Entering Europe: ‘An exploratory research into the opportunities to build new partnerships’

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Entering Europe:

‘An exploratory research into the opportunities to build new partnerships’

University of Groningen

December 2007, Groningen

University of Groningen

Faculty of Business Administration

Specialization Business Development

Author:

Jeroen van Dormolen

Student number:

1271334

Initiator:

Lanham Associates

First Academic Supervisor:

dr. J. Kratzer

Second Academic Supervisor:

dr. K. Zoethout

Supervisors Lanham Associates: Mary Lanham

Daya Keur

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-Preface

The thesis that lies before you marks the end of my study at the University of Groningen and with it, the final chapter of my life as a student comes to an end. Of course this glorious occasion would not be possible without the help of others and this is where I would like to say thanks.

First I would like to thank everybody at Lanham Associates who helped me during my research for their support and enthusiasm. I would like to express special gratitude to Mary and Dale Lanham who gave me the opportunity to do this study and took me under their wing during my stay in Atlanta and San Diego. Also a special thanks to Daya Keur for his supervision and making it possible to conduct all the interviews in The Netherlands, England and Germany.

I would like to thank dr. J. Kratzer for his supervision and feedback and dr. K. Zoethout for co-supervising during the final stages of my thesis.

Furthermore, I would like to thank my parents, Jacques and Betty van Dormolen, who supported me during all the stages of my study, gave me the room to find my own way and always believed in my abilities.

Finally, I would like to thank my wife, Martine van Dormolen, for being so patient with me and giving me the love and support when I most needed it.

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Abstract

Rationales for this research

Lanham Associates is well established in the North American MS Dynamics NAV market, has a partnership with most NAV resellers and are looking to expand. Because the European NAV resellers are starting to make more use of add-ons, Lanham Associates sees opportunity to expand their market to Europe. Countries include Germany, France, Great Britain, Benelux, Spain, Portugal, Greece and Italy.

Problem statement

To be able to expand their market to Europe, Lanham Associates will have to build a network of European NAV resellers who will add the Lanham products to the Navision software-package they sell to their end-user. Because the North American and the European NAV reseller are not alike, Lanham Associates will need insights in the possibilities for establishing new partnerships with European NAV resellers. The research objective therefore is:

To provide Lanham Associates with insight in the European markets for MS Dynamics NAV resellers in order to build a network of European MS Dynamics NAV resellers and effectively expand their market to Europe.

Subsequent the following sub-questions can be asked which combined give an answer to the research question.

How do the resources of social capital influence the opportunities for Lanham Associates to build new partnerships with European MS Dynamics NAV resellers?

How do the components of embeddedness influence the opportunities for Lanham Associates to build new partnerships with European MS Dynamics NAV resellers?

Conclusions

For the first question, the following conclusions were drawn.

Lanham has considerable resources of social capital in the North American market. Most of these, status, reputation, credibility and trust, are the result of being in the business since the beginning and having made the first altercations to Navision to make it fit the North American market. Though this gives Lanham great advantages in their home-market, these resources of social capital are not transferable to other markets.

Knowledge is one resource of social capital which is transferable to other markets. Initially this will be one of the strong points Lanham can bring to the table when convincing European NAV resellers to start using Lanham add-ons in their sales.

From a social capital standpoint, Lanham should be able to built resources of social capital and use these resources in the attainment of goals. In this case, the establishment of an embedded network of European NAV resellers.

For the second question, the following conclusions were drawn.

Because trust is not something that is automatically there from the beginning the European NAV reseller was analyzed on openness to using add-ons and the actual usage of add-ons. The view that European NAV resellers are not open to using add-ons seems to be out-dated. However, only half the NAV resellers interviewed actually use add-ons at this moment, so for most NAV resellers the experience with add-ons is still quite low.

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always have had to work out most problems they had with the software themselves, this could mean they keep this mentality and would not consider using Lanham support for more than technical questions and reporting bugs. How this will manifest itself is uncertain and could be different for every NAV reseller. The final component of embeddedness is probably the most outgoing and hardest to obtain. Joint-problem solving arrangements mean both firms cross their organizational boundaries to work together and fix problems on-the-fly. Because European NAV resellers have a do-it-yourself mentality and like to keep clear boundaries, especially towards their customers, crossing organizational boundaries seems harder for European than for North American NAV resellers.

Building real embedded ties which have all three components will be hard to establish. There is potential for fine-grained information transfer, but this depends on the mentality of the NAV reseller as well. Joint problem-solving arrangements will not be made easily but as the European market is just starting to use add-ons this could happen in the near future when the NAV resellers have more experience with add-ons.

Recommendations

First impressions are very important and when positive, can further the amount of trust given by the NAV reseller.

