Developing strategic supplier networks: An institutional perspective

This article appeared in a journal published by Elsevier. The attachedcopy is furnished to the author for internal non-commercial researchand education use, including for instruction at the authors institution

and sharing with colleagues.

Other uses, including reproduction and distribution, or selling orlicensing copies, or posting to personal, institutional or third party

websites are prohibited.

In most cases authors are permitted to post their version of thearticle (e.g. in Word or Tex form) to their personal website orinstitutional repository. Authors requiring further information

regarding Elsevier’s archiving and manuscript policies areencouraged to visit:

http://www.elsevier.com/copyright

Author's personal copy

Developing strategic supplier networks: An institutional perspective

Seyda Deligonul a, Ulf Elg b, Erin Cavusgil c, Pervez N. Ghauri d,⁎a St. John Fisher College, USAb Lund University, Swedenc University of Michigan-Flint, USAd King's College London, Department of Management, 150 Stamford Street, London SE1 9NH, United Kingdom

a b s t r a c ta r t i c l e i n f o

Article history:Received 1 April 2011Received in revised form 1 October 2011Accepted 1 December 2011Available online 29 December 2011

Keywords:SocializationGlobal strategySupplier relationshipsSupplier networkInstitutional theoryIKEA

This study examines the exposure of themembers of supplier networks to two layers of social influences. First, asthe network connects an actor to a foreign constellation, the actor faces influences of a global character. Second,each individual actor experiences different forces emanating from its indigenous institutional environment. Theexposure to two institutional practices presents a conundrum for eachnetworkmember. In this duality they altertheir behavior in order to resolve the contrast and clashes of layered forces. By drawing upon institutional theoryand in-depth study of a global retailer, IKEA, this study shows how the retailer handles this duality. The studyincreases understanding of how a supplier network can be socially transformed into an idiosyncratic assetwhich is costly to imitate for rivals and thus offers a unique competitive advantage to the firm. The framingwhich is used for IKEA's strategy under institutional theory in this article underscores the regulative, cognitive,and normative socialization as part of a company's strategic process to align relationships with its partners.

© 2012 Elsevier Inc. All rights reserved.

1. Introduction

Many studies stress the role of inter-firm relationships and sourcingnetworks in global competition (Andersen & Christensen, 2005;Buckley & Ghauri, 2004). With the increased importance of an interna-tional supplier base, global suppliers play a critical role in the internalinstitutional system (indigenous system) embedded in a foreign one(international system). Such a role requires special relationships thatare based upon commitment and in-depth understanding of the dualityin practice. In this respect, legal requirements and the economic envi-ronment influence the nature of relationships in the local setting, paral-lel to the consideration of actors and forces in the international setting(Dacin, Kostova, & Roth, 2008).

This study focuses on how a global supply chain can manage thesemulti-tier forces to institute a balance by using social transformationas a strategic lever. The balance is particularly curious given the conclu-sion by Garud, Jain, and Kumaraswamy (2002, p. 210) that institution-alization is “messy, manipulative, instrumental, conscious, anddevious.” In this article, the institutional perspective is deliberately cho-sen and further developed to allow us to analyze the mechanisms andforces that shape the mutual understanding and commitment to rela-tionships for all members in the IKEA's network.

At the global scale, a supply chain network connects a player toforeign constellations outside of its indigenous institutional environ-ment. The exposure to two institutional contexts – familiar and

unfamiliar – presents a compliance challenge for each network member(Spekman, Isabella, & MacAvoy, 2000). Each actor in the network oper-ates with other's rules, while subjected to rules of its own. The dualityof expediency to two sets of requirements creates power struggles andclashes of accepted practices (Brito, 2001) and often strains the relation-ship in a network. At the face of this complexity, the key question is howa firm aligns its global supplier network in an integrated and consistentstrategy. By focusing on social adaptation as a unique competitiveasset, this study examines how such transformation can be proactivelybuilt andmaintained on an institutional infrastructure while the compa-ny marshals its suppliers in a particular direction. IKEA provides a rigor-ous working laboratory to this end as an integrated home productscompany which sells flat pack furniture and accessories around theworld (e.g., Baraldi, 2008; Baraldi &Waluszewski, 2007; Torekull, 1996).

Previous research on distribution channels (Coughlan, El-Ansary,Anderson, & Stern, 2006; Frazier, 1999; Gaski, 1984; Pelton, Strutton,& Lupkin, 1997) and the network perspective (Ford, 1998; Hadjikhani,Lee, & Ghauri, 2008) discuss the operational performance of inter-firmrelationships regarding norms, power and social exchange.Furthermore, Barney (1986) discusses how a firm creates a competitiveadvantage through control of its strategic factor markets. However,lacking in this stream of research are investigations of structure andprocesses where norms and values come to fruition to actively supporta company's strategy for bridging the social and cultural inconsis-tencies. An institutional approach can serve this purpose by offering aframework that an integrated supply chain balances various institution-al forces and turns them into a powerful asset to sustain competitive ad-vantage, which is difficult for rivals to imitate (Oliver, 1997).

Journal of Business Research 66 (2013) 506–515

⁎ Corresponding author.E-mail address: [email protected] (P.N. Ghauri).

0148-2963/$ – see front matter © 2012 Elsevier Inc. All rights reserved.doi:10.1016/j.jbusres.2011.12.003

Contents lists available at SciVerse ScienceDirect

Journal of Business Research

Author's personal copy

The present study contributes to existing literature by applying aunique perspective in explaining how supplier relationships can sup-port a firm's global strategy. With the institutional approach, thisstudy fills the gap in earlier works that emphasize the functionaland operational aspects and thereby downplay the role of supplierconstellation in institutional compatibility. Specifically, scholars tendto emphasize supplier relationship under purchasing strategies andnot under competitive strategies (Crespin-Mazet & Ghauri, 2007).With the exclusion of the strategic perspective, the institutionalforces often vanish or at best become stylized to a simple problemof control in operational context. Instead, this study presents amodel where the supplier network engages in both developmentand sustainability of competitive strategy under challenges that arebeyond the operational level. The operational control structuresaddress efficiency issues but as Grewal and Dharwadkar (2002)state they miss the significance of socio-political processes, conflictsand commitments in influencing partner attitudes. Especially worthyof note is that these authors underscore the incomplete examinationin alternative streams of research, where the analysis is typically lim-ited to a relational economy with decision-analytic focus. In contrast,our investigation, by bringing a social developmental view, framesIKEA's strategy and market positioning as not only an economicissue, but also a social orientation with long term commitments.

