under single
ownership whereas autonomous
innovations can be undertaken through
a distributed ownership regime and
market-based relations. The evolution of
dynamic transaction costs leads to shifts
in governance from firms to markets as
knowledge moves from tacit and
idiosyncratic to codified and public,
whilst product architecture evolves from
23
integral to modular. A new systemic
innovation will reverse this trend and
restart the cycle.
Most of the literature on this topic has
focused on the impact of product
architectures on organisational
structures at the level of the firm with
implications for how activities should be
organised inside the firm and supplier
relationships managed. Henderson and
Clarke (1990, p. 16) propose a
connection between product
architecture and an organisation’s
product development strategies,
communication channels and
information filters. Architectural
innovation often depends on introducing
new linkages in the way components
interface with each other and these can
be a source of unexpected
interdependencies. The fact that these
impacts have to be understood from the
vantage point of existing architectural
knowledge makes it all the more difficult
to appreciate their impact.
Sanchez and Mahoney (1996, p.
64) go one step further than Henderson
and Clark’s (1990) and suggest that:
“…although organisations design
products, it can also be argued that
products design organisations, because
the coordination tasks implicit in specific
product designs largely determine the
feasible organisational designs for
developing and producing those
products”. [emphasis in original]
Fine (1998) went further and
argued that consistency amongst
product, process and supply chain
architectures is necessary to improve
performance, a claim supported by
some empirical studies (Novak and
Eppinger, 2001; Randall and Ulrich,
2001). Langlois (2002, p. 32) suggests
that these arguments are:
“...a variant on what the mainstream
economics of organization has long
believed: production processes design
The IMP Journal Volume 1, number 1
organizations. If the production process
requires team production or call for
highly specific assets, a nonmodular
structure (“hierarchy”) is in order;
otherwise, a modular structure (“the
market”) is more appropriate”.
[emphasis in original]
Another stream of research has
questioned the notion that product and
organisational architectures should be
isomorphic. The interaction of
architectures at different levels (e.g.
firm, supplier relationships) introduces
some important asymmetries in these
connections (Mikkola, 2000; Brusoni
and Prencipe, 2001; Prencipe et al,
2003).
Brusoni and Prencipe (2001) use the
examples of the aircraft engine and
chemical industries to discuss the role of
lead manufacturers as systems
integrators. If the decomposition of
products into basic subsystems and
components ensures a clear-cut division
of labour and knowledge at the
component level, architectural
knowledge cannot necessarily be
embedded into the standardised
interfaces that connect these modules.
As Dosi et al (2003, p. 103) argue,
systems integration activities are crucial
in “…the persistent, imperfect efforts to
match the untidy dynamics of division of
operational labour, knowledge
accumulation and cross-corporate
division of competencies”.
Sosa et al (2004, p. 1677)
introduce the notion of product
ambiguity in the context of a
development project “…defined as the
absence of knowledge about design
variables and/or their interfaces, some
design interfaces are not foreseen at the
outset of the project and are only
discovered after design teams work on
the systems themselves”. As Sosa et al
(2004) illustrate, product-related
interdependencies and development
team interactions are often misaligned in
situations where past product
24
architectures defines project
organisation for the development of new
products. In summary, firms may need
to maintain and develop a wide range of
technological capabilities, including
investments in relationships with
suppliers and other actors, to deal with
unpredictable interdependencies as well
as evolving technical and organisational
interfaces (Prencipe, 2000; Araujo et al,
2003).
Brusoni et al (2001) see these
multi-technology, systems integration
firms as coordinators of loosely coupled
networks of suppliers of equipment,
components and specialised knowledge
that rely on other mechanisms for
accumulating and developing new
knowledge other than productive
activities. As Pavitt (2003, p. 81) notes,
in complex product fields it is important
to have capabilities to deal with
unforeseen interactions amongst system
components and to deal with uneven
rates of development amongst
components with potential implications
for the stability of architectures.
Sako (2003) examines the link between
product and organisational architecture
and suggests that instead of
organisational architectures being
shifted around product architectures,
existing organisational arrangements
constrain product architecture shifts.
When these shifts take place, they
introduce important disruptions in
capabilities, organisational structures
and supplier relations – e.g. firms with
highly integrated supply networks are
likely to resist shifts towards more
modular product architectures. Takeishi
and Fujimoto (2003, p. 274) study of
modularisation in the car industry
concluded that this process “…seems to
proceed with hierarchical changes in
each of the product, production and
interfirm systems in its own context and
with its own logic, and at the same time
evolving through dynamic interactions
amongst these multiple systems of
hierarchies”.
The IMP Journal Volume 1, number 1 25

In this paper we argue that the
relationship between technology and
organisation is less predictable and
manageable than most of the literature
reviewed thus far envisages. In order to
study these interactions, we propose to
shift the focus to the design of an
individual component embedded in a
broader technical system with a variety
of interfaces with other components. At
a higher level of analysis, we suggest
that the relationship between technology
and organisation has to be understood
at multiple levels: 1) the technical and
organisational interfaces within a firm; 2)
the technical and organisational
interfaces within dyadic relationships; 3)
the technical and organisational
interfaces in a network of connected
relationships.
Figure 1 illustrates these
different levels of analysis in which there
can be: (1) interplay between the two
interfaces within individual layers, and
(2) interplay between interfaces across
layers.
In the next section we will
elaborate on these notions before
proceeding to analyse our empirical
case.
3. Technical And Organisational
Interfaces
The concept of modularity has
become increasingly used as a means
of dealing with technical
interdependencies stretching across the
boundaries of firms, particularly in fast-
moving industries such as automotive
and electronics (Sako, 2003; Sturgeon,
2003; Takeishi and Fujimoto, 2003). The
key idea behind modularity is to match
technical and organisational interfaces
in a way that technical
interdependencies are kept within
modules and interfaces can be
standardised and dealt with through
arms-length relationships. Thus mod-

Technical Organisational
Firm
Interfaces Interfaces

Technical Organisational
Dyadic Relationship
Interfaces Interfaces

Network of connected Technical Organisational

relationships Interfaces Interfaces

Fig. 1.
The IMP Journal Volume 1, number 1
ular product structures map on neatly on
to modular organisational structures and
production networks. In these modular
production networks, “…suppliers and
customers can be easily linked and de-
linked, resulting in a very fluid and
flexible network structure” (Gereffi et al,
2005, p. 85).
However, this matching is
seldom possible since technical as well
as organisational interdependencies can
stretch across technical and
organisational boundaries in a variety of
ways. Let us look in more detail at the
idea of matching technical and
organisational interfaces in a system.
Figure 2 provides an illustration of a
technical system divided into five
modules. Each module has a variety of
interfaces with other modules and for
each module, these interfaces provide
connections to both proximate and
distant modules. For example, module F
has three interfaces with modules B, D
and E. Each of these interfaces may be
“thinner” or “thicker” in terms of what is
transferred across the interface and
more or less independent of other
interfaces. For module F, for example,
the interface F-E might be thin,
standardised and independent of the
other two interfaces, F-D and F-B.
However, interface F-D say, can be
thicker and dependent on other
connected interfaces. The effects of a
change in the interface F-D can be felt
in both proximate interfaces (say F-B)
as well as more distant interfaces (say
D-C).
In Simon’s (1962) terminology,
some interfaces provide good systems
decomposability whilst others do not.
For near-decomposable systems,
interfaces may have degrees of
connectivity to various other interfaces
in both proximate and distant modules.
Some of these interface connections
may be addressed at the dyadic level
(i.e. requiring changes on both sides of
the interface) but with no further
consequences elsewhere in the system.
26
Other interface changes may provoke a
cascade of connected changes involving
both proximate and distant interfaces.
The organisational level of
analysis introduces another layer of
complexity in this scheme both at the
intra and interorganisational level. Two
alternative interorganisational structures
to manage the technical inter-
dependencies between the modules
depicted in figure 2 are illustrated in
figures 3 and 4. In figure 3, company A
is assumed to be in control of the overall
design including the specification of the
performance of individual modules and
the interfaces between them (illustrated
by B-F, B-C, etc) – in short, company A
is a prototypical systems integrator in
the terms defined by Brusoni and
Prencipe (2001).
The organising principle
illustrated by Figure 3 works well with
the modularisation ideal of how
development and production activities
should be partitioned and co-ordinated.
The hierarchical supply structure allows
company A to concentrate on final
assembly while vertically specialised,
first tier suppliers B-F assemble their
respective modules based on
components sourced from their
suppliers and so on.
However, there are problems
with this perfectly decomposable
structure. First, development and
production may require different
organisational interfaces owing to the
different functional and physical
interdependencies amongst modules.
Secondly, the number and variety of
technical interfaces, as well as the
interdependencies amongst interfaces
that have to be managed by Company A
can easily become overwhelmingly
complex. Thirdly, module suppliers are
also involved in other relationships that
may place different requirements on the
development and use of their resources
– e.g. achieving economies of scale in
their operations – and constrain their
ability to deal with technical inter-
The IMP Journal Volume 1, number 1 27

interface

E
D

Fig. 2. Technical system A consisting of modules B, C, D, E and F

F- B
C
B- F-D
F F-E
B-
D-E D-F D-C

E-
D

F
C-

E-
B

B F
C-

E
C

Fig. 3. A Hierarchical Organisational Structure For Development And Production Of A

Technical System A. Interfaces among modules are dealt with by company A in all its
relationships with suppliers.
The IMP Journal Volume 1, number 1 28

dependencies of their modules within – firms, relationships and networks of

this particular system. Finally, problems
of technical interfaces between
individual modules are probably best
addressed within dyadic relationships
between the suppliers in charge of
developing and producing these
modules rather than by an omniscient
systems integrator.
In addition to technical
interdependencies, there are also plenty
of organisational aspects to consider.
For example, the suppliers’ modules
may also be subject to interfaces and
interdependencies with other technical
systems and this will have a bearing on
their decision to cooperate or resist
systems integration solutions obeying a
pure technical logic.
Furthermore, from the
perspective of technical systems
integration, there is a limit to how many
technical interfaces can be taken into
account and how the effects of changes
in one interface on other parts of the
system can be predicted. The
organisational layer depicted in figure 1
connected relationships – creates
further complexity for systems
integration. In particular, the link
between the organisational and network
layers has been neglected by those who
conceive these interactions as purely
hierarchical (see figure 3). This link
includes third party connections that are
unaccounted for in interactions between
the relevant actors in the technical
system and may impact upon decisions
made at interfaces at the dyadic level.
Furthermore, it suggests that decisions
on how to organise technical interfaces
are never made on technical grounds
alone.
The corollary to this argument is
that integration activities are ever
present in large technical systems but
they have a much more distributed and
incremental character than envisaged
by the notion of a Chandlerian visible
hand coordinating a network of loosely
coupled Smithian suppliers (Dosi et al,
2003). Rather than relying on
centralised authority, systems inte-

F
F-
B-F E

B E

F-D
D-E
B-C

C-D D
C

Fig. 4. ‘Team’ Organising Allows Interfaces And Relationships To ‘Match’ And Evolve In
The Development Of Technical System A.
The IMP Journal Volume 1, number 1
gration activities involve a number of
interacting parties and a process of
incremental, mutual adjustments guided
by dyadic interactions, which often have
to take into account interdependencies
that are not containable within those
dyads. Whereas it is possible to manage
connections across specific technical
interfaces, the nature of connections
across multiple technical interfaces soon
becomes too complex to understand
and manage. Each technical interface is
thus embedded in a complex set of
connections with its own technical and
organisational logic.
In the next section we present a
case where the development of a new
truck was organised as a team of
suppliers with some ideas of technical
and organisational interfaces used as
starting points for interaction among the
team members and third parties that
were identified and activated en route.
4. The Scania-Dayco Case2
This case deals with how a truck
producer Scania organised a team of
suppliers for development of a new truck
model. By giving the suppliers the
opportunity to solve problems through
interactions based on interdependencies
among technical components, Scania
were able to reduce the development
time, cost and weight of the new model.
The case focuses on one of Scania’s
suppliers Dayco, who was in charge of
developing hoses and pipes for the new
model. For Dayco the benefit of working
with other suppliers meant a saving of
40-50% in the normal unit costs for
similar products.
2 The Scania-Dayco case is part of an extensive case
study on how Scania organised and managed the
development of a new truck and is presented at length
in von Corswant (2003). Data collection was based on
fifteen semi-structured interviews and analysis of
secondary sources namely CAD models, company
records and documents. For further details see von
Corswant (2003) especially chapter 3.
29
4.1 The products and the interfaces
The pipes and hoses provided
by Dayco have interfaces to various
components such as the engine, AC
compressor, radiator, expansion tank,
frame, intercooler and oil filters.
Consequently, moving or changing the
design of these other components
requires adjustments to the design of
pipes and hoses. The production of
pipes and hoses may be performed
more efficiently with the use of specific
tooling but, since other modules are
given a higher priority in design, it is
often the case that pipes and hoses are
developed according to standard
designs and interfaces. As a result,
pipes and hoses are often adapted to
finalised designs of other components
while adaptations the other way around
are practically impossible. Components
produced by use of specific tools may
however improve technical solutions.
For example, combinations of steel
pipes and rubber bellows (the latter
requiring tools) may be used instead of
long standard rubber hoses.
Steel pipes in combination with
bellows are less expensive while rubber
hoses are more flexible, i.e. they do not
require tooling and can thus be inserted
late on in the design process. Apart from
cost consequences, poor technical
solutions may cause quality problems.
These quality problems are experienced
in assembly and during use. The latter is
especially problematic since a large
fraction of warranty costs are accounted
for by leaking pipes and hoses. Another
consequence of adjusting the design of
pipes and hoses to the finalised designs
of other components is that the scope
for dealing with important technical
features is limited. For instance, the
choice of pipe diameter and bending
radius affects how a specific pipe can be
produced. Too small a radius or too little
distance between two bends may
The IMP Journal Volume 1, number 1
require expensive production tools. In
addition, such design parameters also
affect Dayco’s purchasing of raw
materials and components as well as
the layout and utilisation of production
equipment. For instance, if the design of
coolant pipes can be coordinated so that
the production for several customers
can make use of the same steel pipe
dimension, Dayco’s purchase volume
increases and different pipes may be
produced by the same machines and
tools.
4.2 Scania’s perspective
Since the 1950s Scania has
been involved in developing modular
product architectures. When developing
new truck models, Scania strive for the
re-use of existing or modified
components and modules. However, in
this project several components were
new and some of the existing
components were moved in relation to
others which called for extensive
adjustments of the pipes and hoses
solution.
In previous development
projects, Scania performed a major part
of the product development in-house.
For this project however, key suppliers
were involved and a development team,
including representatives from several
internal functions and some of the
suppliers, was formed. Scania hoped
that the suppliers would contribute fresh
ideas that would improve the technical
solutions developed in the project. In
particular, combining the suppliers’
knowledge of product development and
component production looked
promising. Moreover, Scania wanted to
capitalise on the suppliers’ experience
gained in other customer relationships.
4.3 Pipes and hoses in the technical
system
30
Dayco was assigned the
responsibility for developing a number of
different pipes and hoses in the engine
compartment. To keep the unit cost
down, Dayco wanted to use steel pipes
as far as possible. However, to
compensate for movements and
vibrations, different types of hoses or
bellows of rubber or silicone were used
in combination with steel and aluminium
pipes.
Some of the technical interfaces
required a lot of interaction with other
suppliers. Below we describe how the
interfaces were dealt with in relation to
one particular component, the
intercooler. For all components, design
concepts had been developed prior to
the interaction although there was still
room for changes. Design compromises
could still be worked out through
negotiation between the different team
members.
The intercooler pipe connects
the turbo charger and the intercooler.
The turbo charger was originally placed
on the upper part of the engine and the
air outlet (where the intercooler pipe is
connected) was placed on its upper
side. This implied that the pipe had to be
connected to the turbo charger from
above. Therefore, the pipe would have
to travel from the turbo charger to the
intercooler underneath the cab floor. To
begin with, this solution seemed to work
well although space was very limited.
However, it turned out that there was a
risk of friction of the cab against the
intercooler pipe. In extreme situations,
the suspended cab could move
downwards and come too close to the
pipe. In the meantime, many other
components had been added around
the intercooler pipe, making it difficult to
find alternative ways for slotting the pipe
underneath the cab floor.
To solve this problem Dayco had
to interact with the department
responsible for cab development. One
solution was to hollow out parts of the
insulation under the cab floor to create
The IMP Journal Volume 1, number 1
more space. Unfortunately, this would
create more noise and affect driver
comfort. Instead, alternative places to
house the pipe had to be considered.
After discussions with the engine
supplier it was agreed that the turbo
charger could be turned 180 degrees so
that the outlet pointed downwards. In
this way the pipe could be moved away
from the cab floor. This meant that other
connections on the turbo (e.g. the
exhaust pipes and lubrication pipes)
also had to be moved. In addition, it
became necessary to develop a shield
to be inserted underneath the
intercooler pipe to protect it against
flying stones. Moreover, the intercooler
pipe’s new position meant that a rather
expensive forged pipe knee on the turbo
could be eliminated. Instead, the
intercooler pipe was collared so that it
could be connected directly to the turbo
charger using a standard coupling.
At the other end of the pipe there
was a silicone bellow connected to the
intercooler. Based on the existing
design the intercooler supplier had
chosen a connection with a 76 mm (3
inches) diameter. However this is not a
standard metric dimension. For Dayco,
metric standard dimensions are a less
expensive solution compared to custom
sizes. In addition, flow calculations
showed that the pipe diameter could be
reduced, which further helped to reduce
its cost and weight. Changing the
diameter of the pipe could be done
without any extensive adjustments by
the intercooler supplier since the
necessary tools had yet to be produced.
The bellow was needed to
compensate for vibrations and
movements between the turbo and the
intercooler. To withstand the hot air from
the turbo, the bellow had to be made
from silicone. For the design of this and
other bellows, Dayco collaborated with a
hose supplier introduced by Scania with
31
whom they had a working relationship,
but previously unknown to Dayco.
Based on requirements regarding
temperature, air pressure, movement in
different directions etc, this supplier
could help Dayco design a suitable
bellow (e.g. regarding material,
thickness and number of folds). Since
the bellow was more expensive than a
steel pipe, it was deemed important to
make it as short as possible. In addition,
Dayco tried to use metric standard
dimensions a move facilitated by the
change in pipe diameter. The supplier
also contributed knowledge regarding
how to design the bellow so that
production costs could be further
reduced. For example, a bellow with
smooth folds can be made by
vulcanizing rubber on a fabric that has
been threaded on a horn with a
particular shape, while more advanced
designs required more expensive tools
(e.g. for moulding).
5. Analysis
The case analysis focuses on
the design of technical interfaces. We
begin at the level of the individual
component to analyse its interfaces to
other components. Thereafter, we move
on to analyse the connections of the
focal interface to other interfaces. This
provides a platform for a discussion of
how to manage the development of
individual components and interfaces at
the level of the whole technical system.
By focusing on an individual
component, its interfaces to other
components at a point in time can be
identified. In figure 5, a scheme for the
analysis is outlined where the individual
component is placed between two of its
interfaces with other components, which
in turn, connects it to other interfaces.
The case describes how the in-
The IMP Journal Volume 1, number 1
Connected interfaces (1)
Individual interface (1)
Individual component
Individual interface (2)
Connected Interfaces (2)
Fig. 5. A Scheme For Analysis
tercooler pipe needed interfaces to two
other parts, the turbo charger and the
intercooler. The development of the
interface with the turbo charger
highlighted several features of the pipe
and the turbo charger, as well as their
respective interfaces with other parts of
the truck. An important issue was where
to place the components in relation to
each other and to other components.
Depending on this decision a number of
other components would be affected
and interfaces would need to be
readjusted or redesigned. For example,
according to one of the alternatives for
placing these components, a intercooler pipe, an interface with the
problematic interface between the pipe
and the cab floor would have to be
redesigned. An alternative placing would
imply changes to the interfaces between
the turbo and other components such as
the exhaust and lubrication pipes.
In addition, new parts such as
the shield and a pipe collar were needed
to make this solution work, while other
32
components such as a forged pipe knee
could be eliminated. Hence, all these
connected interfaces needed taking into
account as part of designing the
interface between the intercooler pipe
and turbo charger alone. Still, these
interfaces were all part of the focal
technical system, i.e. the truck, whereas
considerations of connections between
these and other components such as
the materials they would be made of,
the equipment and tooling required for
their production, also played a role in
the decisions made.
At the other end of the
intercooler had to be developed. This
interface was, from the supplier’s
perspective, considered in the context of
standard metric dimensions used by its
other customers and the materials
bought for other purposes from its
suppliers. In addition, the interface
between the turbo and the intercooler
had to take into account the impact of
The IMP Journal Volume 1, number 1 33

vibrations as well as the interface properties equally relevant. At a system

between the pipe and the turbo due to
the hot air flow placing restrictions on
the materials used for this pipe.
Figure 6 summarises the
relationship of the two interfaces of
direct concern for the design of the
intercooler pipe and some of the
connected interfaces.
Apart from focusing on the
design of interfaces, the features of the
individual components need attention. In
the previous discussion the features of
interfaces have been limited to thick or
thin and standardised / independent or
interdependent. However, the case
illustrates how specific technical
features can affect all levels of the
technical system (i.e. individual
components, individual interfaces,
connected interfaces). Hence, while the
main feature of a pipe may be its flow
specification, the nature of the fluid
transported can make its thermal
level, different sets of components (of
which some were subject to interfaces
stressing other technical features)
create the vibration and sound
characteristics of the truck. Although
these system level characteristics
depend entirely on the design of the
individual parts and of their interfaces,
they cannot be assigned to individual
components or interface-specific
features in a way that would enable
good systems decomposability and
parallel component development.
Hence, what needs to be
considered when individual interfaces
are developed include:
a. the features of the two
component parts
b. the features of the interface itself
c. the features of connected
interfaces
d. system/network related features