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Table of Content

PREFACE ... 1

ABSTRACT ... 2

INTRODUCTION ... 6

MICROSOFT DYNAMICS NAV ... 6

LANHAM ASSOCIATES ... 6

MSNAVISION RESELLER ... 6

RATIONALES FOR THIS RESEARCH ... 7

PROBLEM STATEMENT ... 8

OUTLINE OF THE REPORT ... 9

1. LITERATURE REVIEW ... 10

1.2 SOCIAL CAPITAL... 10

1.3 LEVEL OF ANALYSIS ... 11

1.4 EMBEDDEDNESS ... 12

1.5 FROM CAPITAL TO LIABILITY ... 14

1.6 IMPLICATIONS FOR ORGANIZATIONS ... 14

1.7 CONCLUDING REMARKS ... 15 2. RESEARCH DESIGN ... 16 2.1 GATHERING DATA ... 16 2.2 METHODS OF ANALYSIS ... 17 2.3 DATA REDUCTION ... 17 2.4 DATA DISPLAY... 17 2.5 CONCLUSION DRAWING ... 18

3. RESULTS AND ANALYSIS OF THE NORTH AMERICAN MARKET ... 19

3.1 RESOURCES OF SOCIAL CAPITAL ... 19

3.2 EMBEDDEDNESS ... 20

3.3 CONCLUDING REMARKS ... 21

4. RESULTS AND ANALYSIS OF THE EUROPEAN MARKET ... 22

4.1 TRUST –OPENNESS TO ADD-ONS ... 22

4.2 TRUST –EXPERIENCE WITH ADD-ONS... 23

4.3 KNOWLEDGE... 23

4.4 FINE-GRAINED INFORMATION TRANSFER ... 24

4.5 JOINT PROBLEM-SOLVING ARRANGEMENTS ... 25

4.6 CONCLUDING REMARKS ... 25

CONCLUSIONS AND RECOMMENDATIONS ... 26

MAIN CONCLUSION ... 26

RECOMMENDATIONS ... 27

DISCUSSION ... 28

LIMITATIONS ... 28

GENERALISIBILITY ... 28

RECOMMENDATIONS FOR FURTHER RESEARCH ... 28

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APPENDIX I INTERVIEW NORTH AMERICAN NAV RESELLER AND CODE LIST ... I.

APPENDIX II INTERVIEW EUROPEAN NAV RESELLER AND CODE LIST ... X.

APPENDIX III MATRIX NORTH AMERICAN NAV RESELLERS ... XVIII.

APPENDIX IV MATRIX EUROPEAN NAV RESELLERS ... XIX.

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Introduction

This report is the result of a research for Lanham Associates on entering into new geographical markets and how to build new networks in those markets. This introductory chapter starts with a description of Microsoft Dynamics NAV, which is the platform Lanham Associates works from, followed by a description of Lanham Associates, their products and the MS NAV reseller. Furthermore it describes the rationales for doing this research.

Microsoft Dynamics NAV

Microsoft Dynamics NAV is an enterprise resource planning (ERP) software product from Microsoft. The product is part of the Microsoft Dynamics family, and intended to assist with finance, manufacturing, customer relationship management, supply chains, analytics and electronic commerce for small and medium-sized enterprises. VARs (Value Added Reseller) can have full access to the business logic source code, and it has a reputation as being easy to customize1.

Lanham Associates

Lanham Associates is an American product development organization that was founded in 1996 specifically for the purpose of adding distribution and supply chain functionality to Navision Financials. The applications that were created eventually became Navision Advanced Distribution. Today they continue to create Supply Chain Planning & Execution products to enhance the MBS Navision system, now called Microsoft Dynamics NAV. All products are developed within the Navision environment so that data is housed in one database, and consistent business information is available from any part of the system.

Products include supply chain planning and execution applications such as E-Ship, EDI, Retail Supplier Link, ADCS Warehousing, and Advanced Forecasting and Procurement for Microsoft Dynamics NAV. They also offer security tools such as History and Security Management2.

MS Navision Reseller

Services and education is done through the Microsoft reseller to support the successful integration and implementation of the products. These products are available exclusively through the Microsoft reseller channel. The Microsoft NAV reseller is the first line of support backed up by support from Lanham Associates.

Because Lanham is a development organization and sell their products strictly through the NAV reseller there is no direct contact with their end-customers. NAV customers have a NAV reseller who provides them with their Navision software package. If a NAV customer would have need for a specific solution that is not included in the standard Navision, the NAV reseller has two options:

Building a solution themselves

Buy an add-on from an ISV (Independent Software Vendor) that can be implemented in Navision.

1

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Lanham is such an ISV. For a NAV reseller to buy an add-on from Lanham he has to sign a partner-contract from which a further relationship is build. In order to implement the add-on correctly a product-training has to be done by the NAV reseller and there is support available in the form of documentation (Online-help, FAQ), direct help by sending an email/calling in, or consultancy. These conditions give the following model (see Figure 1).

Figure 1 ‘Market-model Lanham Associates’

Rationales for this research

Lanham Associates is well established in the North American MS Dynamics NAV market, has a partnership with most NAV resellers in the market and are looking to expand. Because the European NAV resellers are starting to make more use of add-ons, Lanham Associates sees opportunity to expand their market to Europe. Countries include Germany, France, Great Britain, Benelux, Spain, Portugal, Greece and Italy. At this point there is a European representative in The Netherlands and in the near future a local technical support will be set up.

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Problem statement

To be able to expand their market to Europe, Lanham Associates will have to build a network of European NAV resellers who will add the Lanham products to the Navision software-package they sell to their end-user. Because the North American and the European NAV reseller are not alike, Lanham Associates will need insights in the possibilities for establishing new partnerships with European NAV resellers. The research objective therefore is:

To provide Lanham Associates with insight in the European markets for MS Dynamics NAV resellers in order to build a network of European MS Dynamics NAV resellers and effectively expand their market to Europe.

In order to identify these insights two specific theoretical frameworks will be used, namely social capital and embeddedness of networks. These frameworks are used because they identify the important aspects of the relationship-side of a business, which for Lanham is crucial in their business-process. Without a wide network of partnerships with NAV resellers, Lanham does not have a channel to sell their products. This gives the following conceptual model:

Figure 2 ‘Conceptual Model’

This gives the following research question:

Which resources of social capital and which components of embeddedness influence the opportunities for Lanham Associates to build new partnerships with European MS Dynamics NAV resellers?