This study shows how supplier relationships develop in order toprovide a sustainable strategic advantage. The discussion here iden-tifies a set of critical factors that explain this process and present atheoretical framework (Greenwood & Hinings, 1996; Kraatz & Zajac,1996; Scott, 2001). In addition to an in-depth study of IKEA and itssupplier relationships with selected companies in Poland and Russia,our presentation, utilizing IKEA, looks into a hub-and-spoke frame-work of relationships where two organizational fields – domestic andinternational – are coordinated at the hub (IKEA's headquarters). IKEAis an appropriate firm to study as it is widely considered a successfulglobal benchmarkwith its unique integration and successful adaptationof its internalmarket to external players over the firm's unique businesssystem (Elg, Ghauri, & Tarnovskaya, 2008; Jaworski, Ajay, & Sahay,2000; Kumar, 1997).

For this study we conducted face-to-face interviews with IKEAexecutives and with suppliers in Russia and Poland. The choice ofIKEA is deliberate since the firm represents one unique case of success-ful social transformation examples in the global network scene. Byselecting IKEA and putting its strategic supplier network under a quali-tative lens, this article addresses IKEA's special business practice anddelves its useful idiosyncratic details that are important for its success.

1.1. Theoretical background

Institutional theory directs attention to forces that emanate fromthe domain of social processes (e.g. Scott, 2001). A firm's strategicactions may not be free possibilities determined solely by economicarrangements, but can be regarded as a choice among a narrowlydefined set of legitimate options determined socially within the orga-nizational field (cf. Scott, 2001). According to DiMaggio and Powell(1983), an organizational field is a set of actors and practices thatconstitute an area of institutional venue. The venue may include keysuppliers, consumers and regulatory agencies. Organizational fieldsare quite often deeply established and highly structured (Ranson,Hinings, & Greenwood, 1980) under norms and behavior of organiza-tional actors with different roles.

With the rooting of the organizational field, boundaries are formedand players are exposed to new actors as well as to societal norms asan alternative to the prevailing ones (Cavusgil, Knight, & Riesenberger,2008). The shaping of a particular organizational field is to a large extentbased upon the focal firm's key values and core strategy. An investiga-tion into this process and how it can bemanaged can further our under-standing of how to build a strong position in foreign markets.

The perspective of generating pressures toward similar practices isan important tenet in institutional theory. Additionally, institutionalforces act on firms and compel them to seek legitimacy. Accordingto Suchman (1995), a field can offer three types of legitimacy; prag-matic legitimacy results when the firm's behavior corresponds to aself-interest calculation of its most immediate audience in the field;moral legitimacy refers to the normative evaluation of the firm andwhether it is considered to do the right things by the wider public;cognitive legitimacy concerns whether its activities are comprehensi-ble and correspond with the larger belief system and the experiencedreality within the field. In line with theoretical expectation, empiricalstudies have typically affirmed the increase of homogeneity of organi-zational fields under institutional development (Kraatz & Zajac,1996). At IKEA too, the process of isomorphing (homogenization withmimetic, normative, and coercive forms) and legitimization areexploited for the benefit of the entire system, both upstream and down-stream, by attempting to diffuse the necessary conditions that will pro-mote the firm's strategic intentions (Yeniyurt, Townsend, Cavusgil, &Ghauri, 2009).

Institutional influences on organizational behavior take threeforms. In Scott's (2001) words, these three pillars stand on the regu-lative, the normative, and the cognitive influences. Jointly, the threepillars are critical in answering three questions. The regulatory influ-ences establish the norms for self-interest and resulting clashes;normative influences structure the expectations from the membersof the organizational field; and cognitive influences address the inter-pretational integrity to tune up the behavior in the organizational field.These three pillars affect the firm's actions by shaping, endorsing, medi-ating, and channeling the institutional environment.

According to Barringer and Harrison (2000), inter-organizationalresearch applies institutional theory by discussing how external rela-tionships are useful as a response to environmental pressures and as avehicle for increasing a firm's legitimacy and for governing relation-ships. Hitt, Ahlstrom, Dacin, Levitas, and Svobodina (2004) discussalliances and institutional theory with a focus upon how the external,institutional environment affects the choice of a firm's alliance partnersin Russia and China. They conclude that amore stable external environ-ment makes it possible for Chinese firms to have a long term perspec-tive on their alliances and the benefits they can generate. Dacin,Oliver, and Roy (2007) show how alliances can provide organizationswith legitimacy as a specific benefit. According to Dacin et al. (2007) le-gitimacy ensures economic and competitive goals as well as effectivegovernance, and it provides the rationale for firms to enter into alli-ances. Noorderhaven (1995) points to institutionalization and withoutempirical support recognizes its function in developing discrete markettransactions into long-term buyer–seller relationships based uponcommitment and a restraint from opportunism. McDermott andCorredoira (2010) show that suppliers from emerging markets canupgrade their products and processes and increase their competitive-ness through in-depth, institutionalized relationships with foreignMNEs.

Brito (2001) develops an institutional approach for analyzing col-lective actions in industrial networks. The main focus is on how agroup of actors develop institutional relationships that can supporttheir own interests within the broader network. Andersen,Christensen, and Damgaard (2009) apply Scott's (2001) three institu-tional pillars and discuss how their institutional environments influ-ence firms from different parts of the world and how this influenceshapes their expectations within inter-firm relationships. They arguethat the legal, regulative and cognitive pillars in society can influencenorms and expectations within buyer–seller relationships. Whilethese studies substantially contribute to our understanding of how in-stitutional theory may be applied to supplier relationships, they de-vote a limited interest to the institutionalization process taking placewithin single alliances and how it can shape shared norms andinterpretations.

507S. Deligonul et al. / Journal of Business Research 66 (2013) 506–515

Author's personal copy

Often studies based on an institutional perspective focus on the con-ditions of the organizational field, and specify the associated guidinginstitutions. The discussion often proceeds to the resultant requirementfor instituting legitimization and finally to isomorphism. Also, thediscussion looks at inertia to change. In institutionalism, the questionof how the Scott's three pillars evolve and change given the interactionpatterns and power balances among the members takes the centerstage (e.g., Greenwood & Hinings, 1996).