Example:
intercooler pipe – cab floor
Connected interfaces (1) turbo – exhaust pipe
turbo – lubrication pipe
intercooler pipe – collar
intercooler pipe – material

Individual interface (1) intercooler pipe – turbo charger

Individual component intercooler pipe

Individual interface (2) intercooler pipe – intercooler

Intercooler pipe – materials used for

other customers
Connected interfaces (2) turbo – intercooler
intercooler pipe - turbo

Fig. 6. Relationships Of Interfaces

The IMP Journal Volume 1, number 1
When developing individual
interfaces the specific technical
features in all four of these dimensions
influence the logic of how they are
managed. In summary, interface
design very seldom contains simple
trade offs between two clear cut
alternative solutions with no further
consequences on other elements or
interfaces, and with only one feature to
consider e.g. cost or the value of a
specific technical parameter. Instead,
numerous and often conflicting
aspects and features need be dealt
with holistically in order to reach viable
compromises. The team work
exemplified by this case, where
interaction among the suppliers
representing different parts and
specialised knowledge allowed them
to address a large number of technical
interdependencies, may enhance
these compromises and thus the
quality of the technical system as a
whole. When compared to the way in
which technical interdependencies are
managed by an overarching system
integrator, setting out specifications for
suppliers and thus limiting their scope
to address interfaces from their
perspective, this mode of working
presents clear benefits and
challenges. These will be addressed in
the next section.
6. Discussion
Although the case only covers
a fraction of the technical and
organisational aspects of developing a
new truck it highlights some of the
arguments outlined earlier. It also
demonstrates how the organisation of
the development effort allowed for
interaction not only among the firms
involved in the development team but
also connected third parties, e.g. the
suppliers’ suppliers and other
customers.
To start with, there was a clear
division of technical and organisational
labour in place when the development
activities begun. For the development
team, this division worked as a starting
point for interaction within and across
34
the team’s boundary. As part of the
technical division of labour, design
concepts had been developed by
Scania as a platform for component
designs and technical interfaces
amongst components. The
organisational division of labour was
based on the systems architecture
devised by Scania and team members
were enrolled as representatives of the
different technical components of the
end product. The design of the
technical and organisational interfaces
made ex ante by Scania was based on
previous technical solutions i.e. their
existing truck range. This was
supplemented with specifications for
new and improved features that
Scania wanted incorporated in the new
model.
The interplay among technical
and organisational interfaces can be
seen working across the layers
depicted in figure 1. Dayco tried to
solve problems and improve the
technical solutions by relating to and
activating its existing connections
along technical and organisational
dimensions. For example, the efforts
to use of standard metric dimensions
for the pipe connection were made in
order to relate this solution to Dayco’s
use of connections in other
relationships. Hence, this solution was
more efficient for Dayco and thus also
made Dayco a more efficient supplier
to Scania. Another example of
connected relationships occurred
when Dayco interacted with a
specialist on bellows accessed
through Scania to solve a particular
technical problem. This firm was not
part of the development team but of
Scania’s supply network. When faced
with similar problems in future
development projects, Dayco may well
benefit from reactivating this
relationship facilitated by Scania.
When addressing specific
technical problems, individual team
members needed to develop their
knowledge through interacting within
and across team boundaries.
However, the development team also
developed its own idiosyncratic
The IMP Journal Volume 1, number 1
knowledge as a unit. The problem with
vibrations is one example of technical
aspects that could not be dealt with by
the involved firms individually or
solved in interactions within the team’s
boundary. Technically, vibration
problems were the result of a whole
set of interfaces amongst linked
components and thus solving these
problems requires joint efforts across
the whole team. Thus vibrations and
other technical features of the system,
such as noise and driving comfort,
cannot be assigned to particular
components and cannot dealt with by
individual suppliers or through dyadic
relationships. Instead, they require co-
operation and interaction among
several team members. Furthermore,
all the technical and organisational
units involved in these efforts are also
involved in other teams and projects
both internal and external to Scania.
Therefore consensus or compromises
among such different concerns require
team members to arrive at joint
decisions.
As far as the design of
technical interfaces is concerned the
case illustrates how they develop from
interaction among team members and
how these are able to experiment with
relating different components to each
other. A wide range of consequences
of different design options can be
taken into consideration. These effects
include consequences for the technical
features of the end product as well as
consequences for the suppliers in
terms of possibilities to relate technical
solutions to their respective networks.
For example, the location of the pipe
connecting the turbo charger to the
intercooler took account of a number
of consequences for several other
components. Also, the cost
consequences of different technical
solutions needed careful
consideration.
The case analysis suggests
that both component and architectural
innovations can emerge from complex
and distributed interaction patterns
rather than being pursued by a single
systems integrator. Although the case
35
captures only a fraction of the
interaction that took place within and
across the team boundary (focused on
a ‘low-tech’ component) it illustrates
how technical interfaces evolved in a
non-linear and non-hierarchical
fashion. Scania, as the systems
integrator set the basic parameters for
the development of new technical
designs by putting together a mixed
team of specialists comprising both
internal and supplier personnel.
However, the outcome of the team’s
work in terms of technical solutions
and the development of relationships
among project members and actors
external to the team, was not
managed in any conventional sense
nor could it have been predicted ex
ante. In all likelihood, had other team
members been selected the technical
and organisational outcomes of the
project might have been rather
different.
7. Conclusions
This paper argues that
distributed innovative activities require
simultaneous and provisional choices
of technological and organisational
interfaces in the face of genuine
uncertainty over the direction of
innovation. Contrary to those who
praise the virtues of modularity and the
standardisation of technological and
organisational interfaces, we argue
that complex product development
processes involve the setting of
provisional interfaces that need to be
periodically revisited as the project
unfolds. As we have shown with the
Scania-Dayco case, innovation
involves an exploration of how
activities can be decomposed within
and across firm boundaries and the
types of interfaces required to
integrate of what has been
decomposed. This exploration is
neither predetermined by rigid rules
nor random. Rather, it evolves through
of a series of pragmatic decisions
concerning which interfaces can be
stabilised to allow concurrent but
autonomous activities to be
The IMP Journal Volume 1, number 1
undertaken, which interfaces need to
be kept open-ended to allow the
coordination of interdependent tasks,
as well as setting up processes for
revisiting prior choices. Sabel and
Zeitlin (2004) coined the term iterated
co-design for these sets of processes.
Iterated co-design allows for a
corrigible partitioning of tasks as
project collaborators learn more about
components, interfaces and the
architecture of the technical systems
they work on. Changes in one
interface may often have connected
effects in other interfaces and to set in
motion a reconfiguration of the
technical and organisational structure
of the project.
We offer three main
conclusions as a result of our case
analysis. First, whilst the extant
literature has emphasised the
interaction between technical and
organisational factors within product
development projects confined within
corporate walls, we have
demonstrated how these interactions
can criss-cross boundaries at the level
of the firm, dyadic relationship and
network of connected relationships
often involving actors that were not
part of the original development team.
In addition, whereas initial decisions
on how to organise a project embody
the result of established patterns of
division of labour and set the platform
for future projects once a project
starts, it acquires the character of a
quasi-autonomous unit developing its
own idiosyncratic body of knowledge
and problem-solving routines.
Secondly, our case throws
some light on the increasingly
fashionable notion of systems
integration. As we have highlighted,
systems integration encapsulates the
notion that firms need to “know more
than they do” in order to integrate
dispersed knowledge held by vertically
specialised suppliers. These
knowledge overlaps allow systems
integrators to interact with their
suppliers and combine specialised
knowledge of how products should be
designed, manufactured and used. But
36
whereas the notion of systems
integration has often been used as the
Chandlerian counterpoint to a
Smithian division of labour and
fragmentation of supply networks, the
Scania-Dayco case highlights a
different side to systems integration.
Whereas Scania could be seen as the
archetypal systems integrator, this
case also shows the limitations of hub-
and-spoke notion of systems
integration in which one single firm
orchestrates the efforts of a network of
specialised suppliers. Our suggestion
is that systems integration occurs at
multiple levels and is often the product
of a series of distributed mutual
adjustments requiring no central
direction or coordination.
This last remark leads to our
final conclusion. Following Piore’s
(1992) argument on the advantages of
network structures for balancing
specialisation and integration and
Dubois and Håkansson’s (2002)
analysis of relationships as both
means and ends, we argue that in this
case relationships facilitated both the
deepening of knowledge as well as the
coordination of unexpected and
unforeseen interdependencies as they
emerged. In summary, relationships
should not be seen simply as a means
of coordinating known and stable
technical and organisational
interdependencies. They should also
be seen as a flexible mechanism and
driver for re-configuring technical and
organisational interdependencies in
distributed innovation contexts.
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The IMP Journal Volume 1, number 1 39

Embedding, Producing And Using Low Weight:

Value Creation And The Role Of The Configura-
tion Of Resource Interfaces In The Networks
Around Ikea’s Lack Table And Holmen’s News-
print

Enrico Baraldi a and Torkel Strömsten b *

a
Department of Business Studies, Uppsala University Box 513, STS Center, Uppsala University, 751 20, Uppsala,
Sweden. e-mail: enrico.baraldi@fek.uu.se. Tel: +46-18-471 14 95
b
Stockholm School of Economics, Box 6501, 113 83, Stockholm. e-mail: torkel.wedin@hhs.se. Tel: +46 8 736 93 05

Acknowledgments: The authors would like to thank Björn Axelsson, Elsebeth Holmen, Håkan Håkansson and two
anonymous reviewers for useful comments. Financial support for writing this article has been provided to both au-
thors by Svenska Handelsbanken/Jan Wallander’s Foundation.