Subsequent the following sub-questions can be asked which combined give an answer to the research question.

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Outline of the report

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1. Literature review

The interviews with North American and European NAV resellers showed that the relationship Lanham has with these NAV reseller is critical for the success of Lanham products. The NAV reseller not only is the direct representative of Lanham but also has to know all technical aspects in order to sell and implement their products. For Lanham therefore, their social structure of NAV reseller is the source of their business and having a good relationship with their resellers is paramount. The interviews showed that Lanham also has resources which can help them in the attainment of new partnerships with NAV resellers. This chapter will give a literature review on social structure, social capital and liability, and the possible types of ties actors can have in the network. This will give the theoretical framework by which the collected data from the interviews can be analyzed to provide the insights in the opportunities Lanham has, to acquire new partnerships with European NAV resellers.

1.2 Social Capital

Social structure is seen as a network of actors who are in some way connected through a set of relationships. If the outcomes of a social structure are positive, helpful in the attainment of specific goals, we say the social structure conveys social capital. But when social structure prohibits and obstructs action, it produces social liability (Leenders & Gabbay, 1999). So having a social structure does not automatically mean you will profit from it and it could even prohibit you from gaining advantages.

When looking at social structure and it’s outcomes from a business perspective Leenders & Gabbay (1999) see Corporate Social Capital (CSC) as ‘the set of resources, tangible or virtual, that accrue to an organization through social structure, facilitating the attainment of goals.’ Resources that might be labeled as social capital include trust, reputation, status, credibility, information, support, advice, knowledge and authority (Leenders & Gabbay, 1999). As the examples of resources show, these can only come from a relationship, a social structure. There are elements to CSC which should be taken into account.

1. Social capital is goal-specific. A large number of social ties do not necessarily translate itself into social capital. It only does so if these ties assist the actor in the attainment of particular goals. This has two implications:

Social structure may be beneficial for the attainment of multiple goals, since the multiplex character of many social relationships results in overlap of opportunity structures. Networks created for one purpose may be employed for another.

In some situations, the same social structure can be beneficial for the attainment of one goal, while obstructing the attainment of others.

2. An actor needs to be conscious of the social capital he enjoys. The social structure in which an actor is embedded may confer advantages to the actor, without the actor even realizing it. 3. The social structure that brings opportunities for the realization of particular goals need not to have been built in the pursuit of these goals – social capital often is a by-product of other social activity.

(Leenders & Gabbay, 1999)

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1.3 Level of analysis

The distinction between social structure per se and the outcomes of social structure highlights the requirement of an explicit focus on levels of analysis in any social capital study. This requirement is especially paramount for studies of social capital in organizational settings. The social capital that individual employees enjoy stems both from their own networks (and the networks of their alters) and from the networks within and between teams, departments, and companies.

Structure at any given level will typically affect outcomes at multiple levels (See Figure 2) (Leenders & Gabbay, 1999). As figure 3 shows all levels of analysis are connected, even when considering only two levels of analysis there are 4 types of connections. For this study however the focus will be on structure at organizational level and social capital at organizational level. This means only connection type D is taken into account.

Figure 2 ‘Structural causes of social capital and social liability at various levels of analysis’ (Leenders & Gabbay, 1999)

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1.4 Embeddedness

Research on embeddedness is an exciting area in sociology and economics because it advances our understanding of how social structure affects economic life (Uzzi, 1997b). Embeddedness can be classified into four forms: structural, cognitive, political and cultural. For this study the focus will be on structural embeddedness, which is principally concerned with how the quality and network architecture of material exchange relationships influence economic activity (Zukin and DiMaggio, 1990 in Uzzi, 1997b). Structural embeddedness focuses on interfirm relationships. An understanding of how embeddedness and network structure produce particular economic outcomes demands a closer examination of the interactions among firms in organizational networks. Research shows that exchange relationships among firms in a network can be either arm’s length as an atomistic market or closely knit and collaborative as the organizational network literature emphasizes (Powell, 1990 in Uzzi, 1997a). Uzzi (1997a) views arm’s-length and embedded relationships as being on opposite ends of an exchange continuum so that a network can have varying levels of structural embeddedness from low (arm’s-length) to high (embedded ties) depending on the type of ties used by firms in the network. This view allows for the possibility that networks can be mechanisms for both cooperation and exploitation (Granovetter, 1985; Burt, 1992 in Uzzi, 1997a).

Arm’s-length Relationships

In arm’s length ties only price and quantity data needs to be exchanged between buyer and seller because, according to neoclassical logic, it contains all the information necessary to make efficient business decisions currently and in the future (Hirschman, 1970 in Uzzi 1997a). Each party to the transaction pursues their own interest and exchanges with the highest bidder or lowest cost producer. Sociological factors such as family, shared ends or values, history, commitment, or trust have a minimal effect on economic action (Harrison, 1992 in Uzzi 1997a). Thus, when arm’s length ties are used among firms in a network, the network structure resembles the competitive model of microeconomic theory (Baker, 1990 in Uzzi 1997a).

Arm’s length relationships are argued to produce efficiencies and promote survivability in several ways. First, they provide wide access to market information. Because there is a low level of exchange between any two parties, firms can spread their business out in small parcels to many firms which in turn gives the focal organization a large number of competitors from which to sample price and quantity information. Second, arm’s length ties reduce the risk of opportunism because firms, in the process of spreading their business out among many trading partners, avoid small numbers bargaining situations and increase their ability to withdraw from problematic partners (Hirschman, 1970; Williamson, 1985 in Uzzi 1997b). Finally, low interfirm dependencies mean that firms can unilaterally adapt to changes in the market (Williamson, 1985 in Uzzi 1997a).