While scholars recognize that social norms developwithin a broaderinstitutional context (Achrol, 1997; Anderson & Narus, 1990; Grewal &Dharwadkar, 2002; Heide & John, 1992), they have devoted less atten-tion to the development of the three pillars of institutional environ-ment. Disagreement occurs in the literature regarding how the threepillars of institutionsmight evolve and transform. Scott (2001) conjuresthe regulative, normative, and cognitive institutional pillars as analyti-cally independent and self-contained. Co-evolution or interactionwould not be expected. In contrast, Hirsch and Lounsbury (1997) assertthat the institutional pillars are not analytically and operationallydistinct but rather, overlapping, so that development of one pillar willinfluence the development of other pillars. Our analysis sheds somelight on the debate.

All in all, existing theory provides a preliminary, basic understand-ing of the research problem. For the firm to gain a competitive advan-tage, it has to understand and deal with the unique institutional forcesat work. The first step is to identify significant factors that have an im-portant influence on the firm's strategic activities and understandtheir roles. These can include business partners and customers as wellas societal actors. Secondly, in order to be accepted by critical actors,the firm needs to entrench itself as a legitimate player in the market.Legitimacy can be pragmatic if the firm promotes the self-interest ofother players, moral if it appears to do the right things and cognitive ifthe activities are in concert with prevailing beliefs and norms concern-ing how things should be done. The higher the firm's legitimacy stand-ing, the more capacity the firm has to influence other actors andmanipulate the regulative, normative and/or cognitive pillar of behaviorin line with its strategic intent.

This approach is likely to be relevant in relation to both upstreamand downstream partners. The study here concentrates on the insti-tutionalization process involved in relation to suppliers, and howIKEA has been able to influence their behavior and mobilize their sup-port for its market strategy. Indirectly, our case shows how interactionswith other market players are a part of the institutionalization process.We define the organizational field as a hub-and-spoke system of dualnetworks configured around the IKEA headquarters. IKEA sits in thehub of an organizational field and regulates the upstream and down-stream constellations by propagating system-wide influences innorms, business practices, rules, habits, and beliefs.

1.2. IKEA and the institutionalization of supplier relationships

IKEA's supply chain is organized in three parts: purchasing, range,and stores. Strategic, long term decisions concerning the sourcingnetwork and the supply chain, as well as concerning the marketingof the products, are taken at IKEA head office. The firm is founded inthe small village of Älmhult where the first store was opened in1958. Today, it has more than 300 stores in over 35 countries. Onthe supply side, IKEA is organized into 40 trading offices around theworld, responsible for local purchasing and daily relationships withsuppliers. The development of a global sourcing network started inthe 1960s and Poland was IKEA's first foreign supplier market.Today the number of suppliers has grown to approximately 1300 inover 50 countries, but Poland is still one of the biggest suppliermarkets,second only to China.

IKEA is frequently used as an example of a company based upon adynamic and progressive supply chain (Gattorna, 2006). This drivesfrom its flexibility of supply chain and capacity to create, or take

advantage of, opportunities as they arise. Ever since the 1960s, IKEA'sbasic strategy has been to selectively externalize as many activitiesand resources as possible, making external networking a keycompetence of the firm (Larsson, Brousseau, Driver, Homqvist, &Tarnovskaya, 2003). IKEA's networking capability involves buildingrelationships with a number of key actors in the countries wherethe firm operates (Elg et al., 2008), but its global sourcing networkis an especially important source of strategic advantage. Supplierrelationships serve the firm to cut costs but also to develop new prod-ucts, find new materials and new production solutions. This alsomeans that most supplier relationships have a long term orientationand that the majority of the purchases are made within deep andestablished relationships (Baraldi, 2008).

Inmany cases, IKEA aswell as the suppliers have alsomade substan-tial joint investments in their relationships (Baraldi, 2008). The supplierrelationships are not just long term buyer–seller relationships, basedupon trading products, but strategic commitments where IKEA placesa major effort into making the suppliers understand and support thefirm's business model and brand values (Ghauri, Tarnovskaya, & Elg,2008).

Supplier surveys are sent out every three months in order to eval-uate satisfaction, and a newsletter is distributed to suppliers on a reg-ular basis discussing issues such as what customers expect from IKEA.This further illustrates the concern for maintaining strong relation-ships based upon mutual commitment. The firm also has a supplier'sombudsman who is responsible for looking after the suppliers' inter-est and making sure that they are treated fairly. Another example of abroad value orientation is that IKEA systematically engages the sup-pliers in social responsibility efforts and in developing a credibleCSR strategy. For example, the supplier survey includes statementsregarding IKEA's standards regarding foresting issues and child labor.

For this article IKEA case is selected because it shows that strategicadaptation and alignment of relationships can be both imposed andupheld strategically by a unit in an organization (in our case, by theIKEA headquarters). By means of cognitive orientation, the IKEAheadquarters has been able to strategically encode members througha socialization process. When internalized, this process provides ascript (patterned behavior), and the network members accept it as ablueprint for desired behavior. In enactment of the IKEA institution,the coding process represents a means to externalize or objectify pat-terns of norm, values, and accepted behavior which members can seein play and start a new round of socialization. After some time, the in-stitution (and the resulting patterned behavior) becomes regimentedand taken for granted. Then, it might be difficult for the network part-ners even to realize that their behavior is in fact partly controlled byan institution. Acting in accordance with the norms of the institutionis viewed as rational by those who share the institution. Our studyshows that such homogenization in the IKEA system is an intention-ally implemented strategy.

2. Method

The study here develops existing theory further by generating newinsights. An inductive and qualitative research method is applied inthe line (Eisenhardt, 1989; Yin, 2003). Following previous studies weshow that in-depth cases can generate a holistic perspective, a descrip-tion that considers a number of different dimensions (Elg et al., 2008;Ghauri, 2004; Stake, 1995). An in-depth case study approach can gener-ate unique insights into the complexity of inter-firm processes (Parkhe,1993). Moreover, coverage of IKEA includes their supplier relationshipsin Russia and Poland. These are two important supplier markets and yetvery different in their institutional environment.