Abstract

This article builds on an industrial network perspective to present the value creation process in a new
light, by stressing the importance of resource interfaces in two concomitant sub-processes: value em-
bedding and daily value production and utilization. We analyse the networks around two very different
resources, Holmen’s newsprint and IKEA’s Lack table, but we focus on the very same value-bearing
feature for both resources, namely low-weight. We stress that the value of a resource derives from its
combination with other resources in the network. Therefore, the interfaces between the involved re-
sources play a key role both when this value is first embedded in the focal resource and when it is then
daily produced and utilized across the network. Our analysis of the two empirical cases shows relevant
differences in the ways in which value is created in the newsprint and in the Lack networks. In the
newsprint case, value embedding and daily utilization are more closely connected compared to the Lack
case, where the two sub-processes can be more easily distinguished. Such differences are also related
to the configuration of resource interfaces in the two networks: resources are more “dispersed” in the
newsprint network, where technology is more complex, a wider range and several types of resources
intervene, giving rise to many more indirect and hidden interfaces and heavy technical interdependen-
cies. All this requires value embedding and daily utilization to proceed hand in hand. By converse,
Lack’s network is technically and socially more streamlined, which allows one strong actor, IKEA, to
separate and directly coordinate value embedding and daily value utilization. Whereas value creation is
characterized by weak coordination and local rationality in the newsprint case, in the Lack case it is
characterized by stronger coordination and overall rationality, driven by IKEA. We conclude the article
with a series of theoretical implications that summarize our contribution to the value creation literature.
The IMP Journal Volume 1, number 1
Keywords: Networks, resources, interfaces
1. Introduction: Low Weight, Value
And Resources
This article discusses the crea-
tion and use of a specific feature that
is valuable in several products, namely
low weight. Our discussion focuses on
two very different products, IKEA’s ta-
ble Lack and Holmen’s newsprint pa-
per, which have been the central ob-
ject of two extensive case studies
based on more than 170 interviews at
60 different organizations. Despite the
differences in the respective value
creation and utilization, low weight is a
very important feature for both prod-
ucts. It is a key feature for IKEA’s Lack
because it helps to keep down trans-
port costs that account for 30% of its
total costs. Low weight also facilitates
internal logistics, increases the
chances that consumers who wish to
buy a Lack table by impulse eventually
carry it to IKEA cash lines and helps
them carry it home more easily. For
newsprint, low grammage (i.e., thinner
and hence lighter paper) increases the
paper surface in the huge rolls that
printing houses purchase, so that they
save money because a roll with lighter
paper contains more printing surface.
Moreover, roll changes – costly disrup-
tions while printing – are reduced. Fi-
nally, low grammage paper allows sav-
ing raw materials upstream and de-
creases transport costs to final users
for each newspaper.
The richness and depth of our
empirical material concerning both
Lack and newsprint triggered us to
start a discussion of how low weight
was created and used by several ac-
tors in the networks around the two
products. We soon realized that low
weight was a feature that was consid-
ered valuable by several actors, but
also that the processes to create this
feature differed in the two cases, as
much as did the processes to use it.
We also noticed differences in how the
creation and the daily utilization of low
40
weight were related in the two cases.
Next to some underlying similarities,
these salient differences induced us to
explore the phenomenon of creating
and using low weight in these two dif-
ferent settings, with the purpose of
casting new light on the process and
the notion of value creation.
More precisely, this article
tackles four questions concerning
value creation. The first one is “how
does a valuable feature become em-
bedded in a product in the first place?”
The second question is “how is this
valuable feature produced and utilized
on a daily basis?” While the first ques-
tion focuses on how value is created
through new resource combinations,
the second one focuses on how value
is created daily through routine combi-
nations. The third question is “how are
these two sub-processes related to
each other?” and our last question is
“how is value creation related to the
configurations of the interfaces among
the involved resources?”
This study takes an industrial
network approach (Håkansson, 1982;
Håkansson & Snehota, 1995) and ap-
plies a “resource interaction” perspec-
tive (Håkansson & Waluszewski, 2002:
33-38) with the aim of casting new
light on the issue of value creation.
The latter perspective stresses how
value emerges from networks of inter-
acting resources among which clear
interfaces emerge (Wedin, 2001;
Håkansson & Waluszewski, 2002;
Baraldi, 2003): value springs from a
complex web of resource interfaces
that have both a technical and a social
dimension. Thus, the unit of analysis
of this study is the network of social
and technical resources. Further, we
argue that the value of a resource is
better understood by looking at several
direct and indirect resource interfaces
stretched across the entire network.
Our cases will illustrate that value
emerges not only alongside single re-
source-to-resource interfaces, but also
The IMP Journal Volume 1, number 1
from a complex web of indirect inter-
faces. Thus, we stress that the value
of a product does not reside simply in
the “product-user” interface or in the
“buyer-seller” interface (cf. Araujo, Du-
bois, & Gadde, 1999: 498-500), but is
created trough several other interfaces
simultaneously. For example, news-
print’s value is created when the spe-
cific features embedded during wood
sorting and pulping are utilized by
printers elsewhere in the network.
This discussion suggests that
resource interfaces are sources of
value that can be a target of manage-
rial actions to create value. Differently
put, resource interfaces are the tools
that firms can, at least partially, handle
to create value. However, attempts at
value creation are affected by the con-
figuration of the resource interfaces
around a focal resource – that is, the
issue addressed by our fourth question
above. This study is organized as fol-
lows: first we present our theoretical
framework, followed by our method
and the two cases. Next, we analyze
and discuss the two cases. Finally, our
conclusions also connect our findings
to previous research.
2. The Value Of Resources And
The Importance Of Resource In-
terfaces
The value of a resource can be
viewed as a series of benefits and cor-
responding sacrifices associated with
its features. Further, the value of a re-
source comes into play in its combina-
tion with other resources and when its
features are activated in the interfaces
with other resources. This notion cor-
responds to the general view on value
that can be found in the IMP literature
(cf. Håkansson & Snehota, 1995;
Anderson & Narus, 1998; Walter,
Ritter & Gemünden 2001); but also de
Chernatony, Harris & Dall’Olmo Riley
(2000: 40-41) rely on a similar notion.
Both benefits and sacrifices appear on
several dimensions (economic, techni-
cal, emotional, symbolic, etc.), de-
pending on how specific actors evalu-
41
ate the features of that resource. Our
view on the value of resources relies
on four tenets: resource heterogeneity,
socio-technical creation of value, value
idiosyncrasy and multidimensionality.
The notion of resource hetero-
geneity (Penrose, 1959) stresses that
the value of a resource does not re-
side in the resource itself, but it de-
pends on how that resource is com-
bined with other resources (Ibid: 25,
74-75; Alchian & Demsetz, 1972;
Håkansson, 1987). These resources
can be classified into four basic types
(Wedin, 2001; Baraldi & Bocconcelli,
2001; Håkansson & Waluszewski,
2002): products and facilities, that is,
technical resources, and organiza-
tional units and business relationships,
that is, social resources1. Social re-
sources organize technical ones, with
relationships being quasi-
organizations (Blois, 1972) that act as
a governance mode to coordinate in-
ter-firm exchange (Richardson, 1972).
The specific features of a resource
become more or less valuable only
when confronted or combined with
other resources of the same or of a
different type. Moreover, resources
shape each other’s features during
long-term interaction processes
(Håkansson & Waluszewski, 2002: 33;
2005). This resource interaction2
leaves traces on resources that be-
come visible in the interfaces between
them, that is, in the contact points
along which two resources affect each
other’s technical, economic and social
features. Thus, the value of a resource
emerges from the interfaces in the
network of other resources that embed
it.
Next, the creation of value
happens both at a technical and a so-
cial level in a network. The literature
1
For a full description of the four resource types see
Wedin (2001: 38-40) and Baraldi (2003: 15-16).
2
This “resource interaction” perspective and the
above resource classification have been used in
several case studies concerning technology devel-
opment and utilization and the management of re-
source interfaces: see for instance Lind & Strömsten
(2006) Baraldi & Waluszewski (2005), Hjelmgren
(2005), Gressetvold (2004), Forbord (2003), Baraldi
(2003), Håkansson & Waluszewski (2002), Baraldi,
Bocconcelli & Söderlund (2001), and Wedin (2001).
The IMP Journal Volume 1, number 1
distinguishes between two types of
value: a use and an exchange value
(Ramirez, 1999). Use value emerges
at the technical level, from combining
physical resources to perform trans-
formation activities. Exchange value is
instead created at the social level,
from combining social resources to
perform exchange activities (Johanson
& Strömsten, 2005). Thus, both tech-
nical and social resource interfaces
intervene in the value creation proc-
ess.
Our third theoretical tenet
stresses that a resource must be valu-
able for someone or in relation to
something else and for a particular
purpose and use: nothing could ever
be valuable in a vacuum. The creation
of value is an interactive process and
value is therefore idiosyncratic and
requires highly context-specific knowl-
edge (Snehota 1990: 59-60). This
holds not only for the social, but also
for the physical values of resources:
there is no determinism in the creation
of strongly technical values, because
even the most apparent physical fea-
tures must be positively evaluated
(i.e., considered as valuable) by
someone, if a resource such as a
product is ever to be utilized. And this
“(e-)valuation” process is highly spe-
cific, depending on the context where
the resource is exchanged and util-
ized. Someone must find the resource
valuable, either because of the way it
is used technically with other resource,
or because of the way it helps the firm
to create softer commercial values, for
instance to its customers.
Finally, we derive from Pen-
rose (1959) the notion of value multi-
dimensionality, suggesting that a re-
source carries a multiplicity of values,
thanks to its many physical and so-
cially constructed features that can
potentially deliver value to someone
(Ibid. 75-6). At a fine-grained level, the
value of a resource can be decom-
posed into several value-bearing fea-
tures (costs, performances, durability,
health-friendliness, style, etc.). De-
composing the value of a resource re-
veals a web of values built into this
42
resource by interactions with other re-
sources that all contribute specific fea-
tures. Whether the single features are
mutually additive (that is, increase the
overall value of a resource) or not, de-
pends on the context where these fea-
tures are forged and utilized: some
values such as low cost and high per-
formance of a product may depend on
mutually exclusive features because of
resource constraints. However a
product’s low cost may trigger users to
buy such high volumes that they moti-
vate the introduction of new comple-
mentary resources that allow very high
performance. Thus, the attribution of
value to resources is complicated by
the fact that they are utilized together
with other resources and that their
several values interplay in highly com-
plex ways (see the discussion on
“team effects” in Alchian & Demsetz,
1972).
2.1 Two sub-processes in value crea-
tion: new and routine combinations
It is only in combinations with
other resources that the value of one
resource is created. But these re-
source combinations can be under-
taken by firms either on a daily basis,
indeed as a matter of routine, or on
special occasions with the aim to cre-
ate new combinations (Moran & Gho-
shal, 1999). Routine combinations are
the backbone of firms and can be per-
formed without much reflection. New
resource combinations might instead
lead to initial problems, because the
value they create requires an embed-
ding process that involves several ac-
tors, who need to positively evaluate
the new resource combination.
Routine resource combinations
are clearly important, because they
allow “delivering” value on a daily ba-
sis, each time an act of production
and/or utilization involving a focal re-
source is performed. But a fuller un-
derstanding of value creation also re-
quires consideration of the new com-
binations that helped embed into a re-
source a certain value-bearing feature
for the very first time. A dynamic per-
The IMP Journal Volume 1, number 1
spective to value creation requires the
study of both the daily process of pro-
duction/utilization and the historical
process of shaping the new resource
combinations that led to modifying the
focal resource so that a certain value-
bearing feature was embedded in it.
These are two logically distinct sub-
processes: daily value produc-
tion/utilization, on the one hand, and
value embedding, on the other hand3.
At a first glance, the sub-
process of value embedding seems to
logically precede the one of daily pro-
duction and utilization, because new
resource combinations need to be
shaped before they can be daily ex-
ploited in a routine way. However, ac-
tors often identify technical and eco-
nomic problems in daily activities and
this might trigger development efforts,
where new resource combinations and
interfaces are tried out and shaped.
Thus, in practise the two sub-
processes might be reversed, so that
daily value utilization precedes value
embedding. In addition, introducing a
new feature in a resource always re-
quires considering the existing techno-
logical structure, including all its rou-
tine combinations and daily activities.
Further, the two sub-processes
can also happen simultaneously, as in
the case of customized solutions that
entail creating new resource combina-
tions and making available particular
value-bearing features immediately to
a specific user (this holds in particular
for service products that are often pro-
duced and consumed at once). More-
over, the two sub-processes need not
be spatially detached, with suppliers
embedding the new value-bearing fea-
ture and users passively waiting to util-
ize it later on. Value embedding re-
quires that users too change their re-
3
The discriminating factor between the two sub-
processes is the extent to which resource combina-
tions are modified: not at all or as little as possible in
daily value production/utilization, as opposed to in-
cremental or radical modifications in value embed-
ding. Thus, we shall look at the degree of change in
resource combinations to discern between the two
sub-processes: routine resource combinations sus-
tain daily value production and utilization, whereas
new resource combinations allow embedding value
for the first time.
43
source combinations prior to daily utili-
zation, in order to adapt them to the
new solution. But, most importantly,
users often directly take part in the de-
velopment of new combinations by
suppliers, either through making re-
quests or suggesting concrete solu-
tions (von Hippel, 1986; 1988;
Håkansson, 1987). Finally, value em-
bedding and daily utilization can hap-
pen both simultaneously and at the
same locus, as in the case of toolkits
that allow users to customize innova-
tive solutions on their own (von Hippel,
1994; 1998).
2.2 The configuration of resource in-
terfaces and value creation
As stated in the introduction,
one of the questions of this study con-
cerns how the configuration of re-
source interfaces is related to value
creation and to its two sub-processes
of value embedding and daily value
production/utilisation. The issue of
configuration surfaced from a prelimi-
nary analysis of our empirical material,
showing that the two value creation
processes were tightly related to how
resource interfaces were configured at
the technical and social level. Gener-
ally speaking, the resources involved
are not arranged randomly in the net-
work, but according to patterns that
are partly organized by actors and
partly dependent on technical interde-
pendencies. Our preliminary analysis
also showed that the configuration of
interfaces differed in the value embed-
ding process from the daily value pro-
duction and utilization process, due to
the dominance of new as opposed to
routine resource combinations in these
two sub-processes. We will develop
inductively from our case analysis the
role of the configuration of resource
interfaces, but we can point out al-
ready here the three groups of indica-
tors that we will use for our fine-
grained analysis (see Section 6):
Firstly, the number of technical
resources and interfaces is important
for how value is embedded and daily
used. But also the complexity and de-
The IMP Journal Volume 1, number 1 44

gree of interdependency of technical and beyond their boundaries, in the

interfaces impact on the value creation
process. Moreover, number, complex-
ity and interdependency of technical
interfaces may vary between value
embedding and daily value utilization
in different cases. The configuration of
technical interfaces is of great concern
for a firm trying to embed a specific
product in an existing technical struc-
ture or to add a value-bearing feature
to an existing product. Technical inter-
faces can also be indirect, that is,
transmitted from two resources to a
third one. Indirect interfaces add com-
plexity to interface configuration and
are harder to discern by the involved
actors.
Secondly, the number and
complexity of social/organizational in-
terfaces will also be analysed. Several
units might be either directly or indi-
rectly involved in the daily value pro-
duction and utilization of a certain
value and their using behaviour might
support a certain technical solution
against others. If there are several
strong indirect social interfaces, more
firms than expected will be affected by
any change in the network.
Thirdly, the number and com-
plexity of the interfaces between social
and technical resources is also pivotal.
The configuration of these mixed inter-
faces indicates how firms try to organ-
ize the value creation process, within
whole network. Mixed interfaces also
suggest a political dimension and point
out the actors’ different and diverging
interests in relation to the resources
and interfaces involved in value crea-
tion. Moreover mixed interfaces indi-
cate how actors try to attain control
over the value creation process.
We do not however posit a lin-
ear and univocal causal relation from
configuration to value creation, be-
cause the process of value creation
itself shapes to a large extent the way
resource interfaces are configured. In
fact, especially the value embedding
sub-process entails the creation of
new resource combinations that
change the landscape of resource in-
terfaces. Still, we argue that the re-
source interface configuration reached
at a certain point in time affects how
the value creation process can unfold
later on (see also Dosi, 1982; Arthur,
1988).
To sum up our discussion, we
conclude (1) that value creation is re-
lated to the configuration of interfaces
between resources, and (2) that value
creation includes two theoretically
separate processes, namely, the em-
bedding of a value-bearing feature in a
focal resource and the daily produc-
tion/utilization of such value. These
ideas are displayed in figure 1.

Value Value
EMBEDDING PRODUCTION/
VALUE of a UTILIZATION
resource
New resource com- Routine resource
binations combinations