Embedded relationships

At the other pole of the exchange interface is an embedded relationship. In these relationships, social factors such as personal relations, identity, and trust influence the nature of the economic association and the behavior of the economic actors themselves (Granovetter, 1985 in Uzzi 1997a). Arm’s-length ties may be greater in frequency but of lesser significance than embedded ties in terms of company success and overall business volume. An individual simultaneously can act ‘selfishly’ and cooperatively with different actors in their network, depending on the quality of the social tie and the structure of the network in which the actors are embedded (Uzzi, 1997b).

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Trust

Trust has been found to be the governance mechanism in network exchange relationships (Smitka, 1991; Larson, 1992; Portes and Sensenbrenner, 1993 in Uzzi, 1997a). Trust is the belief that an exchange partner would not act in self-interest at another’s expense and appeared to operate not like calculated risk but like a heuristic – a predilection to interpret someone’s behavior in a favorable light, rather than with the intensive calculation typical of economic models of decision making (Uzzi, 1997a).

The presence of trust in an interfirm relationship is important because it facilitates the giving of voluntary contributions to the relationship that go beyond an exchange partner’s expectations. Over time, these exchanges create relationship-specific opportunities that can be drawn upon in times of need (Uzzi, 1997b). This means that firms with embedded ties in networks gain access to privileged resources that help them adapt, while also lowering transaction costs (Uzzi, 1997a).

Fine-grained Information Transfer

This is information exchange beyond price and quantity including information on strategy, profit margins, technical know-how and tacit information acquired through learning by doing. This way each of the partners comes to understand the products and production processes of their trading partner well. As a result, firms linked through embedded contacts can jointly contribute to design and process innovations, rather than simply transmitting prices or following the plans of the purchasing firm (Helper, 1990; Powell, 1990 in Uzzi, 1997a). This information is not a form of, or result of, asset-specificity.

Rather this type of know-how may be quite general and transferable to a wide range of exchange partners without a loss of value (Smitka, 1991, in Uzzi, 1997a). Uzzi (1997b) found that information links in embedded ties comprise a composite of non-distillable “chunks” of information that are not only highly detailed (relative to price data), but quickly processed in a manner consistent with Herbert Simon’s notions of “chunking” and expert rationality (Prietula and Simon, 1991 in Uzzi 1997a).

From the point-of-view of organizational competitiveness, what this means is that these chunks of information not only allow individuals to handle more detailed data at one time, but that decision-making is sped up because exchange partners are processing chunks of packed data rather than individual pieces of that data (Uzzi, 1997a).

Joint Problem-Solving Arrangements

These are routines of negotiation and mutual adjustment that flexibly resolve problems. In embedded relationships, exchange partners send personnel or tightly link their operations across firm boundaries in an effort to solve production or design problems on-the-fly (Smitka, 1991; Larson, 1992 in Uzzi, 1997a). Thus, joint problem-solving arrangements are key mechanisms of “voice” that allow organizations to promote resource pooling and to learn from their mistakes through direct feedback from exchange partners (Uzzi, 1997a).

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1.5 From capital to liability

There are three conditions that turn embeddedness into a liability:

1. There is an unforeseeable exit of a core network player – the loss of a core organization in a network will have a large negative effect on the viability of the network as a whole. The intensity of these effects increases with the size and level of embeddedness in the network such that, at the limit, an “extinction effect” will occur.

2. Institutional forces rationalize markets – if changes to the system rupture social ties, then the benefits of embeddedness generated by the ties can be lost. For instance when an outside company buys up an embedded tie in the network and implements a new corporate culture which deals in arm’s-length ties only.

3. Overembeddedness characterizes the network – This can reduce the flow of new or novel information into the network because redundant ties to the same network partners mean that there are few or no links outside members who can potentially contribute innovative ideas (Burt, 1992 in Uzzi, 1997b). Also feelings of obligation and friendship may be so great between transactors that a firm becomes a “relief organization” for the other firms in the network (Uzzi, 1997b).

1.6 Implications for organizations

Organizations gain access to special opportunities when connected to their exchange partners through embedded ties, such that the opportunity level is positively related to the degree to which a firm’s network partners use embedded ties – at least up to some threshold. These relationships suggest that the effect of embeddedness and network structure on economic action depends on two variables:

how a firm links to its network and,

the composition of the network that a firm is linked to.

Uzzi (1997b) found that actors had a significant lower failure rate when linked by embedded ties to their network and that being connected to a network comprising an integration of embedded ties and arm’s-length ties, rather than a network comprising from either embedded ties or arm’s-length ties, significantly decreased the failure rate even further (See Figure 4).

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1.7 Concluding remarks

The starting point of the literature review existed of the concepts of social structure and social capital (Leenders & Gabbay, 1999). This has been integrated with the findings of Uzzi (1997b and 1997a) on embeddedness and their effects on the social structure and the organization itself. The review showed that having a social structure can accrue social capital when organizations are aware of their place in the network and the possibilities this brings. The architecture and quality of the social structure can further these opportunities. However, a social structure can also bring liabilities in multiple ways and over time.