Poland is the first foreign supplier market and appears in the compa-ny history as amilestone in supplier network development. On the otherhand Russia is a promising outsourcing partner with good prospects butstill in an early development phase. Currently, Russia represents less than

508 S. Deligonul et al. / Journal of Business Research 66 (2013) 506–515

Author's personal copy

1% of IKEA's global output mostly in the solid wood industry. Lookinginto different points in the spectrum of development, the supplier rela-tionships in these two countries represent fairly distinct cases withregards to the history, life cycle position, and prospects of partners aswell as the strategic importance for IKEA. They also examplify stableand harmonious relationships as well as those who have recently beenin a more turbulent phase.

The study is based on direct interviews with managers both at thecorporate level and with supply chain managers. We considered thesample universe as a hub-and-spoke format. At the hub, IKEAmanagerswere interviewed and at the spoke their counterparts were includedinto the interview sample. Interviews were conducted face to face in asemi-structured format. Then the transcripts were used as the majordata collection technique supported by an extensive use of secondarysources and observations at both IKEA's corporate offices and supplierlocations (cf. Ghauri, 2004). In total, 51 interviews were carried out asshown in Table 1. In selecting IKEA, our premise was that IKEA is “aunique case” with its global footprint and experience in that it offersspecial opportunity to make a significant contribution in theory build-ing research (Ghauri & Grønhaug, 2005; Yin, 2003).

As part of the data gathering, we also visited different supplier sitesand conducted interviews at these sites. The interview topics addressedsuch issues as: the state of relationships with IKEA; technical, manage-rial, and financial assistance received from IKEA; trust and mutualunderstanding between IKEA and the company's representatives;IKEA's brand and its role in the design and production of IKEA's productrange; and reactions to various IKEA policies and initiatives. The inter-views were recorded and then the transcripts were translated. On theIKEA side, we conducted interviews at the offices in Sweden withrespondents holding high and mid-level positions. Our intervieweesincluded the senior assistant to the founder of IKEA, Ingvar Kamprad,and the global purchasing director, commercial managers for two func-tional areas, human resources manager, and project managers. In bothRussia and Poland, executives at the country office level were inter-viewed. This broad approach enabled us to get different perspectiveson the role of supplier relationship development and allowed us totriangulate our findings. All respondents were either currently involvedin supplier relationships or had previously been responsible for supplierdevelopment during their careers at IKEA.

On average, an interview lasted for 90 min. The interviews weretranscribed and analyzed using Miles and Huberman's (1994) andGhauri's (2004) recommendations regarding clustered matrix codingtechniques. In the context of cross-cultural survey-based quantitativeresearch, issues of equivalence and comparability are considered to beparticularly important (Ewing, Salzberger, & Sinkovics, 2005), butshould be regarded as equally important in qualitative research(Ghauri & Firth, 2009; Sinkovics, Penz, & Ghauri, 2005). Therefore, it isespecially important to stress that due to the linguistic proficiency ofthe research team, all interviewswere carried out in thenative languageof the respondent. Thus, the interviews were carried out in English,Swedish or Russian. In accordance with the practice of relying on mul-tiple sources of evidence to develop “converging lines of inquiry” (Yin,2003), comprehensive documentary data were also collected and usedfor the analysis. These included corporate documentation and publica-tions, internal bulletins, business plans, information on the IKEA

homepage and intranet, and newsletters to suppliers, which all helpedus to triangulate the data collected through different methods.

More specifically, the research includes the following suppliers. Thefirst Russian supplier is a ceramics factory at Konakovo in the Moscowregion. It relies on IKEA as one of its biggest accounts and it expectedto supply about 10% of the total turnover in the coming years to IKEA.This actor is referred to as Supplier 1 in the text below. The Priozerskyfactory in the St. Petersburg region (Supplier 2) has worked with IKEAfor almost 40 years and IKEA has been instrumental developing thissupplier's business. But in spite of the long history, the relationshipwas currently exposed to turbulence due to the supplier's intent todiversify the customer base. The third Russian supplier, Lenraumamebelin St. Petersburg, had a large and modern production plant designedespecially for IKEA. The relationship started in 1994. It was interruptedfor a short period but resumed in 2003 and at the time of our study,about 40% of the supplier's production was made for IKEA. Still, theirplan was to elevate IKEA to become an even more dominant customerin the future.

In Poland, one firm (No. 4 in the text below) was PROFIm in Turekthat supplied three types of office chairs. IKEA was this supplier'smain customer and accounted for about 20–30% of the production.Swedwood, Poland (Supplier 5, which is owned by IKEA) producedwooden furniture and it differs from the other cases by being afully owned enterprise. This supplier desires to become an indepen-dent manufacturer serving other customers. According torespondents, this caused some difficulties and ambivalence in the re-lationship with IKEA.

2.1. Conceptualization based upon the empirical study

Fig. 1 presents the theoretical framework developed from this re-search. It is originally anchored in earlier studies. However, our ap-proach has enabled us to further refine the understanding andmodify the framework. Fig. 1 can thus be regarded as a result of ouriterative research logic, and it represents a useful outcome of ourwork. The study follows Scott's (2001) pillars of institutional influ-ence and discusses the regulative, the normative, and the cognitivepillar for each dimension. According to this framework, we exploreIKEA under various force fields. The purpose of this exploration is touse an institutional lens to construct insights that is generalizablefrom the context of IKEA.

The focal company which holds the hub indoctrinates the mem-bers at the spoke positions with symbolic patterns in order to servethe cognitive needs of the network. We explain the cognitive influ-ences as channels for imparting of symbols, culture, and informationin order to converge to organizational unity. We conclude that havingthe symbolic aspects of social exchange in place is not sufficient; itcreates understanding but hardly initiates behavior. Therefore anoth-er component of enculturation, in which behavioral motivators andmonitoring mechanisms are put in place, is needed. This part of theorganizational development involves incentives, controls, and also agovernance process. We label this category as regulative influenceswhich we discuss as part of the order and conformity process. Finally,the normative influences set up the implementation motives. Itshould be stressed that we do not intend to glorify IKEA. We considerIKEA with its merits and demerits, as an anchor to offer insights to un-tangle the development of strategic supplier relationships under theinstitutional perspective.

2.2. Behavioral dimension

The behavioral dimension involves driving the actors, activities andresources in the organization under the institutional blueprint. The dis-cussion explores IKEA's approach to behavior modification based on asocialization process. In that process, three set of forces, cognitive, reg-ulative, and normative influence the transformation.

Table 1List of interviews in Russia and Poland.