CONFIGURATION
of resource
INTERFACES

Fig. 1. Resource Interfaces And The Value Creation Processes

The IMP Journal Volume 1, number 1
Figure 1 suggests that the
value of a resource emerges from a
creation process composed of the two
sub-processes of (a) value embed-
ding, whereby a certain value is first
built into a resource, while new combi-
nations of resources are performed,
and (b) daily production and utilization,
whereby this value is then daily pro-
duced and utilized in routine resource
combinations. The value embedding
process and the production-utilization
process unfold within specific, and
likely different resource configurations.
These resource configurations are co-
ordinated inside and between organi-
zations. Within these broader configu-
rations at the network level, single re-
source interfaces are the elements
that can be acted upon in order to cre-
ate value. In other words, interfaces
are both the sources and the tools for
value creation.
3. Method: Investigating Value
Around Furniture And Paper
This article is grounded on two
previous studies (Wedin, 2001 and
Baraldi, 2003). These were written for
quite different purposes, but a closer
look, revealed the importance of a
common value-bearing feature,
namely low weight, for two very differ-
ent products: Holmen’s newsprint pa-
per and IKEA’s Lack table. However,
despite this common feature and
common raw materials – wood and
wood fibers – the processes by which
low weight was created and utilized
greatly differed in the two cases.
Therefore, even if the two previous
studies had not been conceived to
complement each other, the authors of
this article decided to employ them
together in order to explore the issue
of how value is created and to pinpoint
relevant differences in how the proc-
ess of value creation can unfold.
This empirical material is quite
extensive, with one case entailing 100
and the other 70 personal interviews
conducted across the networks where
45
each of the focal products is embed-
ded. One case study concerns the
production and use of newsprint in the
whole network stretching from electric-
ity production to printing and publish-
ing (Wedin, 2001); while the other
case study concerns the development
and operations, from production to re-
tailing, of IKEA’s table “Lack” (Baraldi,
2003). For the newsprint case, about
100 interviews were conducted in the
period 1995-2001 at more than 40 or-
ganizations affecting the focal re-
source, newsprint. However, the inves-
tigation started from a focal organiza-
tion, the paper producer Holmen Pa-
per and its production unit Hallsta, lo-
cated a few kilometres from Uppsala,
Sweden. The Lack case relies instead
on about 70 interviews, conducted in
the period 2001-2003 at more than 20
organizations involved in the develop-
ment and daily operations around the
focal resource, Lack. As in the previ-
ous case, also this investigation
started from a focal organization, IKEA
of Sweden, the unit in charge of man-
aging IKEA’s product range.
Not only did the two cases al-
low us to explore the same empirical
phenomenon, but they both also of-
fered us several advantages: (1) the
cases are very rich and the empirical
material was collected with the explicit
goal to penetrate resource interactions
stretching to an entire network; (2) al-
ready a first look at the cases revealed
different configurations of the networks
around the two focal products, which
hinted at some interesting and relevant
differences in the value creation proc-
esses; (3) despite the differences in
the types of products (a table and
newsprint), with their very different
network contexts, we could search for
some common denominators in the
maze of resource interactions linked to
value creation. By analytically compar-
ing these two case studies it was pos-
sible to identify both common, general
patterns and salient differences in the
issue that we investigate.
The IMP Journal Volume 1, number 1
From the extensive empirical
material collected for these two large
case studies we selected two value
creation processes that we will shortly
present and analyze in detail on the
basis of Figure 1. Therefore, within a
general double case study design, we
make use of an “embedded case” (Yin,
1989) or “multiple-level-of-analysis
case” research design. This methodo-
logical approach is helpful especially
when the research issue to be tackled
is a complex one (Ibid), as in our in-
vestigation, and the approach has
been fruitfully applied to tackle the
complexities of industrial network
(Easton, 1995: 480).
Each case starts by presenting
the focal product and the network in
which it is embedded. For each prod-
uct low-weight is seen as valuable by
one or several actors in the network.
The cases continue with an illustration
of the process that led to the embed-
ding of this feature in each product,
showing the involved resources. Then,
we illustrate for each product the daily
processes whereby the value-bearing
feature is produced and utilized by one
or several actors. We stress how this
value emerges from the interaction
with other resources and we penetrate
some selected interfaces.
4. The Lack Case: Resource Inter-
faces And Low Weight
IKEA is a giant in furniture re-
tailing, with 65,000 employees and
about 200 stores that sell a range con-
sisting of 12,000 product items for over
€12 billion. Today’s impressive figures
rest on the fact that for 60 years IKEA
has aimed to produce furniture with a
strong low-price focus. But in order to
achieve this goal IKEA does not be-
have like a traditional retailer that sim-
ply “shops around” for available low-
est-price solutions; IKEA is instead a
production-led retailer that considers
the resources involved in manufactur-
ing and transportation, all the way from
raw materials to customers’ homes. A
key ingredient in this strategy is close
46
business relationships to suppliers and
logistic partners that help IKEA main-
tain its low prices.
The Lack table well symbolizes
this approach. The price of this best-
seller, sold in 2.5 million pieces per
year, has been stable for 25 years at
€9.9! Since its launch in 1981, IKEA
expected Lack to become a symbol for
its surprisingly low prices, but with the
constraint that Lack should cover all its
costs. This obliged IKEA and its sup-
pliers to carefully identify such costs
and act on the resources that im-
pacted on them. Since transportation
accounted for about 30% of the total
cost for such a low price product, IKEA
and its partners had to find a technical
solution that would reduce transport
costs. “Because weight is the main
determinant of transport costs our goal
became reducing the weight of Lack
tables”, as an IKEA product manager
put it. The solution was found in the so
called board-on-frame technology em-
ployed to produce inner doors: a frame
of chipboard was filled with special
honeycombed paper and covered by a
thin sheet of HDF (high-density fibre-
board). The result was a very light
construction, because it was mostly
empty inside, but one that was still
highly resistant: therefore board-on-
frame was applied to the production of
Lack’s tabletops.
For over a decade this low-
weight solution was enough to keep
down Lack’s transport costs. However,
there still were some parts of a Lack
table that could not be low-weight, that
is, “empty-inside”, namely its legs.
Legs posed special technical problems
and board-on-frame could not be ap-
plied on them: their small surface, in
relation to their height, impedes filling
them with honeycombed paper ori-
ented perpendicularly to their surface,
a requirement to obtain a solid sur-
face. Even though lightness was seen
as a very valuable feature for Lack’s
legs, it was not easy to attain. At-
tempts were made with plastic legs:
they were lighter than solid wood, but
they posed great problems in coating
because it was almost impossible to
The IMP Journal Volume 1, number 1
achieve colour uniformity with table-
tops. And customers reacted quite
negatively to these hybrids. In the
early 1990s it was clear that a more
long-term solution was necessary in
order to extend the low-weight feature
to Lack’s legs – hopefully a solution
based on the same “empty inside”
concept as tabletops. It was at this
point that IKEA explicitly asked its
supplier Swedwood Poland, which for
a few years had manufactured all Lack
tables, to envisage a technical solution
to build empty legs. This request was
at the origin of an important develop-
ment and value-embedding episode
that we now describe in detail.
4.1 Creating low-weight value by de-
veloping Lack’s empty legs
Swedwood Poland had not all
competence necessary to solve the
complex technical problems of empty
leg, but it had a close relationship to
Wicoma, a mechanical engineering
shop located just a few hundred me-
ters away that for several decades had
been repairing, maintaining, tuning
and further developing Swedwood’s
machines. It immediately appeared
that no easy-fix technical solution
would provide empty legs: Swed-
wood’s production facilities could not
be easily modified to produce empty
legs and a quite radical re-engineering
of the leg construction appeared nec-
essary. A few years before, the Polish
furniture producer had been acquired
by Swedwood, the large manufactur-
ing arm of IKEA’s furniture empire.
Thus, Swedwood Poland viewed
IKEA’s request to find a solution for
Lack’s weight problems as its own pri-
ority. But more than an explicit corpo-
rate order, it was IKEA’s strong inter-
est in reducing the weight of Lack’s
legs and long-term engagement to this
type of product that induced Swed-
wood to accept to embark on a devel-
opment effort that aimed at engineer-
ing both a wholly new machine and the
very construction of Lack’s legs, in or-
der to have them really “empty inside”.
47
However, not everything
should be new in the solution for low-
weight legs: “Introducing new materi-
als than those we had for Lack’s table-
tops would increase costs and com-
plexity. So we chose to use the very
same materials, HDF and chipboards,
also for Lack’s legs” as a technician at
Swedwood notes. In fact, Swedwood
had extensive experience of these two
materials, although in a different
manufacturing application. In particu-
lar, Swedwood Poland had a long-term
experience in cutting and gluing to-
gether chipboards into frames and in
cutting square surfaces of HDF as thin
as 3 mm and gluing them on the hon-
eycombed paper-filled frames. How-
ever, this experience could only be
used as a starting point in envisaging
a solution for the construction of empty
legs and, especially, for the new ma-
chine that should automate leg manu-
facturing. Instead, Swedwood and
Wicoma had to work hand in hand to
develop a new construction that both
respected the same-material con-
straint and could be automated on a
specialized, but not too expensive and
high-tech machine.
Swedwood and Wicoma’s
technicians faced the problem of re-
combining HDF and chipboards (the
only allowed materials) into a solution
consuming as little material, and
hence weight, as possible. A further
constraint to Swedwood and Wicoma
was that the re-combination of HDF
and chipboards should be possible to
automate at relatively low costs. After
several meetings around a drawing
table, technicians from Swedwood and
Wicoma figured out how one could
obtain stable and resistant legs that
required as little material as possible.
This solution relied on (1) a few
squared chipboards to be placed
about 20 cm apart from each other
inside the leg and (2) a light and flexi-
ble HDF sheets to be literally bent and
glued around the chipboards to hold
them together and thereby creating the
leg’s external, vertical surface.
In parallel, Wicoma’s mechani-
cal engineering competence turned
The IMP Journal Volume 1, number 1
out to be essential to devise a unique
and specialized machine capable to
put together efficiently the above com-
ponents, while performing key opera-
tions (e.g., carving and bending HDF
sheets). Developing this leg line re-
quired penetrating complex engineer-
ing details about the technical func-
tions, output capacity, speed and pre-
cision level. A small but essential de-
tail that Swedwood had to teach
Wicoma is that in order to have HDF
sheets exactly stick to the chipboard’s
lateral surfaces, it was necessary to
carve each HDF sheet along three
lines. But even more than this, the
machine needed to be able to carve
with great precision: (a) with the right
carving depth (not too much that would
break the sheet, nor too little that
would make it impossible to bend the
sheet) and, (b) with the right carving
angles (to allow HDF to stick exactly to
the corners of each chipboard). Finally
the leg line should also glue and press
to obtain a complete leg for Lack.
Wicoma had experience of
such technical issues as basic opera-
tions, architectural design and key
subsystems (e.g., engines). “But the
project was so specific that Wicoma
had to develop the technical specifica-
tions together with us, because we
were the only people who really knew
how the machine should perform on
chipboards, HDF and glues”, as
stressed by a Swedwood technician.
For instance, triangular tables need
triangular legs: therefore the leg line
Wicoma
5
4 Org.
Leg line
8 Empty
7 6
HDF
1 Swedwood
Fig. 2. The Resources Involved In Embedding Low-Weight In Lack’s Legs
48
needed to be able to fold HDF sheets
with only two carvings around triangu-
lar chipboard inserts. Even if the leg
line is considered today as a rather
simple machine by Swedwood’s tech-
nicians, it was essential to create and
build into Lack value, in terms of a fur-
ther weight reduction.
In the above value embedding proc-
ess, 8 resources played a key role:
empty legs (where the low-weight fea-
ture physically resides); HDF (a main
input to achieve low-weight); the leg
line (the facility that mechanized
manufacturing); Wicoma, Swedwood
and IKEA (the three organizational
units involved); and the business rela-
tionships Wicoma/Swedwood and
IKEA/Swedwood. These 8 resources
are presented on the network of figure
2.
Which were the interfaces among the
above resources that were most im-
portant in building into Lack the value-
bearing feature of low weight? The
following ones certainly played a key
role and are depicted by solid double-
headed arrows numbered from 1 to 8
in figure 2. The numbers given to each
interface also roughly indicate when
they progressively appeared on the
scene or were consolidated, giving a
sense of the underlying process:
1) Swedwood-HDF: this is the oldest
interface that pre-existed the idea and
concretization of empty legs, but it is
an important one because it “imposed”
the constraint of using HDF, not only
for its lightness and resistance feat-
Products
Facilities
Units
2
legs 3 IKEA
The IMP Journal Volume 1, number 1
ures, but also for the costs associated
with an eventual change of materials
and for the extensive experience of
this material held by Swedwood.
2) IKEA-Empty legs: this interface too
pre-existed the concrete solution for
empty legs, indeed it was the spark
that initiated the whole technical de-
velopment described above because
IKEA sensed the possibility of obtain-
ing some form of cost saving in trans-
portation by reducing the weight of
Lack’s legs.
3) Relationship IKEA/Swedwood-
Empty leg: this interface acted as a
further motivator to induce Swedwood
to embark on a costly development
project, based on the assumption of
IKEA’s long-term engagement in low-
weight products and in this specific
relationship.
4) Relationship Wicoma/Swedwood-
Leg line: this interface partly pre-
existed the empty leg solution and was
the channel to involve a key partner
both knowledgeable of Swedwood’s
manufacturing process and materials
and willing to engage in a costly de-
velopment effort. The technical speci-
fications for the leg line were jointly
shaped by Wicoma and Swedwood.
5) Wicoma-Leg line: when the solution
started taking form, as a blueprint, this
interface pushed the further concreti-
zation of the special manufacturing
solution. Wicoma’s mechanical engi-
neering competence played a deter-
minant role in this direction, especially
for the “homework” that Wicoma had
to do for devising the subsystems that
would achieve the functionality needed
by Swedwood and for putting them
together into a functioning machine.
6) Swedwood-Leg line: this interface
became more and more relevant as
the machine took shape, a process to
which Swedwood contributed its ex-
perience of woodworking and of how
the leg line should fit in the whole
manufacturing process for Lack. Not
only technical issues, but also Swed-
wood’s investment and cost calcula-
tions contributed to shaping the ma-
chine.
49
7) HDF-Leg line: this interface required
a great deal of specific technical know-
how in order to build into the leg line
the capacity to transform a flat sheet of
HDF into a tri-dimensional structure.
For instance, the precision in carving
HDF required detailed calculations and
the engineering of cutting tools capa-
ble to cope with these stringent toler-
ances.
8) Leg line-Empty legs: this is finally
the interface where the value-bearing
feature of low-weight is physically
connected into Lack, thanks to the
specific quality of the operations that
the leg line can perform. Empty legs
are the output from this machine and
close the circle in this process of value
embedding that had started with
IKEA’s wish to reduce its transport
costs.
From this moment on, empty
legs become a relatively hidden ele-
ment in a lower weight Lack that can
be utilized by other actors in the net-
work, as we shall see in the next sec-
tion. These value embedding efforts
were sustained by shaping new com-
binations among the resources re-
viewed above. We now move to the
resource combinations and interfaces
that characterize the daily production
and utilization of the value-bearing fea-
ture of low weight.
4.2 Daily producing and utilizing the
low-weight inside Lack’s empty legs
Once the specific empty leg so-
lution was identified, it was relatively
easy to implement it at Swedwood’s
plants. Soon this supplier started daily
production of low-weight legs that,
packed with Lack’s low-weight table-
tops, could now be delivered all over
the world. We can now review the
processes of daily production and of
daily utilization of the valuable feature
of low weight. In doing this we have to
include several other actors, resources
and interfaces that lie farther away
from those that originally embedded
this value. We shall also see the in-
centives these actors have in utilizing
The IMP Journal Volume 1, number 1
Lack’s low weight and how technical
interfaces are coordinated via organ-
izational ones.
Let us start with the daily pro-
duction process that leads to having a
lower weight Lack. Many of the re-
sources involved in this daily process
are the same as those presented in
the previous section, even though
some other resources become rele-
vant in this process. These resources
are presented on the left side of figure
3 below (the right side shows instead
the resources involved in the daily
utilization of Lack’s low weight and will
be discussed later).
The main difference compared
to the value embedding process pre-
sented above is that we now look at
how these resources are daily em-
ployed in a routine way. Therefore
Wicoma, for instance, is not involved,
unless machine breakdowns occur. In
the daily value production some other
resources become relevant: the inter-
face HDF-Leg line (arrow 1 in figure 3)
Daily production
Leg 3
1 line Empty
7 Lack 7resStorehouse
legs Lack
HDF 4
Swedwood
2
5 6
Kronopol
Fleet
Logistics
ners
Fig. 3. The Resources Involved In Daily Producing And Utilizing Lack’s Low Weight
50
raises the issue of who delivers HDF.
This introduces on the scene a new
business unit, Kronopol, the sole sup-
plier of HDF. Even though no special
adaptations have been made by
Kronopol to have its HDF fit into
Swedwood’s empty leg production, the
manufacturing capacity of this supplier
is extremely important to secure daily
production: in fact, Kronopol is the only
producer in Europe of the very thin 3
mm HDF that Swedwood needs in its
production. Therefore an important
interface is Kronopol-HDF (arrow 2 in
figure 3): a specific coordination and
reciprocal knowledge of production
needs and capacity between Swed-
wood and Kronopol is necessary here,
especially because Swedwood carries
inventories of HDF enough only for
two weeks of production. The business
relationship between these two units is
the channel that allows this coordina-
tion through daily orders and commu-
nications.
Daily utilization
IKEA
IKEA DCs IKEA Sto-
Wharehouse Customers
8
8 10 9
5 6
Fleet Lack
part-
Logistics part-
ners
The IMP Journal Volume 1, number 1
Within Swedwood then the
daily production of empty legs takes
place by handling the interfaces HDF-
Leg line (from inventory management
to production) and the last production
interface Leg line-Empty legs (arrow 3
in figure 3). The specialized features of
this facility and Swedwood’s manufac-
turing experience are essential to han-
dle this interface. The required exper-
tise and routines range from order
management and production planning
to detailed technical competence on
how to operate the leg line and control
the quality of its operations. The last
interface that produces low-weight is
Empty legs-Lack (arrow 4 in figure 3):
Swedwood needs here to organize its
production knowing that the right leg
will need to be packed together with
the right table top. This requires keep-
ing track of the exact volumes to be
produced for the many variants of
Lack: half a dozen different colours,
square and triangular legs, and differ-
ent lengths. Thus Swedwood needs
the production planning ability to have
the right legs ready at the right time to
be packed with the right tabletops,
without causing delays or piling up
costly inventories that wait for their
complements.
At the same time, the Empty
legs-Lack interface is also the first one
that actually utilizes the newly pro-
duced lower weight feature. A pair of
scales would tell you that the packed
Lack really weighs about a kilogram
less than a solid-wood leg one. But
this is just the beginning of a broader
process of utilization of this value that
stretches to the whole network on the
right side of figure 3, where we en-
counter many new resources that were
not involved in the original value em-
bedding efforts. It makes sense to start
by looking at the first business units
that interact with Lack as soon as it
starts its journey from Swedwood Po-
land to reach customers around the
globe: these units are IKEA’s logistics
partners who pick whole pallets of
Lack at Swedwood’s delivery ware-
house and load them on their railway
wagons and containers. IKEA out-
51
sourced all of its logistics to hundreds
of transporting companies, but the
overwhelming majority of IKEA’s deliv-
eries are handled by 50 close partners
(e.g., Maersk, TNT and Scandi Inter-
link) with whom IKEA has long-term
relationships. These partners have
often huge transport fleet with hun-
dreds of trucks and vessels (Maersk
has about 200 vessels).
A key interface for the direct
utilization of Lack’s low-weight value in
transportation is in fact Lack-Fleet (ar-
rows 5 on figure 3): this interface con-
cerns the single transportation mean –
a truck or a wagon. Hundreds of pal-
lets of Lack are loaded on these facili-
ties from Swedwood’s warehouse in
Poland to be transported first to IKEA’s
30 distribution centres, spread on four
continents, and then to IKEA’s over
200 retail stores. The heavier the
product and the more costly for Lack
by each single kilometre: heavier loads
consume in fact comparatively more
fuel. Even if the weight loss thanks to
empty legs for each single table is
small, this should be multiplied by the
2.5 million pieces (and thousands of
pallets) transported yearly over several
kilometres around the globe. When
logistic partners set a price for their
services, they consider the weight of
the goods they transport: it should not
go over certain limits for total loads
and, especially, for the most weight-
sensitive facilities such as small
trucks, goods weight is an integral part
of cost calculations. In relation to every
delivery, logistics partners invoice
IKEA and the effect of having trans-
ported a lower-weight Lack becomes
visible as a lower cost for IKEA in the
interface Logistic partner-IKEA units
(arrows 6 in figure 3).
Having suppliers perform
transportation activities not only allows
IKEA to focus on its core activities
(product development, warehousing
and retailing), but is also an excellent
way for IKEA to keep strict control and
daily monitor transport costs, through
logistics partners’ invoices. But IKEA
can also utilize internally the low
weight value of Lack: both IKEA distri-
The IMP Journal Volume 1, number 1
bution centres and retail stores per-
form extensive goods handling activi-
ties, such as unloading incoming
trucks or containers and filling storing
areas and racks in their large ware-
houses. In addition, distribution cen-
tres also need to load pallets of Lack
on outgoing transport facilities, while
retail stores need to open these pallets
and place single pieces in the exhibi-
tion and take-yourself areas. During
these activities important interfaces
emerge between the lighter Lack and
all internal logistic facilities (see arrows
7 in figure 3): the forklifts, cranes and
the floor personnel at IKEA’s whole-
sale warehouses and retail stores can
draw advantage from moving lighter
pallets and pieces of Lack. This in-
creases the speed of their operations,
and reduces human fatigue or energy
consumption by forklifts and cranes.
But another interesting effect of
handling lighter Lack tables emerges
in the interface between internal logis-
tic facilities and the IKEA unit where
they are located (arrows 8 in figure 3):
this effect is a reduction of the internal
logistic costs. Even if this improvement
is in absolute terms minute, it has a
great relative impact on a low price
item such as Lack. IKEA is so con-
cerned about even tiny improvements
in all external and internal logistic in-
terfaces to have developed a very pre-
cise cost accounting system that con-
stantly scrutinizes the cost dimension
in interfaces 6 and 8.
But the utilization process of
Lack’s low weight is not over yet. What
about the interface Lack-Customer
(arrow 9 in figure 3)? Individuals and
families visiting IKEA on a Saturday
afternoon are favoured by a lighter
Lack when they carry it to their cars:
this increases their satisfaction with
IKEA’s total offering and induce them
to return to IKEA. However, the inter-
face lighter Lack-Customer is also af-
fected in a more concrete way: while
strolling around IKEA’s exhibition area,
many visitors get the idea of buying
things they had not planned. While this
impulse easily lead to an actual pur-
chase for such items as a potato
52
peeler or even a frying pan, it is much
more unlikely to occur for a table! Or at
least, it was so until the further weight
reduction allowed by empty legs. Now
IKEA customers may purchase Lack
tables by impulse, because the lighter
weight eliminated an obstacle to this
buying behaviour. Therefore, Lack’s
low weight affects a final interface,
Customer-Retail unit (arrow 10 in fig-
ure 3), by increasing the revenues of
this unit and by increasing the effec-
tiveness of their short-term price cam-
paigns on Lack. Now, when Lack is on
sale, chances are higher that some
customer will really pick it up and walk
with it all the way to IKEA’s cash lines.
To summarize the whole value
utilization process, low weight is a
valuable feature for transport, distribu-
tion and retail units that can perform
their activities at lower costs and
hence for IKEA that can make large
savings. But low weight is also valu-
able for customers that take Lack
home and for retail units that can sell
more of it, especially those purchased
by impulse. Therefore, some inter-
faces (e.g., Logistic partner-IKEA) util-
ize low-weight for cost reductions,
whereas others (e.g., Customer-Retail
unit) utilize it for revenue increases.
The latter type of utilization was not
planned by IKEA, who aimed to re-
duce transportation costs. Above we
focused on the individual interfaces
where the low-weight feature is util-
ized, but there is a most fundamental
and diffuse way in which the whole
network (and especially the final cus-
tomer) utilizes low weight and this fea-
ture allowed further savings in trans-
portation that in turn contributed to
keeping Lack’s retail price at €9.9.
5. The Holmen News Case: The
Creation Of A Low-Weight Paper
The early 1970s were a turbu-
lent period in many ways, including for
the paper industry and for the paper
producer Holmen. For a long time
Sweden had been considered a forest
The IMP Journal Volume 1, number 1
country with an excess of forests and
raw material for the forest industries.
However, in the beginning of the
1970s the industry expected an immi-
nent wood shortage, which would lead
to increased prices. Since the paper
industry was a large user of wood, in-
creased wood prices were seen as a
great threat. Another important issue
at this time was the OPEC negotia-
tions in 1973 that led to a dramatic in-
crease of oil price and what was to be
known as the “oil crisis”. Since the pa-
per industry was a significant user of
oil, the increased cost severely af-
fected profitability. Both these events
induced the paper industry and the
focal business unit in this case, Hol-
men-owned Hallsta paper mill, to start
searching for methods and technolo-
gies that could save on these two raw
materials, wood and oil.
Hallsta was founded in 1915 to
serve the growing newspaper market
in the Stockholm area. Today, this mill
has a production capacity of 800,000
tons of paper and 900 employees. Its
customers are mainly the large pub-
lishing companies in Germany,
France, Holland and Great Britain.
Hallsta’s owner, Holmen, is one of
Europe’s largest producers of printing
paper with a turnover of €1 billion and
2,500 employees: its four paper mills
produce annually capacity almost 2
million tons of paper.
In the early 1970s Hallsta con-
sumed huge quantities of wood and
faced the threat of higher wood prices.
Hence finding a technology that could
be more wood-efficient became a pri-
ority. In addition, Hallsta consumed
large quantities of oil in two major ac-
tivities, the production of chemical pulp
and of steam that was used in the dry-
ing section of paper machines. A solu-
tion to the increased cost of both raw
materials would be to produce a paper
with lower grammage weight based
only on mechanical pulp. This solution
excluded all inserts of chemical pulp
previously required to strengthen the
pulp. But a new type of mechanical
pulp was needed that was not present
at that time. However, with such a pa-
53
per, fewer fibres would be needed to
produce the same printing surface.
Fewer fibres would also be steamed in
drying the paper, and accordingly less
oil would be needed. This change was
to be far from easy to manage. Sev-
eral interfaces, both technical and or-
ganizational had to be moulded and
coordinated before this could happen
on a broad scale and the control of the
change was never solely in the hands
of Holmen and Hallsta. Today, Holmen
markets a product, Holmen News, with
a reduced grammage weight that
range from 40 to 48 grams per square
meter.
5.1 Creating low-weight paper at
PM12
In the early 1970s the standard
grammage weight for newsprint was
52 grams per square meter. This stan-
dard was accepted both by the users
and customers, the printing houses
and publishing companies, and by the
producers, the paper mills. When Hall-
sta decided to move from 52 down to
48 grams, the goal could be attained
only if several technologies improved.
The involved engineers understood
that “a lower grammage weight per
square meter puts some serious de-
mands on the final product, the news-
print. And as paper is produced by
pulp, new requirements on the pulp
were made, and thus accordingly also
on the technology that produces the
pulp”. A technology to produce a
stronger pulp was accordingly needed.
Until 1974, Holmen based its
paper production on the Stone Ground
Wood (SGW) pulping method, where
wood logs are pressed against a rotat-
ing stone. As this method shortens the
wood fibres, chemical pulp (with its
longer fibers) had to be added to the
pulp in order to create a pulp with the
right features, especially strength. The
SGW method had been the dominat-
ing pulping technology for almost 100
years, when the expected shortages
and increased prices in wood and oil
made some firms question the estab-
lished technology. In 1974, Hallsta
The IMP Journal Volume 1, number 1
was about to invest in a new paper
machine and more pulping capacity
was needed to supply it. The board of
directors of Holmen had decided to
invest in the SGW technology, but
then came the oil crisis and the reports
on wood shortage. Suddenly, they de-
cided to abandon the old established
technology in favour of a new, un-
proven one, Thermo Mechanical Pulp-
ing (TMP), based on so called “disc
refiners”. “The accounting people had
given us some reports and we could
see how margins would be affected by
the increased prices. We had to do
something”, as one of the involved
people puts it.
Another unit within Holmen had
already used equipment for wooden
board production, where pulp was
produced in disc refiners, by beating
wood chips between two counter-
rotating discs or plates. The quality of
the pulp had however not been high
enough to be used for newspaper pro-
duction. Still Hallsta decided to invest
in disc refiners from the Swedish com-
pany Defibrator in 1974. An engineer
at Hallsta explains the choice of sup-
plier: “Defibrator had long experience
from developing equipment for the pa-
per industry and was known to be a
very innovative company. They had
worked with wood chips defibration
and they were already a supplier to
another Holmen facility.” Defibrator
had been one of the pioneers in the
development of the refiner technology
and the firm wanted to move it into
pulp production for the newsprint in-
dustry. In Hallsta they found a cus-
tomer that had clear incentives to in-
troduce the technology and that could
become a reference mill for other cus-
tomers: Defibrator needed a reference
customer for the new technology and
Hallsta needed a process that could
help it to lower its oil consumption, its
chemical pulp use and produce a pa-
per with lower weight.
The relationship became very
close and the two parties jointly devel-
oped the TMP process. Hallsta was
the first wholly integrated paper mill to
invest in the technology and therefore
54
quality issues were of great impor-
tance. Early quality problems included
the high content of “shives” or unproc-
essed fibres that caused problems in
the paper machines, and more criti-
cally in the customers’ printing proc-
esses. By increasing the refining in-
tensity and by changing the patterns of
the segments, these problems could
be overcome. These changes were
based on trials and errors: “Still today,
we don’t know what happens inside a
disc refiner, even if the knowledge cer-
tainly has increased on what parame-
ters to use in order to increase pulp
quality” as an engineer at Defibrator
put it.
Eventually, a number of bene-
fits could be reached when the pulp
attained an acceptable quality level,
measured on the quality index Free-
ness, which indicates the pulp’s drain-
age ability in the paper machine. This
index also indicates other features
such as certain strength properties.
Hallsta’s operators realized that by
increasing the refining intensity paper
got stronger, as the length of the fibres
were not damaged by the new me-
chanical pulping technology. Thus,
less chemical pulp was needed as re-
inforcer. As chemical pulp only uses
50% of the wood substance, paper
based solely on chemical pulp risks
having too low opacity. Hallsta realized
that a higher share of mechanical pulp
increased the opacity, which allowed
producing a thinner paper: a paper
with lower grammage weight! As the
TMP technology reached higher
grounds, Hallsta and Defibrator taught
other customers how to run TMP mills,
how to avoid quality problems, and
what pulp recipe worked for what
products. As an engineer at Defibrator
put it: “The development of the TMP
process lay the ground to lower the
use of chemical pulp and facilitated the
development towards a thinner paper.
The relationship with Hallsta was in-
strumental in this.”
A few years later another inno-
vation further reduced the consump-
tion of oil in paper making. Defribator
managed to pressurize disc refiners so
The IMP Journal Volume 1, number 1
that the large amounts of steam cre-
ated when wood fibers are defibrated
in the interaction with the refiner seg-
ments, could be recovered and used in
paper machines’ drying section. The
need for steam here had already been
reduced by a stronger pulp which in
turn allowed a lower grammage.
Moreover now that steam was pro-
vided by the disc refiners in the new
pulping process, Hallsta’s oil con-
sumption could be reduced by 90% in
15 years. This is despite the fact that
the mill’s production volumes had
doubled in the meantime. However,
joint development efforts with Defibra-
tor were not enough for Hallsta to de-
velop a lighter paper: a complemen-
tary development was necessary in
electronic control devices.
A critical factor for Hallsta to
meet the target of 48 grams per
square meter was the possibility of
controlling the paper web’s profile on a
continuous basis, on-line. When the
grammage became lower, the paper
got thinner, which meant that the
numbers of running meters per roll of
paper increased. This required a much
more even paper profile, because
small irregularities along the paper
web caused problems on the rolling
machine and on the tambour, where
the paper is cut to dimension. To
tackle these problems Hallsta collabo-
rated with ABB, who had supplied
Holmen production sites for some time
with control devices. Hallsta had al-
ready invested in ABB’s AccuRay sys-
tem, which was further developed to
handle thinner paper. One of the paper
machine managers describes their re-
lationship with ABB as follows: “The
cooperation was quite intimate with
ABB. We had long discussions on
what was possible to do and they ex-
plained us how we could reach our
goals.”
Another supplier, the paper
machinery manufacturer Voith, con-
tributed to solving Hallsta’s problems
with low grammage by developing the
paper machine in a key dimension.
The “free draughts” in paper machines
had historically played operators bad
55
tricks, since they are the areas where
different sections interface with each
other (e.g., the pressing and drying
sections) and where the paper webs
hang loose. This required a very
strong paper web and constrained the
speed of paper machines. The paper
web was stretched in the free draughts
and, if it contained shives or weak
parts, the whole web broke down and
the paper machine had to stop. Every
stop is extremely costly, and a high
priority goal is to lower unplanned
stoppage time. Thus Voith made the
free draughts of the new paper ma-
chine, PM12, less “free”. This devel-
opment could have eased up strength
requirements, but it also allowed in-
creasing speed in the paper machine.
Therefore, despite the elimination of
free draughts, the paper web had to
become stronger due to the increased
speed. Such strength depends on the
fibre-to-fibre bonding created in the
pulping process, when wood fibres are
defibrated. By examining how the fea-
tures of the pulp changed with in-
creased load and changed segment
patterns, Hallsta improved the strength
quality of its pulp: Hallsta and Defibra-
tor found out together that the higher
the intensity in wood refining, the
stronger the pulp. As a consequence,
the higher load necessary to increase
refining intensity led to an increased
use of electricity.
Lower grammage was some-
thing that also Hallsta’s customers
wanted. One of these is Dagens Ny-
heter, Sweden’s biggest newspaper.
But to avoid unwanted effects with a
lower weight paper, Holmen and
Dagens Nyheter had to work together
until the printing presses could run
smoothly. In printing processes, a
thinner paper, if it also is weaker, can
create great problems, such as web
breaks. Thus, Hallsta and Dagens Ny-
heter’s printing house together
trimmed the printing process based on
a thinner paper. A lower weight paper
can cause problems not only for Hall-
sta’s customers, but also for the cus-
tomers’ customers: when the paper
gets thinner, opacity can become
The IMP Journal Volume 1, number 1 56