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2. Research Design

In general there are two forms of research design, fixed and flexible. In fixed research designs a substantial amount of pre-specification about what you are going to do, and how you are going to do it, should take place before you get into the main part of the research study. Carried out in real world settings, they require a developed conceptual framework or theory so that you know in advance what to look for (Robson, 2002). Because for this research the data collection is both to understand the market, as well as trying to build conclusions from it, no theory lies at the basis. Robson (2002) defines a flexible research design as typically making substantial use of methods which result in qualitative data and much less pre-specification takes place and the design evolves, develops and ‘unfolds’ as the research proceeds.

A theory (whether expressed in terms of mechanisms or otherwise) explains why a particular answer is predicted. Talking in terms of hypotheses best fits fixed design research, where we should be in a position to make predictions before the data are gathered. In a flexible design research, we are likely to be in this position only after, and as a result of the data gathering. The outcomes can be used to support the existence of particular mechanisms in the context studied, even if they could not be predicted (Robson, 2002). As for this research qualitative data will be analyzed and no conceptual framework could be pre-specified, a flexible research design will be used.

Because there is so little known about the European market, and insights in this market are the main reason for this research, the nature of this research is exploratory.

2.1 Gathering Data

As mentioned in the introduction the data collection was both to understand the market, as well as trying to build conclusions from it. Because this was the case, no theoretical framework could be used to reduce the needed data as at the start of the data collection it was unclear which theory to use. The interviews conducted at the 15 North American and 11 European NAV resellers had to provide this information.

Because there was no further documentation available from within the organization, interviews were the only source of data. Therefore, within Lanham open interviews were conducted to get insights in their business processes, products and a first insight in their relationships with their NAV resellers. To get further insight into the North American market of NAV resellers an interview was set up on the basis of the outcomes of the open interviews conducted at Lanham. The interview had to provide as much information as possible but also had to stay within pre-specified answer-areas in order to make a comparison between interviews later on. With the information from the open interviews a set of questions was set up each with specific possibilities as to what kind of answer could be given. This way the interviewee has room to give any possible answer and the interviewer can steer back in the right direction if the interviewee gets too far off course. Also for some questions a simple multiple choice format was sufficient. This resulted in a semi-structured interview. The preliminary results from these interviews gave further insights into the North American network of NAV resellers and form the basis for a similar semi-structured interview for the European NAV resellers.

For the North American market 15 NAV resellers were chosen who have a long-term relationship with Lanham as these NAV resellers could best provide the insights in a partnership with Lanham. These interviews were conducted during the Microsoft Convergence 2007 in San Diego.

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Because these NAV resellers already had contact with Lanham they were more open to doing an interview. These interviews were conducted at the NAV reseller.

All interviews took roughly 10 to 15 minutes and were recorded to prevent data-loss.

2.2 Methods of analysis

After the interviews were conducted for both the North American and European market, the data needs to be analyzed. Because of the exploratory nature of this study, the data is mainly qualitative. Therefore, qualitative data analysis methods will be used.

With a template approach text segments which are empirical evidence for template categories are identified. Key codes are determined either on an a priori basis or from an initial read of the data. These codes then serve as a template for data analysis. The findings are often displayed in a matrix (Robson, 2002).

Because of the semi-structured nature of the interviews many questions already have a set of fixed answer-possibilities and for most other questions the answers lay closely together, therefore, coding the data using a template approach seemed to be the obvious choice.

Also for the classification of the embeddedness of the North American reseller a template approach will be used. The theory of embeddedness will act as the template to which the data will be analyzed. The Miles & Huberman (1994) template approach was used to analyze the interviews conducted at 15 North American NAV resellers and the 11 European NAV resellers. This analysis method has three activities: data reduction, data display and conclusion drawing/verification.

2.3 Data reduction

To code the data from the interviews, first an argumentation is stated for all interview questions in order to establish the relevance of the question and the expected information it will generate. Following the argumentation are the codes applicable to that question. Most codes were generated before the interviews were conducted. For some questions these codes were not sufficient or it was not possible to set up codes in advance. In these cases new codes were added or a code is altered to better fit the common answers given by the North American NAV reseller. All codes listed here are made up out of the common answers given by the North American NAV resellers (see Appendix I and II).

To analyze the North American NAV reseller on embeddedness, three codes were used as a template. The answers of the NAV reseller were coded, when possible, as trust, fine-grained information transfer and/or joint problem-solving arrangements (see Appendix V).

2.4 Data Display

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By doing so, text could easier be put into a code though not having all the characteristics of that code, without the code losing its value.

For the analysis of embeddedness also a matrix can be produced by simple entering the North American NAV resellers on the vertical axis and the three codes of embeddedness on the horizontal axis. Where a code is applicable to a NAV reseller a score of 1 is entered in the matrix (see appendix V).

2.5 Conclusion drawing

Now that all data is quantified, a statistical analysis is possible. For this research two formulas were used to determine statistical outcomes. For some questions multiple codes applied to the same interviewee. For these codes calculating a percentage of the total score for that question would mean some interviewees would have a disproportionate share of the score because multiple codes applied to that interviewee. To make sure the percentages gave the right representation of the total outcome of the code, the following formula was used:

Outcome = (total score code/total interviewees)*100

Results from these questions were put into a column graphic. For all other codes the following formula was used:

Outcome = (total score code/total score question)*100 Results from these codes were put into a pie-chart graphic.