Management level Number of interviews Place of interview

Ikea corporate level managers 14 Interviews in SwedenIkea managers in Russia 19 Interviews in RussiaIkea managers in Poland 10 Interviews in PolandSupplier representatives in Russia 4 Interviews in RussiaSupplier representatives in Poland 4 Interviews in PolandTotal 51

509S. Deligonul et al. / Journal of Business Research 66 (2013) 506–515

Author's personal copy

2.2.1. Behavioral base for cognitive influencesCognitive influences of institutions entail patterns, symbols, words,

signs, gestures as well as cultural rules and frameworks that guideunderstanding of the nature of reality through which the meaning isdeveloped (Grewal & Dharwadkar, 2002). They form the integral partof taken-for-granted beliefs. Organizations will often conform to themas a form of reflex. Such a reflex in symbol and pattern exchange is anecessary component of strategic posture alignment. A successful glob-al strategy requires fast reactions in which cognitive influences addressthe other actors' interpretational integrity in order to tune up behaviorin the organizational field.

In our discussion below we argue that companies who manage todevelop supplier relationships into a source of a global competitiveadvantage need to construct a cognitive orientation to arrive at socialunity by (a) enhancing personal bonding (b) sharing values andresources horizontally and, (c) employing expertise as a means ofaffinity. This approach underlies the significance of the individual asit adopts an approach that progresses from the bottom up.

2.2.1.1. Enhancing personal bonding. In all cases, the relationshipsbetween suppliers and IKEA were built up over several (5–35) yearsand developed on a very personal level. Several respondentsmentionedthe closeness and informal character of relationship as well as theircontinuity and regularity as an important success factor. For example,Supplier 1 explained that his IKEA's contact became for him “IKEA'sface”, contributing to his feeling of trust towards the whole organiza-tion. Supplier 3 commented on the easiness of reaching understandingwith IKEA's contact persons due to their good knowledge of factoryconditions. This respondent also commented both on the role of agood personal relationship in resuming the contacts with IKEA after atemporary “break-up”: And in principle, the contribution of T. hasbeen sufficiently important. Previously, when the IKEA representativescame, I cannot say we were unable to find a common language, butall our negotiations resulted in nothing. And when T. came to us, wemanaged to agree rather rapidly (Technician).

Personal bonding appeared to facilitate collaboration involvingexchanges of vision and business ideas, technology, and in somecases finance. Supplier 4 reported regular (several times a day) tele-phone contacts with his local IKEA representative and stressed thatall problems were resolved through these interactions. On the otherhand, after dropping the interaction frequency to only occasional

contacts, or frequently-changing IKEA contact persons, the relation-ship stepped into an adverse slope. For example, perceived lack of di-alog by both Suppliers 2 and 4 resulted in a cautious approach to theincrease of production for IKEA. The alienation between the partnershas emerged and seriously affected the outcomes of other activitiesas illustrated by Supplier 2. As expected, personal bonding and theresulting suppliers' satisfaction play a crucial role in the speed ofthe development process and the technical level achieved by the sup-pliers. At IKEA the social upper structure is built and maintained frompersonal relationship dyads in a stable long term investment of socialcapital. These dyads are used to strengthen the cognitive base (sym-bols, signs, patterns and so on) as channels of social enculturation.

2.2.1.2. Sharing values and resources horizontally. Respondents stressedthe importance of building horizontal relationships with factory man-agers and technical personnel. By bridging the company, relationshipsat parallel levels enhanced resource sharing, for which respondentsmentioned technology, new (environmentally friendly) materials, ex-pertise in flat-pack production, delivery methods, quality testing andcontrol, training, global network of suppliers and financial support.They also described the role of IKEA's trading organization and men-tioned that local trading and supply managers were among thosemost actively involved in the daily interactions. IKEA technicians werealso involved in the technical support and control through regular visitsto production facilities. Technicians were often referred to by factoryrepresentatives as most trustworthy people with significant technicalexpertise. In summary, at IKEA the foundation of inner social infrastruc-ture emphasizes sharing values by engaging same-tier personnel withtheir counterparts in the other parts of the network.

2.2.1.3. Employing expertise as a means of affinity. Personal ties emergedover time and influenced the suppliers' willingness to share knowledgeand expertise, their desire to participate in training, and their engage-ment in IKEA's code of conduct. The strongest bonding was observedbetween the corporate and factory technicians stemming from sharedexpertise. The expertise usually focused on the technical know-howand knowledge of the production process as well as the factory's gen-eral capabilities and standards (Hitt et al., 2004). Having the necessaryexpertise was considered by suppliers as the most desirable factor inthe relationship: “G. is a very prominent specialist. He has been work-ing with IKEA on woodworking for quite a long time. He is a very

Global strategic

advantage

CONSTITUTIVE DIMENSION

Instituting, and legitimizing influences that are cognitive, pragmatic, norm-

based

The values, structure, processes, and superior

capabilities

BEHAVIOURAL DIMENSION

Influencing the actors, activities and resources in the organization under cognitive, regulatory and normative

rules.

Consistency Isomorphism (rooting of best

practices across the organizational network)

Fig. 1. An institutional perspective on the development of supplier relationships.

510 S. Deligonul et al. / Journal of Business Research 66 (2013) 506–515

Author's personal copy

serious technical specialist. What else can be wished? All that we needwe get” (Technician at Supplier 3).

Observations indicate the contrast between IKEA and many otherorganizations as they point to the nature of organizational integration.At IKEA, it is not the reporting structure, but the expertise, which isutilized to link individuals. With the common language and patternsof expertise, this approach is more effective in tuning the individual tothe larger social cognitive collective.

2.2.2. Behavioral base for regulative influencesRegulative influences of institutions most commonly take the

form of governance and control (Grewal & Dharwadkar, 2002). Incase of non-compliance, the members are subject to the threat of pen-alties in pre-specified rules, norms, and standards (Ghauri & Holstius,1996). The regulatory influences establish the norms for self-interestand resulting clashes. Their resolution is the first requisite for conver-gence to consistent, sustainable, and correct strategic direction that isrequired. In our discussion below we argue that companies whomanage to develop supplier relationships into a source of a global com-petitive advantage need to build their regulative orientation on (a) en-suring goal alignment, and (b) building transparency of purpose.