ABB Products
Holmen
Facilities

4 6 Org.

Units
5
Disc refiners Pulp PM 12
News-
(TMP)
print 7
1 Printing press
2 3 8
Hallsta
Dagens Nyheter
Akzo
Defibrator

Fig. 4. Some Of The Resources Involved In Creating Low-Weight Holmen News

insufficient, that is, the paper becomes
transparent and ads or pictures can be
seen from the other side of a page.
Simultaneously with lower grammage,
the demands on opacity were increas-
ing. One of Hallsta’s customers had
had problems with ads where it was
possible to read text from the reverse
of a page. As the manager for PM 12
put it: “In order to solve this problem,
The resources that embedded
low-weight value in Holmen’s News
are illustrated in figure 4 above. We
have selected eight specific interfaces
that we now scrutinize more explicitly:
1) Disc refiner-Pulp: This interface had
to be created in the first place and had
to fit into the existing technological
structure. It also creates many of the
features later activated in the paper
machines and in the printing presses.
For example the strength features, so
critical to producing a thinner paper,
are created in the TMP process.
2) Defibrator-Hallsta: This relationship
was pivotal for introducing the pulping
technology that decreased wood and
oil consumption. This relationship al-
lowed both companies to learn a lot
about TMP at a time when this tech-
nology was relatively unproven.
the operators had to put in clay that
increased opacity”. In addition, the
amount of ink and how pictures were
composed had to be adapted to the
new grammage. This was something
that Dagens Nyheter in turn had to
teach its advertising customers and
the advertising agencies. The ink pro-
ducer Akzo also had to adapt its prod-
ucts to the thinner newsprint.
3) Hallsta-Newsprint: For the unit that
produces the paper there were clear
benefits in going from 52 to 49 and
then to 45 grams per square meter.
Dependence on wood and on oil would
decrease and this would increase (or
maintain) profitability for Hallsta and
Holmen.
4) Relationship ABB/Hallsta-Paper
machine12: The relationship between
Hallsta and ABB is directed towards
the production facility PM12. ABB had
a long-term experience of industrial
control systems, acquired through
several business relationships, while
paper making had a history of several
decades at Hallsta. Moreover, the abil-
ity and the motivation to solve produc-
tion problems and develop the ma-
chine’ capabilities to control the paper
web’s profile on-line was high at both
parties.
The IMP Journal Volume 1, number 1
5) Paper machine-Printing press: This
interface links two production facilities
that interact systematically with each
other. The printing presses at Dagens
Nyheter are supplied almost exclu-
sively with paper from specific paper
machines, since the paper features
created in a paper machine are almost
unique, even if newsprint is considered
to be a standard product. This induced
the printing site of Dagens Nyheter to
combine its three printing presses with
paper from certain paper machines
and with inks from specific suppliers in
order create satisfying resource com-
binations in the printing presses.
6) Holmen-Dagens Nyheter: The inter-
face between Holmen and Dagens
Nyheter also involves Holmen’s pro-
duction units, such as Hallsta. Dagens
Nyheter’s demands on a lower gram-
mage weight were channelled into the
production units and back to the print-
ing sites. There had to be some inter-
action between the producer and the
user of newsprint in order to create
both a reliable printing process and a
nice looking end product, a newspaper
with lower grammage.
7) Relationships Dagens Ny-
heter/Akzo-Hallsta/Dagens Nyheter:
This interface involving three firms is
“sleeping” because they interact only
when there is a specific need for it.
With a lower grammage there was a
need to coordinate the use of inks and
damp in the printing process. Thus,
there was a need to engage Akzo, the
supplier of ink and chemicals, in order
to fix problems of opacity, set-offs,
web-breaks etc. Dagens Nyheter’s
personnel work specifically with the
products from specific paper machines
and know from long experience how
they reacts with different types of inks
and chemicals.
8) Disc refiners-Dagens Nyheter: This
is an indirect and invisible interface as
the development in the TMP technol-
ogy towards a stronger pulp impacts
the possibility for newspapers such as
Dagens Nyheter to go down in gram-
mage weight and print more efficiently.
Few people are aware of this interface,
namely Hallsta’s Technical Marketing
57
function, which can tell customers how
strength features created in the TMP
process affect the printing press.
5.2 The daily production and utiliza-
tion of low-weight newsprint
Low weight is utilized daily in
several ways and by several actors in
the network around Hallsta. There are
several actors with economic incen-
tives to use a lower grammage and we
shall illustrate here how these incen-
tives intervene to coordinate the inter-
faces between technical and organiza-
tional resources.
Wood is the main input in a
chain of activities: it is first cut into
small chips and then defibrated in the
disc refiners that produce pulp. Today,
Hallsta has three TMP units that pro-
duce almost all of its pulp. Pulp is then
the input for paper making, which ba-
sically consists of taking away most of
the water from the pulp to create a
web of wood fibres that bind to each
other into a paper sheet. In order to
accomplish this, a paper machine con-
sists of three major parts or sub-
systems. The first step is the vire sec-
tion, where the draining activities start
and the paper web gets its basic pro-
file. In the second step the paper web
goes through a pressing section,
where further water is drained from the
web. The last step contains a drying
section where further water is heat-
dried from the paper web. The thicker
the paper, the longer it will take to dry
it and thus, the more steam is needed.
Producing stream is energy demand-
ing and as described above had used
oil for a long time. As the steam pro-
duced in the disc refiners could be re-
covered and “re-used” in the paper
machine’s drying sections, oil con-
sumption was substantially lowered.
One key interface in the daily
utilization of lower grammage is the
one between Hallsta’s PM12 and
Dagens Nyheter’s new printing site
DNEX’s printing presses (arrow 1 in
figure 5 below). The paper quality is
tried out with the customer, and its fea-
tures should be held constant so that
The IMP Journal Volume 1, number 1
the printing process is reliable for the
customer. Dagens Nyheter’s printing
site monitors paper quality several
times a day to identify discrepancies
and the exact paper roll that caused
problems. Thanks to bar-coding, Hall-
sta can consult its IT system to see if
there were any profile problems on
that paper web in their production.
Low weight is utilized from the
very start of the printing process:
changing paper rolls create tensions in
the paper web which can lead to web
breaks if the web is not strong enough.
Thus the interface between paper and
printing press is important. How long a
paper roll lasts depends on the paper
grammage: the thinner the paper, the
longer the paper roll will last, and this
is positive for several involved actors:
Fewer roll changes reduce the risk of
web breaks. Individual operators’ work
gets smoother, since they need to
change fewer rolls. Purchasers save
money since the paper is priced per
ton so that more printing surface in a
longer roll only costs the same amount
of money. Finally, newspaper distribu-
tion gets more efficient when the paper
has a lower weight: a publisher is able
to print the same number of newspa-
pers, with a 9% lower weight. Trans-
port costs to distribute the same num-
ber of newspapers can be reduced.
And the last component in the chain,
Daily production
Akzo (Inks)
7
Wood 1
PM12
3 8
5 News-
TMP
Pulp
4
Hallsta
Voith
Advertiser
Fig. 5. The Resources Involved In Daily Producing And Utilizing Newsprint’s Low
Weight
58
the delivery man, can now carry lighter
newspapers.
Another important indirect in-
terface links TMP to distribution (arrow
2 in figure 5). A thinner paper makes
the production system a bit more vul-
nerable and dependent on the strength
created in the TMP facility. In fact, if
the paper breaks in DNEX’s presses
distribution can be delayed and the
publisher cannot charge money from
advertisers for newspapers reaching
the reader too late. Thus, distribution
is dependent upon the features cre-
ated long back in the resource net-
work. The producing unit Hallsta too
utilizes lower grammage: a critical in-
terface in daily production is the one
between PM12 and TMP (arrow 3).
These two facilities must coordinate
both volume requirements and quality
demands. PM12 has clear demands
on the strength features that the pulp
must meet in order to function properly
in its operations. Arrow 4 in figure 5
illustrates the interface between the
advertising firm and the product news-
print. This interface is crucial for the
whole network, because it is the ad-
vertisers who are the economic back-
bone in the whole network. The de-
mands from the advertisers drive to a
large extent the publishers, which in
Daily utilization
Bonnier
Dagens Nyheter
6
DNEX
Readers
News Distribution
Printing paper
2
The IMP Journal Volume 1, number 1 59

turn push these demands upstream to the network around Hallsta. Printing
the suppliers of raw materials. Tech- can be performed with greater effi-
nically, the advertisers need to be ciency, and so can paper making. But
aware of the newsprint features in or- most importantly low-weight paper al-
der to obtain a satisfying final print: lows saving on the largest cost com-
DNEX, the printing site, contributes to ponent, wood. Low weight is however
teaching such features to its advertis- also a source of potential problems:
ing customers in the network. The in- advertisers might face poorer ads due
terface between the pulp and PM12 to opacity problems, and distribution
(arrow 5 in figure 5) determines the can be hurt by web breaks caused by
economy for the paper machine. A a lower-strength paper. This could
stronger pulp makes more efficient have negative consequences for the
paper making and reduces disruptions. whole network, because advertisers
But a stronger pulp also consumes contribute a significant share of reve-
other resources, so that this interface nues in the network. The interfaces
spreads to TMP the demands from the illustrated in the two cases will now be
paper machines, which are so eco- further analysed and discussed.
nomically important for the paper mill.
DNEX and the ink manufac- 6. Analysis And Discussion Of The
turer Akzo have developed a rather Two Cases
close interface (arrow 6 in figure 5):
the more adapted the whole process is
The first striking difference be-
in relation to a certain newsprint grade,
tween the Lack case and the news-
the more will also printing ink have to
print case concerns the way value
become adapted to create good
embedding and daily value produc-
runability and printability for the printer.
tion/utilization are related in the two
The interface Hallsta-Dagens Nyheter
cases: the two sub-processes are
(arrow 7 in figure 5) rests on a long
more clearly separate for Lack than for
term relationships started in the 1910s
newsprint. In fact, embedding low-
when Holmen started to supply news-
weight value in Lack could be
print to Dagens Nyheter. It was also in
achieved through a relatively fast and
the relationship with Dagens Nyheter
contained development project, involv-
that Hallsta established the new stan-
ing just a couple of actors and few re-
dard, low weight paper, and was able
sources for a few months; afterwards
to spread it to other customers. The
the rest of IKEA’s network was ready
relationship with Dagens Nyheter is
to start daily utilizing this value. On the
often the start of new product refine-
opposite, embedding low-weight value
ments that later on become a standard
in newsprint was a much more de-
grade for smaller customers. Finally,
manding process, which required
as indicated above, the interface be-
much longer time and was never con-
tween newspaper and distribution ac-
tained within a single project. More-
tivities (arrow 8 in figure 5) is critical.
over, several direct and indirect users
Even if the low grammage feature is
needed to be involved in the value-
institutionalized, it can not really be
embedding sub-process in order to
taken for granted. Now and then print-
test how the many indirect and highly
ing presses have web breaks that de-
interdependent interfaces would react
lay distribution and sometimes the
to the changed weight of newsprint. As
newspaper is not distributed. This in-
a consequence, daily production and
terface is a critical one for the econ-
utilization of newsprint’s low-weight
omy of a newspaper company as ad-
was happening almost simultaneously
vertisers will not pay for ads that never
as this value was being embedded,
reached consumers.
also because the actors that inter-
To sum up, low weight is a
valuable feature for several actors in
The IMP Journal Volume 1, number 1 60

vened in the two sub-processes were
largely the same.
On the contrary, in the Lack
case, most of the users of low weight
appear on the scene only after the
value has been embedded in Lack.
That is after the creation of the leg
line. IKEA may well have initiated the
value embedding episode, but it did
not participate to it. Certainly, a lot of
marginally new resource combinations
were initiated by IKEA’s distribution
units after they started their daily utili-
zation of Lack’s low-weight. For in-
stance, more pieces of Lack could be
placed on the same rack, fewer people
could be utilized to move it and its in-
ternal logistic time could be reduced.
These marginal changes in resource
interfaces are always ongoing. They
are a sort of hidden and continuous
value embedding process that must
always accompany daily value produc-
tion/utilization if users really want to
extract as much value as possible
from a new value-bearing feature.
Only by interacting after some time
with the modified resources, can they
learn how to extract value from it. And
both cases show that daily value utili-
zation requires an almost simultane-
ous embedding on the using side,
through re-combinations of resource
that can be so marginal to look like
routine combinations.
However, a key difference from
the newsprint case is that these user-
related re-combinations of resources
were undertaken only after low-weight
had already been embedded in Lack’s
legs. Instead, printing houses and ink
suppliers intervened in daily use and
testing of the new newsprint solution
while it was emerging and low-weight
was being embedded. The clearer or
softer demarcation between value em-
bedding and daily value produc-
tion/utilization in the two cases depend
on the configuration of resource inter-
faces, to which we turn now for com-
paring the two value creation proc-
esses. The comparison of figure 6
penetrates the configuration of techni-
cal, social and mixed resource inter-
faces, focusing on the following is-
sues:
1- Technical interfaces: their number,
complexity, degree of interdepen-
dency, spatial and disciplinary span,
indirect and hidden technical inter-
faces, and the level of investments.
2- Organizational interfaces: the num-
ber and variety of actors involved; the
complexity, interdependency and dis-
persion of the interfaces and business
relationships among units.
3- Mixed interfaces: the interfaces be-
tween technical and organizational
resources show how actors try to co-
ordinate and control value creation,
their initiatives and type of dominating
rationality. Here we also trace the
power and interests of specific actors
during value creation.