By adding up the horizontal axis the total score of embeddedness per NAV reseller can be calculated. The highest possible score is three, meaning this NAV reseller has all three components of embeddedness. These NAV resellers are classified as embedded relationships. A score of zero is the lowest possible score, meaning this NAV reseller has none of the three components of embeddedness. These NAV resellers are classified as arm’s-length relationships. These two categories have been identified by Uzzi (1997); however, a score of one or two is also possible. For these scores Uzzi has no categories. Because for this research a more sophisticated classification is needed, two new categories are added to the existing arm’s-length relationship and embedded relationship of Uzzi. These are the trusted relationship, which in this research has a score of one, and the dedicated relationship, which in this research has a score of two (see Figure 5).

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3. Results and analysis of the North American market

In this chapter the results of the qualitative data analysis of the 15 North American NAV resellers and the theoretical framework of social structure and embeddedness will be combined to give a representation of the network Lanham Associates is part of and the implications this brings for the organization. To see if Lanham has the potential to gain social capital, the resources for social capital will be analyzed. These are trust, reputation, status, credibility, information, support, advice, knowledge and authority, as mentioned in the literature review. Lanham will be evaluated on these specific resources of social capital. Subsequent the NAV resellers which have been interviewed will be classified as an arm’s-length, trusted, dedicated or an embedded relationship. This will make up a network-model similar to the one in Figure 4 of the literature review.

3.1 Resources of Social Capital

Here all questions that give an insight into the resources of social capital Lanham possesses will be discussed. Some resources are not mentioned below. This does not mean these resources are not applicable to Lanham. The interviews and the analysis merely do not give sufficient information about that specific resource of social capital to give a conclusive answer and therefore will not be included in this study.

Status and Reputation

When asked the question how they got to know Lanham, 40% of all NAV resellers interviewed said they know Lanham historically, meaning they have been working with Lanham ever since Navision came to North America and Dale made the necessary adjustments to fit Navision with the North American market. For 40% the reason for starting a relationship with Lanham was because their customers had a need for a solution which was not provided in the base-Navision software (see Figure 6).

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Trust and Credibility

75% of the NAV resellers interviewed always make use of some of the Lanham applications in their sales. When asked if they have an alternative to Lanham products, 58% of the NAV resellers preferred to use the Lanham applications and 17% is not looking for an alternative (see Figure 7). There are some alternatives out there, but they have a working solution in the Lanham applications. This shows trust and credibility in Lanham as a partner.

Figure 7 ‘Chart of Alternatives to Lanham products’

Knowledge

75% of the NAV resellers interviewed see the technical knowledge Lanham possesses as an important reason for using Lanham products. Another 75% of the NAV resellers interviewed saw the outsourcing of technical knowledge as one of the advantages for using Lanham applications.

Because Lanham has a high level of technical knowledge on Navision and have highly technical products, for many NAV resellers Lanham is a source of information and a place to get training. By having a partner like Lanham NAV resellers do not have to have all the technical knowledge Lanham has to be able to sell their products.

An example of how outsourcing manifests itself is the customer-training. 44% of NAV resellers interviewed bring clients to the Lanham training. This way they do not have to train their clients themselves. Reason for doing this for most resellers is getting the training from the source rather than second hand. This way they get all the knowledge Lanham has to offer and they do not have to have this level of knowledge to be able to give the training themselves.

These results clearly show that Lanham has knowledge, specific to its market, which is of high interest to all actors in their network.

3.2 Embeddedness

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The network Lanham is in could therefore be seen as an Integrated Network as it has a good mixture of degrees of embeddedness, from arm’s length to embedded ties.

Figure 8 ‘Network structure and embeddedness from Lanham’s perspective’

The analysis shows that Lanham possesses multiple resources of social capital and therefore could have opportunities to gain social capital. When looking at the specific resources Lanham has obtained, these resources are not independent of each other. The trust NAV resellers have in Lanham comes from the knowledge Lanham possesses as well as the reputation they have in the market. The reputation Lanham has comes not only from being in the market for so long, but as well from their knowledge of the market and Navision. The resources of social capital that Lanham possesses complement each other.

When looking at the embeddedness of the network, trust is the component seen in more than half NAV resellers interviewed.

Out of the 15 North American NAV resellers interviewed the two embedded ties and two trusted ties make a lot less use of the TS (Technical Support) than others. These NAV resellers want to know the product through and through and want to be able to fix any problem themselves. They would feel their knowledge on the Lanham products is to low if they would need constant TS. These NAV resellers tend to use the TS more as a place for feedback on specific issues. This means the technical level of knowledge on Navision and Lanham products is enabling the NAV reseller to extend his relationship with Lanham to a more embedded level. As most Lanham products are highly technical, having a high level of technical knowledge allows the NAV reseller to have conversations with Lanham that go further than the simple tutorial problem-solving and therefore creating an

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4. Results and analysis of the European market

In this chapter the results from the analysis of the 11 European NAV resellers will be combined with the theoretical framework of social capital and embeddedness. Of course, for Europe it will not be possible to do a similar network-analysis as done for the North American market, as Lanham has only just entered these markets. Therefore, the theoretical framework combined with the results from the analysis should give insight into the opportunities to gain new relationships and where Lanham should be aware of its position in these new markets.

There are organizational differences between European markets, but because the differences between markets are smaller and of less significance than the differences with the North American market, for this study, Europe will be analyzed as a whole.

Reputation, credibility and status are resources of social capital cannot be analyzed at this point as these resources are a result of being in a specific market for a certain amount of time. Because trust, according to the results of the North American market, is an important component of the relationship Lanham has with its NAV reseller and is a resource of social capital as well as a component of embeddedness, this will be the starting point for the European analysis.