2.2.2.1. Ensuring goal alignment. Each supply partner, with its idiosyn-cratic character and its role in the network, has to manage its owngoals against the roles of the entire network. The primary requisitefor goal alignment challenge is the clear understanding of interestclashes. Supplier 3's testimony notes that its factory had undergonea radical change “from no mission to IKEA's mission of saturation ofthe market with high quality and inexpensive products.” This suppli-er felt that the alignment of goals was decisive in the partnership. Onthe other hand, the less successful relationship was marked by op-portunistic behavior (Supplier 2) and characterized by a strong skep-ticism towards IKEA's vision and (environmental) strategy referredto as “marketing tricks”. Indeed the most successful relationships(Suppliers 4 and 3) displayed excellent understanding and genuineadoption of IKEA's vision as the embracing guideline for the newvalue proposition.

2.2.2.2. Building transparency of purpose. Although workers were notdirectly involved in interactions with IKEA managers, they wereaware of the importance of IKEA policies. They were informed aboutthe factory's customer base as well as of the specific requirements (pro-duction, working conditions, environmental) set up by IKEA. For exam-ple, Supplier 3 stressed, “Every worker knew what is required of him.He comes to work with a purpose”.

2.2.3. Behavioral base for normative influencesNormative (or social) influences of institutions typically take the

form of rules-of-thumb, generally accepted practices, standard oper-ating procedures, occupational dicta, and training programs (Grewal& Dharwadkar, 2002). An effective global strategy is not only an eco-nomic proposition but it is also a social conviction. It requires guid-ance under the silent contract of obligation or professionalism.Partners will abide by the social contract in value, moral or ethical re-sponsibility under the supervision of the control authority and alsounder the watch of the entire community (Hadjikhani & Ghauri,2001). We argue, with regard to the IKEA experience, that companieswho manage to develop supplier relationships into a source of a globalcompetitive advantage need to construct their normative orientation by(a) building sensitivity to local values, (b) developing forward-lookingstrategic fit and(c) offering necessary education and training to rein-force the functional aspects.

2.2.3.1. Building sensitivity to local values. Orchestration of a large net-work across the globe requires effective coordination and sensitivityto local norms. Any discordance due to poor coordination, whether

behavioral or formal coordination (Wu, Sinkovics, Cavusgil, &Roath, 2007), reflects on performance. Our study illustrates how alack of local sensitivity on behalf of IKEA managers created prob-lems that influenced suppliers' performance. For example, Supplier2 commented on the unwillingness on IKEA's part to take into ac-count the existing industry norms and standards, “…a guy comesfrom Sweden and says it should be done this way or that way. Butexcuse me; there is the forest code, forest legislation. And you cantell the supplier a lot about how to stock timber, but all the sametime he will follow the existing code and coordinate his actionswith forestry.”

2.2.3.2. Developing a strategic fit. A consistent global market strategybased upon supplier commitment can only be successful with a certainfit between the adaptations and functional modifications required froma certain supplier, the business models and strategic orientation of thatactor. For example, the adaptations made by Suppliers 2 and 4corresponded well with their strategic orientation. However, Supplier1 was based upon a broad assortment of relatively advanced and tech-nologically complex products and unique designs developed by themanufacturer. This supplier was much more reluctant to modify itsoperation and rely on the relatively simple IKEA designs and products,since it would partly jeopardize the firm's basic strategic direction. Inresult, IKEA was not expected to become a key customer. The differ-ences between Supplier 1 and Supplier 4 in terms of volume, partner-ship history, work culture, degree of socialization and so on show thatit is critical for the firm to align the partners according to their strategicleverage in the value proposition.

2.2.3.3. Offering training programs. In order to ensure a partner'sadvancement, IKEA is particular about training. In our interviews, allsuppliers reported participating in some development program atIKEA in Sweden, at Swedwood, or at their own premises. Thus, Supplier2 mentioned receiving an extensive HR training and coaching duringthe difficult perestroika time and the subsequent management crisisat their factory. Supplier 3 talked about good possibilities for theirworkers to get training at Swedwood factories, while Supplier 4 men-tioned the extensive technical training at the quality testing laboratoryin Sweden, which allowed this supplier to introduce similar equipmentat their factory.While appreciating the possibility to receive training formanagement and workers, some suppliers expressed the wish thatIKEA customize it to local needs and conditions: “Training and learningshould be downhere, on the spot, in the specific situation!” (Supplier 2)While the less successful partners voiced their concerns, the benefits ofcapability development through trainingwere recognized (by Suppliers4 and 3) as the critical leverage for new value generation.

2.3. Constitutive dimension

This dimension involves shaping institutional structurewith respectto rules, norms, standards with which the functional aspects are legiti-mized. In that, there is a unity of acceptance of embedded structureand regulation. Streeck and Thelen (2005, p. 16) point out that institu-tional process is “continuously created and recreated by a great numberof actors with divergent interests, varying normative commitments,different powers, and limited cognition.” Thus, both rule makers andrule takers shape institutionalization in time and space.

2.3.1. Constituting a base for cognitive influencesThe cognitive function finds its legitimacy in constitutive space. To

that end IKEA has constituted identity related values, so that the sharedconceptions about partner interests and collective interests are negoti-ated with common symbols. Once such a social base was established,they were able to ensure means of enforcing rules and preventing ille-gitimate action. As far as local suppliers were concerned, the relation-ships with IKEA became a joint responsibility of the factories'

511S. Deligonul et al. / Journal of Business Research 66 (2013) 506–515

Author's personal copy

directors/managers and technicians. All suppliers mentioned the in-volvement of factory workers in their relationship with IKEA.

Suppliers 1 and 3 reported that factory workers often visited IKEAstores to look at how their products were part of total room settings.At Supplier 4, all workers involved in the production process for IKEAknew significantly about the company: “They visit IKEA stores andknow our products” (Managing Director). Meshing individuals intoa larger social collective requires a process with a clear anchor. TheIKEA Company's brand identity as publicized in the market serves asthe social glue at IKEA. Associating themselves with such brand iden-tity allows individuals to align the cognitions of the market-view ofthe company (external) with company specification of identity(internal).

2.3.2. Constituting regulative influencesOur observations show that IKEA headquarters initially focused

on constituting a system of headquarter-dominant governance.Once constitutive aspects were sufficiently matured, the headquar-ters gradually changed its role to become a facilitator. This encour-aged the system to function more directly between thedownstream and upstream partners easing the iron-clad control ofheadquarters. As the institutional infrastructure matured, the head-quarters' supervisory emphasis passed from process to outcome.The support also shifted from operational factors to innovation andcontrol went from authority-centric to social. This was evidentwhen analyzing the nature of the supplier relationships, where theSuppliers 1 through 5 represented different stages of institutionaldevelopment.