Lack Newsprint
Complexity: Complexity:
-Rather straightforward technology -More complex technology
-Simple interfaces, limited numbers -Complex interfaces, many different
of technologies (one key facility) technologies (several key facilities)
Configuration
of technical in-
Interdependency: Interdependency:
terfaces:
-Visible/direct interfaces -Many hidden/indirect interfaces
complexity, in-
-Few technical interdependencies -Heavy technical interdependencies
terdependency,
making harder to fit the new feature
and dispersion
into a structure
Dispersion:
-Restricted technical competence Dispersion:
span -Broader technical competence span
The IMP Journal Volume 1, number 1 61

-Close interfaces in value embed- -Distant interfaces in value embed-

ding ding

-Small investments, focussed on -Large investments, to develop sev-

developing one product and one eral technical solutions across the
facility whole network

Complexity: Complexity:
-Fewer actors involved in value em- -Many actors involved in value em-
bedding bedding
-Many but quite homogeneous ac- -Fewer but very different actors util-
tors utilize the value, knowing little ize value, intermediate users must
about it know much about it
Configuration
of organiza- Interdependency: Interdependency:
tional inter- -Few, mainly direct organisational - Many, both direct and indirect, or-
faces: interdependencies ganisational interdependencies
complexity, in-
terdependency, Dispersion: Dispersion:
and dispersion -Only two business relationships -At least four relationships among
among three units are enough for six units are necessary to embed
value embedding value
-Daily value production/utilization -Daily value production/utilization
mostly within units linked inside across a variegated networks of in-
IKEA’s hierarchy dependent actors

Coordination & control: Coordination & control:

-IKEA chose the actor to handle a
technical interface problem, who in
turn identified the partner for de-
tailed technical development
-Inter-org. interfaces actively han-
dled by IKEA with goal to create
low-weight value
-Strong coordination of value crea-
Configuration
tion
of mixed inter-
faces:
Initiative & rationality:
Coordination &
-One actor with strong motivation
control, initiative
takes initiative and overviews the
& rationality, and
process
power & inter-
-“Overall” rationality, due to a cen-
ests
tralized embedding process
‘ Power & interests:
Power & interests:
-IKEA’s interests against the net-
work, but also for the network if
gains for all exist
-All actors seem to win something
-Minimal need for compromises
-Hallsta chose a technical solution
and then involved a partner, but
many other actors had to intervene
in value embedding
-Many inter-org. interfaces but not
explicitly handled to create low-
weight value
-Loose coordination of value crea-
tion
Initiative & rationality:
-Several actors intervene but no one
takes strong initiative
-“Local” rationality, due to a dis-
persed embedding process
-Several conflicting interests need to
converge, but no mediator exists
-Some actors risk losing on some
dimensions
-Many local compromises

Fig. 6. Comparison Of Resource Interfaces In Value Creation For The Lack And
Newsprint Cases
The IMP Journal Volume 1, number 1
6.1 The configuration of technical in-
terfaces in the two cases
The creation of Lack’s low-
weight value relies on fewer and rela-
tively less complex technical interfaces
than in the newsprint case. Moreover,
Lack’s value relies basically on two
main technologies and competence
areas; wooden furniture manufacturing
and logistics. Newsprint’s low-weight
is created and utilized through several
technologies and competence areas;
foresting, pulp making, paper produc-
tion, printing, advertising and logistics.
Accordingly, there is only one facility
that is essential for Lack’s low-weight,
that is, Swedwood’s leg line, com-
pared to the many facilities that play a
key role for newsprint (disc refiners,
paper machines, and printing
presses). In the newsprint case, the
investments for value creation were
much larger and spread across the
whole network, in several products
and facilities, than in the Lack case.
The newsprint case also presents
several indirect and hidden interfaces
between production and use of the
focal low-weight feature (see inter-
faces 1 and 2 in figure 5), compared to
the quite visible and direct interfaces
between production and use of Lack’s
low weight (see figure 3).
This different pattern of in-
vestments and the emergence of indi-
rect and hidden interfaces reflect an-
other important difference between the
two case studies, namely the strength
of technical interdependencies be-
tween the resources in the two net-
works. Interfaces are in fact much
more interdependent in the newsprint
case: this implies that any change,
such as those brought about by the
TMP technology, have strong effects
on several other technical interfaces,
such as those with paper machines,
printing presses, and all the way down
to ads production. Moreover, differ-
ently from the Lack case, these effects
must be coped with through adapta-
tions in the affected resources; other-
62
wise problems would appear in the
whole technical structure. The need to
have the new low-weight feature of
newsprint really fit into this more com-
plex technical structure is a major rea-
son for having value embedding tightly
connected, indeed almost simultane-
ous, with daily value production and
utilization. This contrasts with the
fewer and looser technical interde-
pendencies around Lack that allow the
two sub-processes to be more clearly
detached. Thus, Lack’s low-weight can
more easily be embedded first and
produced daily and then utilized. This
is because no special technical adap-
tations on the using side need to be
made to utilize this improved feature.
A final difference concerning
technical interfaces, but already hint-
ing at the organizational ones, is the
spatial dispersion of technical inter-
faces during value embedding. Mirror-
ing the lower degree of technical com-
plexity and interdependency, this dis-
persion is minimal in the Lack case
(Swedwood and Wicoma being lo-
cated just 100 meters apart) compared
to the newsprint case, which required
the involvement of distant partners and
even of facilities from the using side in
order to test the results of the new
type of paper before launching it.
6.2 The configuration of organiza-
tional interfaces in the two cases
Only 3 actors/business units
are involved in the embedding of low-
weight in Lack, relying on two estab-
lished business relationships between
them (figure 2), whereas as many as 6
actors and 4 business relationships
are necessary for newsprint (figure 4).
Another important difference concerns
the organizations on the using-side
and their awareness of the new value-
bearing feature. Several units utilize
Lack’s low-weight value, but they do
so without knowing much about it,
maybe just by becoming aware of it on
the spot. Newsprint’s low-weight is
instead utilized by fewer actors, but
The IMP Journal Volume 1, number 1
intermediate users such as printing
houses need to know a lot about this
new feature to be able to exploit it. The
degree of awareness and involvement
necessary to exploit the new value-
bearing feature is clearly related to the
degree of technical complexity and
interdependencies that we to pointed
above. If the latter is high, units need
to make special technical adaptations
before value comes to fruition to them,
which requires these units to be aware
of which resources they need to re-
combine and how.
Even if the low-weight of Lack
has a larger number of direct users
(hundreds of carriers and IKEA’s dis-
tribution units), these users are a rela-
tively more homogeneous group, in
terms of their core activities (mostly
logistics) and in terms of how they
treat Lack. This is by minimally adapt-
ing their other resources to a product
viewed as standard. The low weight of
newsprint may have fewer users, but
they are very different types of actors,
including Hallsta itself (who saves on
raw material, wood), specific printing
houses (who save money in several
ways) and transporters (who carry less
weight): all these users utilize clearly
the low weight of newsprint in quite
different ways. Finally, the organiza-
tional interfaces on the using side of
the network are different also from a
governance point of view: except
Kronopol and IKEA’s logistic partners,
all the units taking part in the daily
production and utilization of Lack’s
low-weight are somehow linked to
IKEA through indirect ownership
(Swedwood) or hierarchical links
(IKEA’s distribution centres and retail
stores). The majority of the units tak-
ing part in the same process for news-
print are instead spread across a
variegated network of independent
firms.
The above configuration of or-
ganizational interfaces further explains
the clearer separation of value em-
bedding from daily value production
and utilization in the Lack case. This
was a solution affecting many organi-
zations in the same way, which did not
63
need to be aware of it nor to adapt to
it. The solution could easily be first
embedded by a couple of local part-
ners and then pushed rather straight-
forwardly to the “others”, also thanks
to IKEA’s governance control over
most using units. The newsprint case
presents an opposite situation on all
counts: there were fewer highly het-
erogeneous users, all had to adapt
and learn a lot about the new feature
before accepting and really exploiting
it and they all were independent and
distant firms. This pushed for connect-
ing together value embedding and
daily utilization of newsprint’s low
weight.
6.3 The configuration of mixed inter-
faces in the two cases
The mixed interfaces and the
attempts to coordinate the value crea-
tion process shed further light on how
the two sub-processes of value em-
bedding and daily production/utilization
are related in the two cases. It is use-
ful to start by comparing how the two
value embedding processes were set
in motion. In the Lack case, IKEA iden-
tified first in Swedwood the ideal can-
didate to handle all problems concern-
ing Lack’s technical interfaces in the
hope that this experienced partner
could envisage the much needed
technical solution; then Swedwood
identified in turn Wicoma as the ideal
partner for detailed technical develop-
ment. One might say that IKEA “out-
sourced” this sub-process of the whole
value creation to Swedwood, allowing
a certain leeway, as long as a satisfy-
ing technical and economical solution
could be attained by Swedwood and
its own partner. As we stressed above,
this solution (Lack’s empty legs) could
then be launched to the rest of a net-
work that had not been involved before
and that now receives basically a
standard resource to be daily utilized.
In the newsprint case, Hallsta
proceeded in an opposite way as far
as the interplay of the technical-
organizational interface is concerned.
Hallsta first of all identified the techni-
The IMP Journal Volume 1, number 1
cal solution (TMP) and only then in-
volved the experienced partner Defi-
brator. Subsequently several other
actors had progressively to intervene
in value embedding. This was simply
because the newly identified heavy
technical interfaces (with inks, paper
machines, printing presses, etc.) re-
quired their intervention to stabilize the
whole technical solution. Therefore, as
we saw above, in order to have the
solution fit in a complex and heavy
technical structure, daily produc-
tion/utilization had to go hand in hand
with the original value embedding.
By “outsourcing” to Swedwood
the development of the technical solu-
tion, IKEA induced a separation of
value embedding from daily utilization.
At the same time, however, IKEA con-
tinued to handle quite actively the in-
ter-organizational interfaces with its
logistic partners, with Swedwood and
with its internal units with the explicit
goal of creating low-weight value for
Lack and of spreading wide its daily
production and utilization. On the other
hand in the newsprint case, there may
be even more inter-organizational in-
terfaces in the form of ongoing busi-
ness relationships, but there is no sin-
gle actor that handles them as strongly
and explicitly, with the purpose to cre-
ate low-weight. In this situation it is
even more likely that the boundaries
between value embedding and daily
production/utilization become more
blurred.
All in all, value coordination
and control are strong in the Lack
case, whereas they are weaker around
newsprint. This reflects the fact that
one single actor, IKEA, has the com-
petence, the motivation and the power
to set into motion a value embedding
effort and to overview the entire value
creation process. In the newsprint
case instead, there are several highly
competent actors, with relatively bal-
anced power but no one really takes a
strong initiative. The outcome of such
a configuration of motivations, compe-
tence and power is that thanks to
IKEA’s efforts, the creation of Lack’s
low-weight follows more a logic of
64
overall rationality that stretches to the
level of the whole network, whereas
the creation of newsprint’s low-weight
follows more a logic of local rationality
(Cyert & March, 1963/1992: 165),
whereby the context for decision mak-
ing is restricted (cf. Simon, 1955) to a
dyad of firms.
The Lack case also shows that
a powerful actor such as IKEA could
easily push its own interest in achiev-
ing low-weight against those of other
actors in the network, such as Swed-
wood’s interest in avoiding risky in-
vestments. However, IKEA was able in
showing that its interests and those of
the network can go hand in hand:
IKEA keeps costs low, Swedwood can
rely on IKEA’s long-term engagement
to reduce risk, and the carriers’ sav-
ings can be shared with IKEA. Since
all actors seem to win something, the
need for compromise is minimal. In the
newsprint case, there are instead sev-
eral possible conflicting interests be-
cause some actors risk losing some-
thing with low-weight paper. Hallsta’s
savings on materials (oil and wood)
can turn into a nightmare for printers
unless opacity is guaranteed and ink
producers do not make costly adapta-
tions. In this situation there is no “me-
diator” for the entire network to ensure
a convergence of interests, but there
are many local compromises. Only af-
ter a rather demanding adaptation
process, can the involved actors gain
from lower weight newsprint, but each
one in a different way.
7. Conclusions And Implications
This article investigated how
value is created in industrial networks.
The two cases showed how value is
created when several firms take part in
a process that includes both new and
routine combinations of technical and
social resources across the entire
network. Building on the “resource in-
teraction” framework (Håkansson &
Waluszewski, 2002) this article has
distinguished, within the broader no-
tion of value creation, the two sub-
The IMP Journal Volume 1, number 1
processes of value embedding and of
daily value production/utilization.
Moreover, this article stressed the role
of resource interfaces, showing how
resources are combined and their in-
terfaces handled to create economic
value. Finally, we investigated how the
configurations of resource interfaces
are related to the value creation proc-
ess as a whole, and to the two sub-
processes of value embedding and
value production/utilization.
A first important conclusion is
that these two sub-processes are logi-
cally separate, but must both be pre-
sent for value to eventually be created
for users. This holds especially when
the two sub-processes of value em-
bedding and daily utilization need to
be closely related, as in the creation of
unique and fully customized solutions.
Moreover, minor adaptations and mar-
ginally new resource combinations
happen continuously, during daily
value utilization, so that value embed-
ding pervades also the more routinely
episodes of value creation. Our sec-
ond conclusion is that we can expect
variations in how tightly connected
value embedding and daily value pro-
duction/utilization are in reality. As
shown by the analysis of our two
cases, looser or tighter connections
depend on the configuration of inter-
faces, and especially on their complex-
ity and degree of interdependency
(see also Dubois & Gadde, 2002: 626-
28, for a similar approach to loose and
tight coupling in the construction in-
dustry).
More precisely, high interface
complexity and interdependency result
in a value embedding that is tightly
connected to daily value produc-
tion/utilization. When the two sub-
processes are tightly related, it takes
time to find socio-technical compro-
mises and reciprocal adaptations. But,
on the other hand, tightly connecting
value embedding and daily value pro-
duction/utilization may be an absolute
necessity whenever interfaces are
numerous, highly complex and inter-
dependent. Besides, even if value
creation will take longer, chances are
65
high that one will obtain, through con-
tinuous adaptations, a solution that
“fits” and reduces disruptions for sev-
eral of the involved actors, both on the
supplying and the using side4.
Further, we linked different
configurations of resource interfaces to
differences in the value creation proc-
ess. The newsprint case presents
complex and indirect technical inter-
faces accompanied by weak value co-
ordination among many actors, which
makes it difficult to handle several
network-level interfaces that can po-
tentially create value. It is very difficult
to set priorities, also because of con-
flicting interests and features within the
very same interface. The Lack case
shows instead that a network influ-
enced by a single actor can handle a
few and simple interfaces through a
stronger value creation coordination
that involves fewer actors: these ac-
tors direct their efforts towards a re-
stricted set of interfaces for which
IKEA has already set clear priorities,
and these actors accept to do so be-
cause they can draw some advantage
from the very same value-bearing fea-
ture.
More importantly, the article
hints at the complex blend of strong
and loose inter-organizational control
(Lind & Strömsten, 2006) and of cen-
tralization and decentralization that
pervades an industrial network during
value creation processes: IKEA dele-
4 This conclusion has also managerial relevance:
shall a manager keep closely related or try to discon-
nect value embedding and daily produc-
tion/utilization, especially for the sake of reducing
costs or increasing speed? Our case studies suggest
that this choice depends on the configuration of inter-
faces in the entire value creation process, not only in
the value embedding or daily value utilization sub-
processes taken separately. It is therefore important
to consider also the using side of the network and the
daily consequences of embedding a certain new
value in a product. The presence of complex and
very interdependent interfaces warns against detach-
ing the two sub-processes, unless speed is a priority
or a powerful actor can impose on others a certain
value-bearing feature. The practice of outsourcing
production to low-cost countries, while retaining
product development at home is a typical example of
strongly detaching value embedding from daily pro-
duction/utilization. But such a cost-driven practice
can turn out to be harmful whenever heavy socio-
technical interdependencies exist at the network
level.
The IMP Journal Volume 1, number 1
gates great responsibility for value
embedding to Swedwood, who in turn
delegates to Wicoma. But the decen-
tralized efforts of the latter were also
affected by IKEA’s logic and control,
because IKEA has only “outsourced”
the performance of the value embed-
ding task, whereas IKEA keeps control
over the daily value production and
utilization. Hence Lack’s value creation
as a whole appears coherent and well
ordered. Many interfaces are well
taken care of and it seems that the
process follows a logic of overall ra-
tionality that takes into account the
entire network. However, this rational-
ity is certainly not absolute and objec-
tive, that is, it does not come from out-
side the network in the form of a glob-
ally rational search for “optimal” solu-
tions (cf. Simon, 1955). This rational-
ity still comes from inside the network,
and it is “designed” centrally according
to the needs and will of one single ac-
tor, IKEA.
On the other hand, Hallsta in-
ternally decided to introduce the new
TMP technology, but this decision
opens up value embedding to practi-
cally the entire network of suppliers,
customers and final users, which in
turn leads to a decentralized value
embedding process where inter-
organizational control is rather loose.
Besides, the entire network literally
needs to start daily utilizing the new
solution before it gets embedded and
value can be really extracted from it.
When complexity is so high and no
dominant actor emerges, value crea-
tion becomes decentralized: each sin-
gle actor tries to pursue own interests,
and solutions are found or adaptations
are made on a dyadic level, following a
sort of local rationality (Cyert & March,
1963/1992: 165). But, in relation also
to the case of IKEA, here appears an
interesting paradox: These many local
adaptations, made without central con-
trol, slowly, painfully and haphazardly
may well turn out to be more long last-
ing, solid and even efficient than what
would have happened if Hallsta or
some other actor had applied its own
control and “overall” rationality to this
66
value creation process. When the so-
lution is in place, it will have a great
solidity, because it has grown together
with the socio-technical structure of
the network and the cost to change
things will be substantial for several
involved actors.
In relation to the literature on
value creation (e.g., Anderson & Na-
rus, 1998; Ford & McDowell, 1999;
Kale, Dyer & Singh, 2001; Ramirez,
1999), this article offers a series of
contributions. First, most studies on
value creation implicitly take a dyadic
perspective and see value as created
only between two parties (see e.g.,
Walter, Ritter & Gemünden, 2001;
Möller & Törrönen, 2003), while ne-
glecting the importance of the sur-
rounding networks. An important con-
tribution of this article is thus making
explicit that value creation is a process
that involves an entire network and
that depends in its unfolding on the
specific configuration of this network.
Single business relationships are still
very important in order to create value,
but we argue that it is limiting to focus
on just one single dyadic relationship.
Value may well seem to be created in
one such relationship, but behind and
around it there is an entire network of
relationships that together contribute
to value creation. Therefore, it is the
combination of several and comple-
mentary business relationships that is
pivotal in both embedding and daily
utilizing a product’s value.
Second, the focus of the value
creation literature is much more on the
level of social exchange (e.g., Gas-
senheimer, Houston & Davis, 1998), at
the expenses of the level of produc-
tion, combination and utilization of
technical and physical resources. This
article showed instead that both social
and technical interactions and re-
sources are essential to value crea-
tion, thereby contributing to restoring a
balance between these two equally
important dimensions in the value
creation process.
Third, the literature considers
value as created either in innovative
efforts or in daily routine activities
The IMP Journal Volume 1, number 1
(Tsai & Ghoshal, 1998). Seldom are
both these aspects of value creation
considered at the same time. This arti-
cle depicted instead value creation as
composed of the two distinct but con-
comitant sub-processes of value em-
bedding and of daily value produc-
tion/utilization. By identifying these two
sub-processes and by exploring how
they are related, this article could in-
corporate both the innovative and the
routine-like aspects of value creation.
Fourth, the focus of the litera-
ture on the concept of value-creating
activities (see e.g., Porter, 1985 and
19965) has left largely unexplored how
social and technical resources are
handled. Therefore, this article pro-
vides a complementary view to the
value creation literature by penetrating
the resources behind value creation,
including the interactions among these
resources, the details of their inter-
faces and their overall configuration at
the network level.
Fifth, the literature includes ty-
pologies of value creation based on
the connections between activities in a
certain industry. For instance, Stabell
& Fjeldstad (1998) discern three value
creating configurations: chains, shops
and networks. Such typologies, al-
though useful as a general frame,
have the limit of shifting to an industry
the unit of analysis for value creation.
This article showed instead how value
emerges within networks that span
and connect several industries: furni-
ture manufacturing-logistics-retailing or
forestry-paper-printing-advertising.
Moreover, Stabell & Fjeldstad’s three
configurations result in mutually exclu-
sive logics for creating value: “proc-
essing inputs into outputs” in a value
chain, “solving a specific customer’s
problem” in a value shop, or “connect-
ing several customers with each other”
in a value network (Ibid). Instead, our
study shows that all three logics inter-
vene and interplay in one and the
5 Quite interestingly, Porter (1996) discusses on
page 65 and 71 the value-creating activities of one of
the focal firms in this article, namely IKEA, although
from a quite different theoretical approach than ours.
67
same value creation process, either
simultaneously or in different mo-
ments6.
This article was a first step in
investigating how value creation and
its two sub-processes are related to
the configuration of resource inter-
faces in different network contexts.
Even if two largely different contexts
were investigated, more research is
needed to provide an even more var-
ied empirical and analytical ground to
our discussion on value creation and
resource interfaces. In particular, it
would be helpful to study several dif-
ferent types of values at the same
time, instead of only one value-bearing
feature as we did. For instance, it
would be interesting to compare the
creation of radically and marginally
new values. Further research needs
also to be done to better systematize
the relations between the value crea-
tion process and resource interface
configurations: comparing several
networks with different configurations
of technical, social and mixed inter-
faces can help in this direction.
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The IMP Journal Volume 1, number 1 71

Hoping For Network Effects Or Fearing Network

Effects

Alexandra Waluszewski a

a
Uppsala University, Uppsala STS, Centre for Science and Technology Studies, Box 513 751 20 Uppsala
e-mail: alexandra.waluszewski@sts.uu.se

Acknowledgements: The author wants to thank Håkan Håkansson, Geoff Easton , Asta Salmi and an anonymous
reviewer for valuable comments.