4.1 Trust – Openness to add-ons

Trust is a two-way street. It has to come from both ways. Therefore it is important to see if the European NAV resellers are open to new relationships with ISV’s. European NAV resellers have the reputation for not being open to using third-parties software in their sales. As an UK ISV put it ‘it’s in the costs of learning something new. As long as it’s inside Navision then it’s okay. But if it’s an add-on that is less obvious they would not want to learn about it’. This reluctance is coming around as ‘…everybody is overworked but the demand for Navision grows, so it is much more sensible that the reseller uses a proven add-on, rather than building it. So they have standard products that are well known and having a supported solution for the customer. There are not enough consultants to do all the work’.

To see where the European market stands on this matter, the European NAV resellers where asked if they were open to using add-ons from third parties. Figure 9 gives a pie-chart of the results from this question.

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Most resellers are open to using add-ons from third parties (76%, open and very open combined). For some resellers (17%) there is a trade-off between building it themselves and using an add-on. Wanting to control all the software and not being able to bill for the add-on is in most cases the reason for doubt.

Overall the impression that European NAV resellers are reluctant to use add-ons seems to be of the past. NAV resellers are very aware of the advantages add-ons can bring to their organization and therefore are open to using add-ons.

4.2 Trust – Experience with add-ons

It is much easier to trust a new partner when you already have had experience with similar partners in the past. And being open to using add-ons is one step, actually implementing add-ons is another. To see if European NAV resellers have had experience with add-ons they were asked if and how many add-ons they use (see Figure 10).

Figure 10 ‘Experience with add-ons’

As figure 10 shows, this is an almost fifty-fifty result. The transition, from doing all aspects of the software-package to relying more on the expertise of ISV’s, is still in progress.

4.3 Knowledge

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The reason for this is that by outsourcing on a specific technical area of Navision, the NAV reseller has time to specialize in his own area of expertise and build add-ons he could sell to other NAV resellers.

So outsourcing technical knowledge is not so much a direct benefit as more an indirect benefit because it frees up time and gives the NAV reseller the opportunity to go into a vertical.

Figure 11 ‘Benefits of using add-ons’

4.4 Fine-grained Information Transfer

To give a prediction of how the information transfer between European NAV resellers and Lanham will take shape is hard to predicted, based on the information gathered so far. At the first stages this most probably is going to resemble an arm’s-length relationship, not considering more than price and quantity. The embedded ties in the North American market were NAV resellers with a higher level of technical knowledge relatively to the others. They considered themselves having inferior levels of knowledge if they could not resolve most problems themselves, coming up when implementing Lanham products. When these NAV resellers would call Lanham, they would have a problem or issue they would like Lanham’s opinion on or they encountered a specific problem which lies in the Lanham product and therefore should be fixed by Lanham.

Because the technical level of knowledge has, to some extent, influence on the possibilities of building an embedded relationship, the European NAV resellers were asked how they would use the technical support. All European NAV resellers said to use the available documentation first to see if this can help to fix the problem they encountered. In addition to this, all European NAV resellers said to call/email the technical support only if all else had failed. Meaning they have been over all documentation, have tried to make it work but have not managed to fix the problem.

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4.5 Joint Problem-solving Arrangements

As mentioned in the literature review, in embedded relationships, exchange partners send personnel or tightly link their operations across firm boundaries in an effort to solve production or design problems on-the-fly. To see if European NAV resellers are willing to extent their cooperation further, they were asked if they would consider using Lanham as a consultant to do the implementation of Lanham products and thereby giving their own consultants the opportunity to have training on the job. 27% of the NAV resellers would consider this and saw the benefits of having an on-the-job training. For most resellers this was seen as to invasive, they like to keep clear boundaries especially towards their customers. For 67% having training is seen as a necessity of using add-ons. For add-ons that need to be trained they would do the normal training, but if it would not be necessary to do the training, they would rather not. Reason for this in general is that having your consultants trained takes time away from billable hours and as the competition is fierce and the workload already is high, the threshold for training becomes even higher.

European NAV resellers have different view on the use of help. This comes from having to work with a Navision-helpdesk which could almost never really help to resolve a problem. A famous quote used to be ‘that issue will be resolved in the next version’, not helping the NAV reseller who had this problem right now. In order to satisfy the customer, NAV resellers learned how to work around problems or fix the problem themselves.

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Conclusions and recommendations

Now that the results of both markets have been analyzed it is time to see where Lanham stands and what opportunities there are for Lanham to enter the European market. As the analysis shows both markets have very different characteristics but in general both markets are moving in the same direction. The North American market is making use of add-ons for quite some time already and most NAV resellers have gotten used to doing business with ISV’s. The European market is just starting to use add-ons but most probably will make up ground relatively fast as the benefits outweigh the drawbacks and workload and competition are high. The European NAV resellers, however, do have a different view on how add-ons fit in their business-processes.

The main conclusion should give an answer to the research question after which recommendations can be made.

Main conclusion

The main conclusion is drawn up by answering the research question. The research question for this study is:

Which resources of social capital and which components of embeddedness influence the opportunities for Lanham Associates to build new partnerships with European MS Dynamics NAV resellers?

This question will be answered by addressing the sub-questions. The first sub-question is:

Lanham has considerable resources of social capital in the North American market. Most of these, status, reputation, credibility and trust, are the result of being in the business since the beginning and having made the first altercations to Navision to make it fit the North American market. Though this gives Lanham great advantages in their home-market, these resources of social capital are not transferable to other markets.