2.3.2.1. Constituting the Code of Conduct. If the firm is to involve suppli-er relationships as an active part in its global strategy, it requires thecompany and its entire supplier network to reach consensus on thevalue of activities which it must perform, and how individuals engagein conducting the activities. Thus, the focal company has to act as aleader setting the rules. Establishing a four-level Code of Conduct“pushes” its supplier network towards adopting IKEA's strategic ori-entation and values. Supplier 1 was on the first level of the Code ofConduct (has improved working conditions and safety standards),Suppliers 2 and 3 were at level two (has met all necessary require-ments of IWAY), while Supplier 4 had reached the fourth level (ISO9001 certification).

2.3.2.2. Constituting legitimacy for norms and conduct of control. Oneway to improve general acceptance of norms across the firms is toestablish standards that are transparent to partners. This is usuallycarried out via visits to factories that IKEA trading managers andauditors carry out on a regular basis. The goal is not only to introducestandards that are possible to implement but also to explain theimportance of meeting the minimum IWAY standards for each facto-ry. Successful suppliers exhibited a good understanding of IKEA'snorms and standards and they showed strong confidence in the rele-vance of these rules for their respective development. On the otherhand, the less successful partners expressed skepticism and poor un-derstanding of the applicability of IKEA standards to their situations.Accordingly, the level of motivation to meet the standards was differ-ent from one partner to another.

2.3.2.3. Constituting standards as inducements. Although it is much eas-ier to deal with uniform forces, global companies do not have such lux-ury. In the interviews, country-specific factors were frequently broughtup. For instance, in Russia, IKEA managers mentioned cooperation withother international retailers to increase the local production standards.This was considered an important trigger for local industry develop-ment as well as a necessary support in the country where certain stan-dards (environmental or technological) were less demanding than theinternational ones. In Poland, where standards are high, IKEA arranged

for professional consultants to help suppliers with efficiency improve-ment. Additionally, the focus of corporate activities was also differentin the two countries. In Russia the focus was on “pushing” suppliers toenhance their technical standards, improve efficiency, and boost theprice competitiveness of their products. In Poland, the focus was moreon developing themost promising suppliers and streamlining the num-ber of partners.

2.3.3. Constituting normative influencesConstituting normative influences is rooted in instituting a process

of socialization in which transformation takes place towardperformance-conscious organization. This involves facilitating closerdistance between all actors, enhancing social interaction within theconstellation of partnership. The ultimate goal is to ensure the effi-ciency of the internal market to exceed the external markets. Indeed,IKEA suppliers are provided incentives to abandon their older tech-nologies to fit IKEA's norms and the new partners are trained in ef-forts to take the system to a higher performance. In order to get thebest out of the new blood, new inductees are put into a social devel-opment program in which their diversity is adjusted to the establish-ment. In our study, all respondents reported certain technologicalchanges that took place at their factories. This was considered impor-tant in spite of the “headache” it brought for the workers at produc-tion sites.

2.3.3.1. Constituting efficiency of internal markets. One of the factorswhich determine the partner connectedness is the level of crediblecommitments. IKEA initiates product projects by a call for a closedbidding process for which all internal and external suppliers tendertheir bids. At the end, if necessary, financial support from IKEA is pro-vided to the winning bidder. Thus, it is not surprising that all respon-dents discussed the financial support received by factories from IKEA.Interviews revealed that some suppliers (Suppliers 2, 3 and 4, in par-ticular) had received significant funding while others (Supplier 1)were only starting at getting this support. For Supplier 2, assistancereceived “help from the factory to survive all crises” during the turbu-lent perestroika times in Russia in the 1990s. Supplier 4 stressed theimportance of a joint investment as it was preparing a new assemblyfacility that would allow increasing efficiency also for other IKEA fur-niture producers in Poland and elsewhere. A proactive and positiveattitude of this supplier was clear in spite of the anticipated problemsin negotiations with IKEA. On the contrary, the problems in relation-ships perceived by Supplier 2 hindered this factory from receiving theplanned loans from IKEA. As explained by the managing director ofthis factory, and referring to IKEA's policy to move personnel betweenfunctions, “the unfortunate situation with IKEA personnel” forced hisfactory to find another investor, an Italian company. Overall, theinterviews showed that new value propositions were pegged to thedegree of efficiency of internal factor markets.

2.3.3.2. Induction of new partners. In newmarkets like Russia,where thesearch for suppliers was an on-going process, high-level managers andeven Ingvar Kamprad, the company's founder, were sometimesinvolved at the earlier stages of relationships. Thus, Kamprad's contactswith Soviet and Russian officials were invaluable for building up thepartner base in this market. In Poland, managers stressed the role ofbusiness developers – people combining the knowledge of productdevelopment, finance and logistics – who helped suppliers to developnecessary competences. It is extremely important that new inducteesbring power to firm constellations, in order to prevent inbreeding ininnovative potential. Specifically, at IKEA new partners are not consid-ered to be a threat to the established social fabric; contrarily they areaccepted with their newness and viewed as fresh blood to strengthenthe plurality. As a result, the new members feed the evolution withvariance and protect the network from isomorphing into a collectionof similar units of perpetuating inefficiencies.

512 S. Deligonul et al. / Journal of Business Research 66 (2013) 506–515

Author's personal copy

2.3.3.3. Constituting social norms to ensure asset deployment efficacy.IKEA's global strategy is characterized by restructuring of the valuechain for better performance (Jaworski et al., 2000). Suppliers benefitedfrom corporate support in product technologies, materials, and knowl-edge on production process, quality issues, loans and lease of equip-ment. Effective resource allocation helped suppliers develop newcompetencies (e.g. speed of production, high and consistent productquality, efficiency in production and delivery) and gain competitiveedge. Still, some assets were also used less effectively. Here, the respon-dents mentioned training and the global network of partners — forwhich the resources were under-used by the suppliers, due to the per-ceived difficulties to adjust to local conditions. As far as local suppliers'resources were concerned, the ones most shared with IKEA wereknowledge of local customers and market conditions, local technolo-gies, contacts, and capital. However, these were not always fully usedby IKEA headquarters. For example, local contacts and local industrynorms and standards were frequently under-utilized by corporatemanagement due to lack of cultural sensitivity.