Abstract

The network society is here, declares sociologist Manuel Castells (1998). He sketches com-
pany life “inside” these networks in considerably lighter colours than those living “outside” the networks.
And Castells is not alone. Researchers engaged in “networks”, “clusters” and “innovation systems” all
stress how relationships and networks can be used to create new economic resources – although what
is understood by these networks is sometimes vaguely defined. Even more optimistic interpretations are
made by policy organisations throughout the world. These hope for networks as transferors of knowl-
edge to economic resources. Policy supported network-like constructions have also increased dramati-
cally. In the US alone there are about 50 policy supported biotech cluster projects. In the small country
of Sweden, the business magazine Biotech Sweden (2003, No 5, p.26) reports a new record in Swedish
biotech clusters, “from zero to fourteen within a few years”.
However, there are also voices expressing fear of networks and their effects. “Networks com-
bine the idea of connection with the idea of disconnection”, says the sociologist Zygmunt Bauman
(Axess, 2003, No 6, p. 13), who sketches a considerably darker picture of the emerging network society.
Instead of a stable and reliable business and organisational world, characterised by defined roles and
engagements, Bauman (2000) stresses that network structures are loose, temporary and unreliable
constructions, characterised by a lack of long-range obligations.
But, on whom shall we rely? Those who put their hope in networks and stress the possibilities
of utilising relationships to create benefits in business and organisational life? Or those who fear net-
works and stress that relationships are unreliable, non-transparent and include risks of nepotism? In this
article we will use the IMP framework as our analytical tool in an investigation of what is behind these
many different kinds of networks. An interesting result is that the IMP framework challenges neither
those with hope for nor those fearing networks – both aspects are treated as highly relevant effects of
connected relationships. However, what is also outlined is that visible exchange relationships between
customers and suppliers are only the tip of the iceberg of the technological and organisational interde-
pendencies that can be caught by the network metaphor. Thus, besides providing tools for pin-pointing
the dark and light sides of relationships, the IMP framework reveals a more complicated issue: if we
develop network-like structures, does this also mean that network processes occur?

Keywords: Networks, knowledge transfer, organisation structures, political effects.