All products Lanham has have matured over time and because Lanham is an ISV it is possible to keep working on their products and building knowledge in their areas of expertise. This knowledge is one resource of social capital which is transferable to other markets. Initially this will be one of the strong points Lanham can bring to the table when convincing European NAV resellers to start using Lanham add-ons in their sales.

The analysis has shown that the European market in general is open to using add-ons but only half the NAV resellers interviewed actually are making use of add-ons. As the mind-set towards add-ons is open, the use of add-ons should grow. This means the timing for Lanham to penetrate the European market is good. Because the market is open for add-ons the possibility to built trust between Lanham and the NAV reseller is there. From there on, credibility could further strengthen trust and other resources like reputation and status. If experience were to be higher, trust could be attained quicker and easier. Since this is not the case, the first experiences with working with Lanham are very important as this will be the basis on which the NAV reseller will build his view of Lanham, Lanham products and add-ons in general.

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Having addressed the first sub-question, the second sub-question can be answered. This question is stated below:

Having an integrated network build up out of an almost equal amount of embedded and arm’s-length ties is, according to Uzzi, the theoretical best network. To see how embedded the relationships with European NAV resellers could be, the three components of embeddedness will be addressed.

Because trust is not something that is automatically there from the beginning the European NAV reseller was analyzed on openness to using add-ons and the actual usage of add-ons. The view that European NAV resellers are not open to using add-ons seems to be out-dated. The European NAV reseller seems to be very aware of the potential of using add-ons. However, only half the NAV resellers interviewed actually use add-ons at this moment, so for most NAV resellers the experience with add-ons is still quite low.

The high level of technical knowledge and the do-it-yourself mentality should bring different questions to the technical support of Lanham than Lanham is used to getting from most North American NAV resellers. These questions most likely will resemble the kind of questions the embedded relationships in the North American market have. This means there is potential for fine-grained information transfer with European NAV resellers.

The final component of embeddedness is probably the most outgoing and hardest to obtain. Joint-problem solving arrangements mean both firms cross their organizational boundaries to work together and fix problems on-the-fly. Because European NAV resellers have a do-it-yourself mentality and like to keep clear boundaries, especially towards their customers, crossing organizational boundaries seems harder for European than for North American NAV resellers.

The higher level of technical knowledge gives potential for building embedded relationships with European NAV resellers. However, the do-it-yourself mentality could prevent this from happening. As European NAV resellers always have had to work out most problems they had with the software themselves, this could mean they keep this mentality and would not consider using Lanham support for more than technical questions and reporting bugs. How this will manifest itself is uncertain and could be different for every NAV reseller.

Building real embedded ties which have all three components will be hard to establish. There is potential for fine-grained information transfer, but this depends on the mentality of the NAV reseller as well. Joint problem-solving arrangements will not be made easily but as the European market is just starting to use add-ons this could happen in the near future when the NAV resellers have more experience with add-ons.

Recommendations

First impressions are very important and when positive, can further the amount of trust given by the NAV reseller.

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Discussion

Now that the research is complete, there is room for discussion. Here the limitations to this research, the generalisibility and a suggestion for further research will be addressed.

Limitations

This research has focused on the organizational level. The individual, team, department and conglomerate levels have been left out. These levels do however have their effects on social capital and the embeddedness of the network. If we look at the highest level, Microsoft as a company has a broader view of where business-software should move and implements strategies which have effects on the way NAV resellers and ISV’s do business. Microsoft is pushing the use of add-ons and verticals. In theory this means every NAV reseller has its own vertical and sells the add-ons that go with this vertical to all other NAV resellers that have a customer who needs that add-on. This strategy indirectly pushes towards an embedded network of NAV resellers and ISV’s (here NAV resellers can be an ISV at the same time). To fully understand social capital and embeddedness of the network all levels need to be studied. Because for this study the main area of concern was the organizational level and therefore, also considering the available amount of time, this research focused only on this level.

For North America 15 NAV resellers were interviewed, which gives sufficient data to draw conclusions from. For Europe within each country a maximum of 4 interviews was done. This meant that for the analysis of Europe the interviews of Great Britain, Germany and the Netherlands had to be combined to have sufficient data to draw conclusions from. It should be taken into account that though the differences between European countries were smaller than the differences between Europe and North America, there were differences which have not been addressed in this research.

Generalisibility

The concepts of social capital and embedded networks are of course applicable to any market or industry and a similar study could be done for any other organization. The results however could be very different from the results of this research. It seems the MS Dynamics NAV market, and possible the business-software market as a whole, on general is more embedded than other markets. Reason for this could be that to successfully implement business-software at a customer, needs more trust, information exchange and joint problem-solving between customer and software-vendor than for most other business-to-business and business-to-consumer products. This means that ‘being embedded’, up to a certain point, is normal and almost a necessity for most NAV resellers. This mind-set reflects on the way NAV resellers do business with ISV’s, as they know what it takes to make things work.

Recommendations for further research

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References

Leenders, R., & Gabbay, S. (1999) Corporate Social capital and Liability, Boston, Kluwer.

Miles, M. B. and Huberman, A. M. (1994) Qualitative Data Analysis: An Expanded Sourcebook, 2nd edition, Thousand Oaks, California Sage.

Robson, Colin. (2002) Real world research: A resource for social scientist and practitioner-researchers, 2nd edition, Malden (MA), Blackwell Publishers Inc.

Uzzi, B. (1997a) Towards a Network Perspective on Organizational Decline, The International Journal of Sociology and Social Policy, v17: 111-155.