1. What Is The Effect Of Networks? say that “network” has become a

Search for the word “Network”
with Google on the Internet, and at
least 155 million hits will show up.
Thus, it is probably no exaggeration to
buzzword of our time. Networks also
appear as fruitful metaphors in at-
tempts to catch interdependencies in
the business world. A Google search
for combinations like “business net-
The IMP Journal Volume 1, number 1
work” and “business relationships”
gives a slight indication – both offer
about 9 million hits each.7
But what is in these networks?
The word network is not only used in
many different ways, but also, even
when used in an academic setting, in
wide, non-defined ways. Furthermore,
and of even greater importance, what
are the effects of these networks as-
sumed to be? Most network interpreta-
tions emphasise that interaction and
relationships are important character-
istics in contemporary business and
organisational life. In this article we will
use the IMP framework. This is a
rather thoroughly defined analytical
tool, which through the interaction
model uses the ARA model and the
4R model (see Håkansson,
Waluszewski, 2002) to investigate the
underlying assumptions and effects of
some different network approaches.
First, we will see that there are rather
disparate assumptions about the
causes of network effects. Second,
while there are interpreters that put a
lot of hope in network effects, there
are also those who regard the same
phenomena as a severe threat.
If the term “network” has be-
come a vogue term in describing con-
temporary business and organisational
life, as Nohria (1992) underlines,
economists still define networks as
non-existent in a functioning market
(Wilk, 1996).8 However, in disciplines
developed in close interaction with the
empirical world – anthropology, sociol-
ogy, business studies and different
historical disciplines – relationships
and their effects have been so strong
that they could not be dismissed as
exceptions. Or, as Gudeman (2001,
p.145) expresses; exchange always
has “unintended consequences” be-
7
This example was used in a lecture by Ivan Sne-
hota, where he did the comparison that a search for
“God” “only” will offered about 60 million hits. (April
2004)
8
The ideal type is the autonomous actor, who can
take part in an exchange with anyone, and for whom
all information other than price is superfluous. Rela-
tionships and network-like structures are regarded as
exceptions; a result of market mechanisms not work-
ing.
72
cause the resources are “responded
to, interpreted, and used in a context
of relationships.” These disciplines
have also been important sources for
the IMP framework9, where the under-
lying assumption is that the exchange
of resources whose full content can
never be known creates “thick” interac-
tion. (Håkansson ed, 1982; Håkans-
son, Snehota, 1995; Håkansson,
Waluszewski, 2002;
www.impgroup.org )
2. Hoping For Network Effects
Paradoxically, despite the lim-
ited interest shown by traditional eco-
nomic theory in relationships and net-
works, it is in the economic and poli-
tico-economic spheres that one finds
the most positive interpretations of “the
network society”. This applies primarily
to the authorities and policy organisa-
tions that have the task of stimulating
economic growth. The connections
that are considered especially promis-
ing are those that are developed be-
tween the “knowledge creating” (aca-
demic) world and the “knowledge us-
ing” (business) world.
The goal of creating close net-
work-like relationships between
knowledge production and businesses
permeates both OECD and EU policy
issues. It is evident in policy sup-
ported endeavours to establish “inno-
vation networks”, “a network in Europe
for trans-national technology transfer”,
“a network of regions”, “networks of
regions of excellence”, “networks
among players in innovation financing
(e.g. venture capitalists, incubators)”
and networks “amongst industrial liai-
son offices in public research organi-
sations to strengthen public-private
links.”10 Reliance on the forces of net-
works is not only a frequent policy ar-
rangement on an interstate level, but is
also trusted by both national and re-
9
See Håkansson, Waluszewski, 2002 and
www.impgroup.org
10
http://europa.eu.int/comm/enterprise/innovation)
The IMP Journal
gional policy organisations.11 For ex-
ample, Japan’s Ministry of Economy,
Trade and Industry aims to “formulate
human networks among the academy,
the business and the governments” to
reach “globally competitive businesses
in the region”. Also in countries and
regions with another type of economic
system (usually labelled developing),
such as China, the fostering of net-
works based on science is regarded
as an important way of creating a
flourishing innovation-based industry.
On behalf of the Chinese government,
the China Academy of Science is en-
couraged to create a “modern science
civilisation and innovation culture in
China” through “dissemination of sci-
entific knowledge, spirit and methodol-
ogy throughout society by adopting an
open and networked means”.12 Fur-
thermore, it is not only policy organisa-
tions, but also the spokesmen for the
knowledge producers themselves, the
academic world, that seems to be pre-
pared to trust the network forces. A
good example is a statement made by
the University of Oxford: “Oxford is
one of Europe's most innovative and
entrepreneurial universities. Drawing
on an 800-year tradition of discovery
and invention, modern Oxford leads
the way in creating jobs, wealth, skills
and innovation for the 21st century…
“Oxford University has a strong com-
mitment to build better and more last-
ing relationships with the business
world, and our level of interaction with
the local, national and international
business community is growing each
year. The University developed a vi-
brant ‘market place’ which brings to-
gether inventors, researchers, venture
capitalists, business angels and entre-
preneurs.”13
What these attempts convey is
a great belief that “cutting edge” sci-
ence and “high tech” innovations are
also valuable resources in the busi-
ness world. However, knowledge
11
Japans’ Ministry of Economy, Trade and Industry
The Industrial Cluster Plan, May 2003
12
http//:English.cas.som
13
www.oxford.ac.uk/innovation
Volume 1, number 1 73
needs help if it is not only to be pro-
duced, but also to be used as re-
sources that contribute business bene-
fits. These attempts also make an im-
portant connection between supply
and use of knowledge. They suggest
that the connection will be created
through the establishment of relation-
ships and network-like structures. Why
is there so much reliance on networks’
effects? Let us take a closer look at
some theoretical schools that have
inspired contemporary policy and their
interpretation of what can be gained
through networks.
3. Hoping For Network Effects On
Innovations And Economic
Growth
“Networks are the fundamental
stuff of which new organisations are
and will be made,” declares Castells
(1996, p. 180). Although Castells un-
derlines that network effects depend
on connectedness and consistency
among actors, he also stresses the
opportunities they provide: “Inside the
networks, new possibilities are relent-
lessly created. Outside the networks,
survival is increasingly difficult.” (Cas-
tells, 1996, p. 187) And, the most im-
portant effect of networks is that the
“network enterprise” can process
knowledge into commodities. (Cas-
tells, 1996, p. 188)
The understanding that rela-
tionships can be used to transfer
knowledge into economic resources
also permeates the innovation system
approach. The kind of knowledge that
the innovation system scholars regard
as particularly important is “cutting
edge” science and “high tech” innova-
tions. Perez and Soete (1988) made
us aware of the “knowledge paradox”,
i.e. the circumstance that regions with
high research intensity still can have a
relatively low proportion of research
intensive products. Freeman (1988),
Nelson (1988) and Malerba (2002)
contributed with ideas of how to con-
nect this untapped resource with ac-
tors able to exploit it in an economic
The IMP Journal Volume 1, number 1
setting. What these scholars underline
is that “cutting edge” science and “high
tech” innovations are not automatically
absorbed by the business world, lead-
ing to prospering businesses and eco-
nomic growth. Thus, they have no con-
fidence in what is often depicted as the
“linear model”.14 To be utilised in eco-
nomic resources, the new knowledge
must be actively taken out of its iso-
lated existence within the knowledge
producers and into units that can be
thought to exploit it.
Commercialisation of technol-
ogy can be stimulated through the es-
tablishment of an “innovation system”
consisting of a network of organisa-
tions, people and rules, dissemination
and innovative exploitation of sci-
ence.15 Thus a core issue concerns
the importance of creating network-like
structures that not only include the
producers of knowledge, but also or-
ganisations that facilitate the transfer
of this knowledge to the business
world. What such an innovation sys-
tem includes is interpreted by the Aus-
tralian Ministry for Education, Science
and Training (2003): as, “Australia’s
ability to generate ideas for innovation
in science, engineering, technology
and related research and development
(R&D); the utilisation and commercial
14 The idea that investment in knowledge production
automatically leads to the development of new tech-
nology, which in turn will be absorbed by the busi-
ness world where it will create economic growth. In
this sense, the linear model is close to the rationality
assumption made in economic theory. For a further
discussion, see Håkansson, Waluszewski, 2002.
15
A closely related variant of innovation systems has
been launched by the sociologists Henry Etzkowitz
and Loet Leyersdorff in “The dynamics of innovation”,
Research Policy, vol. 29, No. 2, February 2000. Un-
der the name “Triple Helix” they launched a network
approach marked by its focus on “network drivers”.
These are private actors who attempt to increase
their “competitiveness in the market”. They act as
“stage keys” and create “spiral movements” that “lift”
the dynamic to new levels. The authors do not go into
either exactly how this works or how the interactions
contribute to creating economically sustainable
growth or improving the economy in existing compa-
nies. But, just as in the innovation system approach,
theirs presupposes that the resources found in aca-
demic and other societal areas are not only techni-
cally possible for transference to the industrial world,
but can also contribute to an increased economic
outcome.
74
application of R&D and other innova-
tion and the conditions which support
this; and the development and reten-
tion of relevant skills for science, inno-
vation and internationally competitive
enterprise.”16 However, for network-
like structures of this kind to lead to
economic growth they must be built
around research-intensive, high-tech
areas, which can create a renewal of
products and production structures.
The fact that many countries suffer
from the “knowledge paradox”, i.e.
their high R&D intensity has not made
imprints in terms of directly related
R&D-intensive products, is regarded
as a result of having the “wrong”17
production structure, i.e. a low tech
structure lacking the ability to absorb
advanced knowledge (Edquist, 2002).
If we use the IMP framework to
approach the issue of how to connect
the academic production of knowledge
with the utilisation of that knowledge in
a business setting, then we see simi-
larities with the innovation system ap-
proach in that interaction and relation-
ships appear as important ingredients
in the process. However, as soon as
we consider this issue from an as-
sumption that neither the supplier nor
the user has complete knowledge
about the resources exchanged,18 then
the effects of confronting the academic
supply of knowledge with use of
knowledge in a business setting be-
come a “Janus-faced phenomenon”,
(Waluszewski, Håkansson 2005).
To confront the production of
knowledge with the use of knowledge
in a business setting means that any
new solution must be combined with
established social and material re-
16
www.dest.gov.au/mapping
17
The ‘wrong’ areas are, for example steel, forest
industries, mechanical technology and engineering.
(Eduist, 2002).
18
This heterogeneity assumption that the IMP
framework rests on is inspired by Penrose (1959), i.e.
the assumption that it is the way a resource is acti-
vated with other resources that create its “services”.
Thus its value is due to how it is combined with other
resources (Hägg et al 1982; Håkansson & Snehota
1995).
The IMP Journal Volume 1, number 1
sources, which in turn are activated in
interfaces that stretch beyond organ-
isational borders. Such confrontation
creates reactions – and new knowl-
edge is created. However, given the
heterogeneity assumption, the effects
of these confrontations can never be
outlined in advance. Furthermore, al-
though some effects might occur in the
focal interface, they will also appear in
other interfaces, handled by other ac-
tors who might express a varied ap-
preciation of them.
How these networks effects are
handled varies between both compa-
nies and business contexts. When
these network effects appear in major
supplier-user interactions, they are in
general handled through business re-
lationships. But network effects can
also be handled through indirect re-
source interaction – and are some-
times not taken care of at all. How-
ever, this is far from saying that the
establishment of relationships among
the representatives of all affected re-
source interfaces would lead to the
development of new solutions that will
create economic benefits for all the
involved parties. In any attempt to util-
ise something new in a business set-
ting, all related actors are forced to try
out ways in which the new solution can
be combined with existing invest-
ments. If these trials reveal that it is
not possible to adapt a new solution to
the main part of existing resource
combinations, then it will be difficult to
contribute to create benefits. This is
irrespective of how highly the new so-
lution is valued in the academic world.
Thus, the value of the new is deter-
mined by its different effects on each
related interface. From this perspec-
tive, it is far from a paradox that there
is a gap between production of knowl-
edge and the use of knowledge in a
business setting. If there is a paradox,
it lies in the idea that the production of
cutting edge science and high-tech
innovations easily could gain the role
of benefactors of economic benefits in
a business setting.
Approached from the IMP per-
spective, it appears as rather optimis-
75
tic to believe that knowledge labelled
“cutting-edge” science or innovations
could easily be embedded into sup-
plier-user interfaces. A basic prerequi-
site for such knowledge is that it is
considered unique (Merton, 1968).19
According to Nature, contemporary
scientists who have the goal of being
published in a highly ranked journal
must present conclusions that have
“immediate, far-reaching implications”,
and “represent a substantial advance
in the understanding of an important
problem.”20 The most prominent re-
search award of them all, the Nobel
prize, is granted to scientists in phys-
ics, chemistry and medicine who have
“conferred the greatest benefit to man-
kind” and who have “made the most
important discovery or invention”.21
However, that a new solution breaks
with existing solutions is not valuable
in a business setting. Here it is not the
uniqueness of a resource in itself, but
its ability to create effects in combina-
tion with other resources, that deter-
mines its ability to create business
benefits. Considering these different
logics of production of science and
economic use of knowledge, the idea
of transferring “high tech” innovations
or “cutting edge” science to the busi-
ness world appears to be rather haz-
ardous – at least if the expected use is
assumed to occur at the same time
and at the same place as the new so-
lution is produced. However, to con-
tribute to economic value in a business
setting, the scientific contributions
need not be new, nor appear in a rec-
19
A prerequisite for the scientist who wants to be
published in a high ranked journal, with Nature as
perhaps the most renowned, is that the conclusions
have ‘immediate, far-reaching implications’, and that
they ‘represent a substantial advance in the under-
19
standing of an important problem.’ Although only a
restricted part of all academic research reaches this
appreciation, it is still ‘cutting-edge’, or ‘unique’
knowledge that is rewarded in the academic
knowledge production (Merton, 1968). With such at
hand, academic research units can be published in
highly esteemed journals, attract new research part-
nerships and bring in new research funding.
20
(Nature, instructions to authors, www.nature.com).
21
The Nobel Foundation is established under the
terms of the will of the engineer Dr. Alfred Bernhard
Nobel, drawn up on November 27, 1895
(www.nobelprize.org).
The IMP Journal
ognised form; “second and third-hand
conceptions of scientific advances”
can do and serve these activities well
(Basalla, 1988, p. 92).
The notion that science does
not need to be new to serve business
is also illustrated by an investigation of
the Swedish “biotech tool” industry.
(Waluszewski, 2004) The scientific
knowledge that is currently behind the
greatest income within this industry,
separation technology, came to the
fore in the academic world in the
1930s and 1940s and had its heyday
in the 1950s, 1960s and 1970s. Thus,
although it was a long time ago that
separation technology was considered
as “cutting edge” science, today it is
very useful knowledge in a business
setting.22
Another issue that is brought
forward when we approach the rela-
tionship between the production of
science and the economic use of
knowledge with the IMP framework is
what could be called the “low tech”
paradox. If we continue to look to an
area considered to be dependent on
“cutting-edge” science and “high-tech”,
such as the Swedish biotech industry,
we will find that for a long time a num-
ber of traditional industries have had
significant roles in the development of
this business. For example, who could
have predicted a few decades ago that
the know-how left behind by the dying
Swedish mechanical type-writer manu-
facturer, Facit, would become a central
source of knowledge for a major por-
tion of the Swedish ‘biotech supply’
companies of today? Currently Part-
nertech, the former Facit, is an impor-
tant supplier of technical solutions to a
number of companies engaged in pro-
ducing biotech analytical tools. If we
look back a few decades, the Swedish
Sugar Company had a problem with
contamination of sugar beet juice.
This industry was far removed from
22
See also Widmalm, S. The Svedberg och gränsen
mellan vetenskap och teknik. In Artefakter, Widmalm,
S., ed, pp.120-149.
Volume 1, number 1 76
the traditional ‘biotech’ area. Who
would imagine that the problem of the
sugar industry would have led to a re-
search project that solved the prob-
lems of the health authorities and the
defence establishment in finding a re-
placement for blood plasma, and gave
rise to a separation gel that revolution-
ised research into big proteins? i
In summary, in a business
world where the economic value of a
resource is based on its effect in com-
bination with other resources, the “sys-
tem” that is activated when new re-
sources are developed and put into
use is unique for each interface – and
can never be outlined in advance. Or,
as Hayek (1945, p. 519-520) formu-
lated the understanding that produc-
tion and use of knowledge have their
own contexts: “the knowledge of the
circumstances of which we must make
use never exist in concentrated or in-
tegrated form but solely as the dis-
persed bits of incomplete and fre-
quently contradictory knowledge that
all the separate individuals possess.”
Let us leave the ideas of using
relationships and networks as tools to
bring “cutting edge” science and “high
tech” innovations into the business
world for a while and take a closer look
at another idea of networks.
4. Hoping For Network Effects On
Geographical Defined Areas
Another type of network effects
considered growth-creating are those
found within “geographically defined
areas”, between “related industrial and
social organisations”, so called “clus-
ters”. (For an overview, see Malmberg
and Maskell, 2002.) Compared with
the innovation system scholars, the
advocates of clusters represent a
more heterogeneous approach. Here
we encounter such different schools
as business strategist Michael Porter’s
cluster approach, the research into
industrial districts and the inter-
organisational studies on social net-
works (Porter, 1990; Lorenzoni, Baden
Fuller 1995; Powell, 2003).
The IMP Journal Volume 1, number 1
Although the cluster scholars
are interested in how network effects
can contribute to economic growth,
there is a basic difference as com-
pared to the ideas brought forward by
innovation system scholars. The clus-
ter scholars emphasise that network
effects do not need to be based on
research-intensive knowledge to be
growth-creating. Instead, it is stressed
that inherent properties of a place
seem to create positive economic ef-
fects over long periods of time. De-
spite Manuel Castells’ (1996) declara-
tion that the forces of globalisation
have replaced “space of place” with
“space of flows” and caused economic
activities to become “de-territorialised”,
industrial activities located in certain
places seem to endure regarding both
the direction of their operations and of
their survival.
Probably the most influential
definition of a cluster is formulated by
Michael Porter: “A cluster of inde-
pendent and informally linked compa-
nies and institutions represents a ro-
bust organisational form that offers
advantages in efficiency, effectiveness
and flexibility” (1998, p. 80). The actors
who populate the cluster are consid-
ered independent and the connections
providing the greatest viability for de-
velopment are not the direct collabora-
tions but the indirect ones character-
ised by competition or rivalry. The
stronger the rivalry the more viable the
development, according to the Porter
model. Together with the knowledge
that “spills over” from indirect connec-
tions, both the efficiency and the
growth of new solutions are stimu-
lated. Or, to use the wording of Powell
et al, (2002): the infrastructure of a
cluster “fosters knowledge transfer and
the formation of technology-based
companies”.
The ideas about geographically
defined clusters or networks are based
on a common assumption about how
they function, irrespective of whether
they were inspired by Porter’s rivalry
ideas, or by other somewhat less re-
lated approaches with a greater stress
on collaboration. It is primarily compe-
77
tition or collaboration within geo-
graphically defined networks that fos-
ters development (Almeida and Kogut,
1997; Saxenian, 1994; Lorenzoni and
Baden-Fuller, 1995; Lorenzoni and
Lipparini, 1999; Boari and Lipparini,
1999; Lundvall and Maskell, 2000).
Thus, it is the economic model world’s
assumption about autonomy that com-
prises the normal state of affairs; in-
teraction, relationships and networks
are treated as exceptions occurring
within certain geographical areas. If
we consider the explanations of one of
the world’s most famous clusters, Sili-
con Valley, (i.e. Florida and Kenney,
1990, Saxenian, 1994), it is mainly the
internal social conditions of the region
that are brought forward, underlined by
such concepts as trust, norms, social
capital, etc. Thus, the dynamic forces
of clusters are explained by the close
interaction among their inhabitants that
facilitates the development of new in-
novations and reduces the uncertainty
of the solution’s economic sustainabil-
ity.
As was illustrated above, this
interpretation has left traces in many
policy-initiated projects, aiming to build
up geographical networks, above all in
the form of what has been called “in-
novative clusters”. Attempts to estab-
lish these clusters have become, ac-
cording to Malmberg and Maskell
(2002), the OECD-world’s favourite
prescription for creating growth. A
quick look at some national and inter-
national policy organisations indicates
that these authors are not exaggerat-
ing. Faith in the possibility of building
innovative networks primarily within
“high tech” areas is strong both na-
tionally and internationally. When
Sweden hosted the sixth international
conference ‘Innovative Clusters: a new
challenge’ in the autumn of 2003,
where Porter’s model formed the
common ground, the conference was
attended by policy representatives
from about 50 countries. It was re-
ported that merely in the USA’s bio-
technology field, there are 48 different
regional ventures that all aim at build-
ing biotechnology clusters. The launch
The IMP Journal Volume 1, number 1
of 19 new cluster projects, where the
IT and biotechnology fields had a
prominent position, was reported at
the same time from Japan. In Sweden,
the magazine Biotech Sweden (No 5,
2003, p. 26) reported a “record in-
crease from zero to fourteen” biotech-
nology cluster in a few years.
Within the IMP framework, in-
teraction is assumed to have a key
role in the process within which place-
related features intervene in the de-
velopment of the resources that may
be activated in a business setting, in
accordance with the cluster school.
However, the cluster scholars ap-
proach this issue from the perspective
of what benefits the features of certain
places can create. In contrast, the
IMP framework draws attention to how
features of different places are em-
bedded into business resources (See
e.g. Baraldi, Fors, & Houltz, eds, 2005,
Waluszewski, 2005). Thus, instead of
being the result of network effects oc-
curring within certain areas, place re-
lated features are regarded as a result
of exchange processes that concern
combining and activating of resources
over borders of companies, and most
often, over the borders of regions and
nations
This way of approaching place
related features raises some questions
concerning the network effects that
become visible in certain areas. It is
possible to distinguish the spatial prox-
imity of companies with related eco-
nomic activities. But the question is
then whether it is within these geo-
graphically defined areas that we will
find the most important interaction
processes behind the supply and use
of the resources these companies ex-
change?
Another issue that is brought
into the fore with the IMP framework is
whether being embedded into an in-
dustrial area characterised by prox-
imity and related business activities
means that each company is supplied
with benefits. In the theoretical models
of geographically defined clusters or
networks, to be embedded into such
relationships is to be supplied with
78
forces that constantly drive innovation
and economic growth. Then Paul
Krugman’s (1991) advice to occupy as
central a cluster role as possible, i.e.
to ‘get into the midst of the buzz’, ap-
pears reasonable. But as soon as we
assume that being embedded into re-
source interdependencies can also
mean being exposed to stagnating or
declining use, then the same advice
seems much more dubious. The com-
pany that finds itself deeply embedded
into an area of strong resource inter-
dependencies, handled by thoroughly
developed relationships, will probably
not applaud these strong connections
if the use of its output is declining.
To sum up, the network effects
that both innovation system and clus-
ter scholars hope for rests with the as-
sumption that the development of net-
work-like structures will also breed
network processes. Networks struc-
tures are assumed to breed network
processes which results in the devel-
opment of supplier-user interfaces.
Perhaps this understanding is a heri-
tage from the traditional economic
model world, where it is assumed that
the establishment of a market struc-
ture automatically leads to market ex-
change. However, when network ef-
fects are approached with the IMP
framework no such guarantees exist.
We can find network processes in hi-
erarchical structures (Johanson, 2005)
and we can also observe network
processes in structures organised to
be as close to the economic model
worlds’ market as possible. (Foelges-
vold, 2005). Thus, hoping for network
effects is, in the IMP tradition, not so
much to hope for network structures,
but for “networking” processes to oc-
cur; i.e. interaction concerning how to
increase efficiency or innovativeness
through combining resources over
company borders. However, even if
such network processes occur, does it
mean that they are distributed among
the economic actors in a fair way, due
to some kind of basic, self-regulating
mechanisms as is assumed in the tra-
ditional market model?
The IMP Journal Volume 1, number 1
5. Fearing Network Effects
If there are many interpreters
that hope for network effects, there are
also those who fear them. However,
these voices are not so often heard in
the general debate. “All links within the
framework of the networks contain
from the outset the possibility of dis-
connection and termination”, says
Bauman (Axess, 2003, No 6, p 13).
Thus, what Bauman (2000) warns us
about is a transition from fixed to tran-
sitory structures, where a network
connection quickly and neatly can be
uncoupled in favour of another. Ap-
proached with the IMP framework,
networks also appear as a looser or-
ganisational form, but only if it is a hi-
erarchical model world that constitutes
normality. If it is the traditional market
model that is normality, then networks
are definitely characterised by “thick”
interaction, i.e. such that leaves im-
prints on both the social and material
resources involved in the exchange
process.
That there are reasons to fear
the effects that stem from network
processes is also outlined within the
IMP framework. However, those ef-
fects that it seems reasonable to fear
are almost contrary to what Bauman
stresses. Any networks that encom-
passes interdependencies between
resources combined in interfaces over
company borders also means that in-
vestments have been made in the de-
velopment and handling of those re-
sources. Thus, being engaged in such
exchange processes includes a risk of
being so tied up that the ability to de-
velop in a new direction becomes very
restricted, Hakansson and Ford
(2002). “The burden of relationships” is
a metaphor used by Håkansson and
Snehota (1998) as an illustration of
how networks can force businesses
into a web of demands for maintaining
established engagements, which in its
turn smothers forces for development.
Of course an individual company or
organisation most often can dispense
one or another connection. But to cut
off only one major supplier or cus-
79
tomer relationship is serious, and to
cut off many such relationships is eco-
nomic hara-kiri. Thus, instead of being
temporary and volatile, networks in
this perspective appear as lasting,
demanding and directing.
The fact that network effects
can be so directing that they lead to
stagnation is discussed by Hasselberg
(2003), where she stress that nepo-
tism is a latent risk in all networks:
“Social contact networks, industrial
networks and local development clus-
ters almost have the role of a research
‘open sesame’ gateway into success-
ful business development. Rarely or
never is attention drawn to the down-
sides of strong social networks or the
conserving results of the fact that con-
nections between previously dynamic
actors slowly stiffen into preserving
patterns of practice.” The belief that
networks are far from neutral is also
outlined when using the IMP frame-
work. Since the use of a new resource
is determined by the effect it has on
other resources, it is those represent-
ing these other resources; their en-
gagement in embedding the new into
the existing structure, that are critical
for the introduction of something new.
As soon as the network meta-
phor is used to illustrate interdepend-
encies in a business setting; i.e. how
features from both social and material
resources are combined over com-
pany borders, the network effects will
be coloured by the interplay between
them. Thus, the risk for nepotism does
not concern the actor dimension in
splendid isolation, but is intertwined
with a resource dimension, i.e. all in-
vestments made in related physical
and organisational resources. Actors
can certainly try to utilise their “nepo-
tistic” forces to manipulate a certain
development path. However, these
forces will not only affect other actors,
but will also put certain resources un-
der pressure. These forces will then be
distributed to all other resources with
which they interface. But, what these
interfaces are, and how they will be
interpreted by the actors that are re-
sponsible for them, is an open issue.
The IMP Journal Volume 1, number 1
However, what is possible to outline in
advance is that the actors that repre-
sent the affected interfaces can opt for
new investments only if it is assumed
that these favour the main part of
those that are already made. Thus, the
nepotism that will occur in a business
network setting will always occur as an
“economic nepotism”, i.e. as a friction
force that will favour the main part of
already existing economic resources
(Håkansson, Waluszewski, 2002).
6. Investigating Networks Effects
What kind of network effects
that are hoped for as well as feared is
it possible to catch with the IMP fra-
mework? Before we discuss this issue,
it has to be underlined that these ef-
fects are assumed to stem from net-
work processes concerning the supply
and use of heterogeneous resources
in an economic setting. First, it is pos-
sible to catch network effects in the
interaction between two parties,
whether or not this has emerged into
an established relationship. The inter-
action model (Håkansson, Östeberg,
1975; Håkansson, ed, 1982) allows us
to investigate the short and long term
effects of technological and social re-
sources that are involved. What is also
included in this framework is how pro-
cesses in the environment, or, what
most often is labelled “macro” factors,
intervene in the exchange between
two parties. Second, it is possible to
catch network effects in the interaction
among several, connected parties.
The ARA model (Håkansson, Snehota
1995) allows us to catch the effects of
resource combinations, activity chains
and actor bonds, i.e. of dimensions
that stretch over the borders of several
companies and organisations. Also
this tool makes it possible to catch
these effects whether they stem from
what traditionally is labelled “micro” or
“macro” processes. Third, it is possible
to catch network effects in resource
interfaces whether they are handled in
visible relationships, in informal inter-
action, or if they are “invisible” or not
observed at all. The 4R model (Hå-
80
kansson, Waluszewski, 2002) allows
us to catch network effects on four ty-
pes of resources; how they affect so-
cial resources such as business units
and business relationships, and how
they affect physical resources such as
products and production facilities. This
tool makes it possible to catch the ef-
fects that occur when connected reso-
urce interfaces are exposed to ten-
sions, i.e. exposed to changes aimed
at creating increased efficiency or in-
novativeness.
Perhaps all of this attention to
the network effects of the exchange of
heterogeneous resources and the re-
sultant understanding that it is the con-
text of their use that determines the
value of these resources may appear
to be academic hair-splitting. But the
images of network effects that this as-
sumption produces are just as different
as the images a photograph gets by
changing from zoom to wide-angle,
when compared to the view that arises
from traditional economic assump-
tions. An illustration from a Swedish
business adventure may explain it bet-
ter: A pile of ice on the frozen River
Torneälv can have different economic
value, depending on how it is combi-
ned with other resources. If it is to be
broken up to provide a passage for
shipping, it is pure cost. But it can also
be put into the hands of a number of
users such as sculptors and house
builders flown in from different parts of
the world. If their constructions are
then embedded into the resource
combinations built up by a number of
tourist offices and travel organisers
who sell “experiences” to customers at
a great geographical distance from
access to ice and snow, then a reso-
urce that so far has mostly generated
costs becomes something very valu-
able. And a tourist attraction named
the Ice Hotel is born – creating values
both for individual companies as well
as for a region in Northern Sweden.23
23
For more information about the Ice Hotel in Jukkas-
järvi, Sweden, see www.icehotel.com
The IMP Journal Volume 1, number 1
If we should try to summarise
the network effects as they are outli-
ned when using the IMP framework,
then it seems fair to use the Janus-
face metaphor. On the one hand net-
work effects can result in such tightly
connected businesses and organisa-
tions that they appear as one single
investment-heavy network colossus
whose direction it is impossible to
change, despite the insight that it has
a number of undesirable effects. On
the other hand network effects make it
possible to view the same network
from another perspective. There are
many cunning ruses and opportunities,
just waiting to be taken advantage of.
If this is a typical aspect of networks,
then it is not so strange that they indu-
ce the desire to intervene and work
actively so that certain solutions be-
come successful, or others are knock-
ed out or closed down. The paradox is
that as soon as one actor, whether a
policy organisation, a company or an
authority succeeds in directing the
processes that are going on, it is no
longer a network. Of course the activi-
ties can continue in the form of some
“organised network,” but in practice it
will function as a hierarchy directed
within the planned economy, in which
one or a few actors’ views of what is
the “best” solution will dominate. This
applies not merely to all attempts to
build up networks around new know-
ledge with the aim of creating new
products, new companies and blos-
soming regions. It is also a constant
danger inherent in all established net-
works populated by actors who are too
strong or dominant.
Thus, creating economically vi-
gorous networks is neither about out-
competing surrounding units nor about
directing a structure in a particular di-
rection, but rather about keeping a
“rainforest”-like process alive, in which
actors with differing interests are utili-
sing each other’s resources. To suc-
ceed in building network structures is
not the same as to succeed in bree-
ding network processes.
81
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i
It was to solve a beet sugar juice contamination
problem that the Swedish Sugar Company ap-
proached researchers at the Institute of Biochemistry
at Uppsala University. This group of skilled and inter-
nationally engaged researchers provided analytical
tools such as the ultracentrifuge and electrophoresis
equipment for the investigation of large proteins. The
contamination of beet sugar juice by a bacterium that
produced Dextran (at that time known for at least a
century) was a very interesting finding for the Swed-
ish Sugar Company. And, the investigations of Dex-
tran included a very valuable finding for the Institute
of Biochemistry. The fact that this type of glucose did
not interfere with human antibodies certainly made
The IMP Journal Volume 1, number 1 84

sense in a research department that, like many bio-

medical and military research environments world-
wide, was struggling with how to handle the lack of
blood plasma during wartime. In 1943, the Uppsala
researchers approached Swedish pharmaceutical
company Pharmacia with the possibility of developing
a blood plasma substitute. In 1947 the product Dex-
tran (later called Macrodex) was launched. For dec-
ades it was one of Pharmacia’s cash cows, and to-
day is a main product of the German owned Fresen-
ius Kabi.

In the early 1950s, when Institute of Biochemistry

researchers were striving to improve the separation
medium used in columns, the experiences from the
Swedish Sugar Company’s contamination problem
again became valuable. Work was initiated to replace
cellulose composition with cross-linked Dextran, led
by a researcher at the department and a colleague
who had moved to Pharmacia. These researchers
were greatly impressed with the ability to use cross-
linked Dextran as a separation medium. The result
was a new separation gel named Sephadex (an ab-
breviation for separation, Pharmacia, and dextran). It
was presented to Nature in 1959 as a totally new
method of separating proteins and other biomaterial
by size. Despite a rather cool reaction from the aca-
demic world and some initial hesitation on the part of
management, Pharmacia decided to pursue the solu-
tion and established a new business unit for biotech
supply, called Pharmacia Fine Chemicals. Decades
later, gels based on cross-linked Dextran are still
essential in separation technology. However, after
contributions from many different parts of science
and industry worldwide, today this technology is em-
bedded in a wide variety of other technical solutions
and is accompanied by many other analytical me-
thods.