2.3.3.4. Constituting norms as a means to share knowledge. In contrast,when IKEA managers listened to supplier ideas and suggestions, itcreated a strong impression on supplier managers and hence resultedin a more positive and even pro-active attitude of suppliers towardsthe relationships. Thus, Supplier 1 spoke proudly about the way theyinfluenced product designs (the size and color of IKEA plates), Suppliers3 and 4 mentioned their regular sharing of new product ideas, industryinformation and price situation with IKEA representatives to be passedon to others. By taking into consideration the expertise at variouspoints, IKEA offered new products to local customer needs faster,which increased sales and contributed to IKEA's image in Russia ascaring about needs of customers.

The level of personal relationships between the factories' and IKEArepresentatives also influenced the intensity of local informationsharing. In many cases, the respondents reported the comfort andease with which information was shared with IKEA's local staff andbig difficulties in approaching the corporate IKEA, where the keydecisions were made.

3. Discussion

In the development of supplier relationships into strategic assets onnew markets, legitimacy through endorsement was the key gauge forassessing social fitness. The IKEA system endorses the actions of a part-ner in terms of desirability, suitability, or appropriateness in the sociallyconstructed system of norms, values, beliefs, and definitions. Unlike theeconomic approach, with its emphasis on uncertainty reduction andpecuniary outcomes, the institutional conversion at IKEA focuses onsocial fitness, which in turn leads to the development of processesthat result in lower dependence, and higher innovative capability toachieve strategic goals. This is ensured by emergence of correspondinginstitutional mechanisms that directly influence the internal policy andindirectly facilitate the economic outcomes in the IKEA network. Alter-natively, the IKEA values and norms gain legitimacy in the culturallydifferent supplier markets by demonstrating how they fit in intothe norms and practices of the actors within the organizational field.Gaining legitimacy is critical when operating in different socio-economic environments (Hadjikhani & Ghauri, 2001) and the casestudy illustrates how a firm may achieve different types of legitimacythat support its strategic approach in a new market (cf. Suchman,1995). By offering valuable resources and knowledge at an early stage,IKEA gains pragmatic legitimacy (Hadjikhani et al., 2008). In showinghow the “IKEA way” can contribute to society, the firm gains morallegitimacy, while cognitive legitimacy is ensured through educatingthe suppliers and explaining their roles within the value chain and theIKEA network in general.

In linewith theory, the process of isomorphing takes place alongsidemimetic, normative, and coercive inducement for the benefit of theentire system. In general, the IKEA case is a good example of how to dif-fuse the consistent strategic orientation within organizational fields.Aligning the supplier network demands policies that feed the innova-tive capability as the system prunes the substandard practices. InPoland, this was partly accomplished by reducing the number of actorsand eliminating less effective suppliers while strengthening thoseremaining in the network. Indeed, technical knowledge and environ-mental expertise that suppliers received from IKEA was underscoredby all respondents. One of the suppliers mentioned improved workingconditions and safety standards, while another one appreciated newtechnologies and environmentally “pure” materials, and yet anotherone mentioned the capabilities “borrowed” from IKEA's quality testinglaboratory. This laboratory and the exchange of expertise in qualitytesting allowed this supplier to reach the status of a high-quality officechair producer on a global scale.

Top management from both sides was involved in developing aninstitutional base in all cases. IKEA headquarters has been very success-ful in conveying and convincing its suppliers to follow its mission,values and business ideas. By recognizing the evolutionary levels, IKEAhas leveraged the social and economic fitness by providing financial,operational support and training needed to complywith its code of con-duct and standards. The long-term commitment to mutually beneficialrelationships facilitated institutional and economic development ofsuppliers despite the occasional lack of understanding between theparties and the perceived irrelevance of some corporate activities. Thissuggests thatmanagers on the specific supplier situations and the actualmarket should place more attention on finding a better fit between thecorporate and local market norms and standards. By enhancing man-agers' understanding of supplier conditions through greater interactionand exchange of knowledge, a partner can make better use of its ownresources invested in the supplier relationships as well as activate andutilize supplier resources for the mutual benefit of the parties.

4. Conclusions and implications

Research evidence presented here advances our understanding ofthe social mechanisms behind developing strategic supplier relation-ships. The firm's supplier network should be regarded as an asset de-serving long term commitment and worthy of difficult-to-reverseinvestments. This appears to be especially reasonable considering thattoday competition is often regarded as taking place between well runinter-firm constellations (Achrol, 1997; Day, 1994; Elg, 2000; Ford,1998; Morgan & Hunt, 1994). Fig. 1 stresses that institutional factorsmatter; better performance will follow when an institutional base isestablished and functionalities are adjusted to external markets andthe realities of the constellation of partners.

The provided empirical evidence illustrates how different dimen-sions of supplier relationships can be managed in order to transformthem into a strategic force. It also shows that institutionalization is along term process, where these dimensions support and reinforceeach other. Moreover, joint activities and personal bonding can lead toshared values and goals, and an efficient coordination of the differenttasks. At the individual level, empowerment of managers and em-ployees is also a crucial part of the institutionalization process. Allparties involved need to further demonstrate their commitment anddedication to the goals and values. The study stresses the importanceof understanding and managing the interaction among the individuals,firms, and constellation of partners consistently. For example, if sup-pliers experience that the personal relationships are not supportiveenough, it may jeopardize the whole strategic approach and make thepartners question the basic values that thefirm represents. A systematicand skillful network orchestration is thus required.

The study demonstrates that if a firm's basic competitive strategy isto be logically integrated with the strategic supplier approach, it is

513S. Deligonul et al. / Journal of Business Research 66 (2013) 506–515

Author's personal copy

necessary to ensure the consistency of social and economic elements.Consistent with Grewal and Dharwadkar (2002), the findings affirmthat organizations strive for economic fitness, which considers thescarce resources and underscores the importance of the task environ-ment, along with social fitness which emphasizes the pursuit oflegitimacy accentuates the significance of the institutional environ-ment.We also stress that in order to successfully drive the institutional-ization process within the supplier network, the firm must matchfunctional aspects and tangible incentives with constitutive and intan-gible elements. The interplay between these dimensions has beenneglected in previous research.

This qualitative study finds many interesting features in IKEA thatmay advance the theoretical grounding of institutional influence.

Compliance: The socialization starts from explicit rules of the insti-tution. This regulatory system establishes the first step to compliance.As the partnerships evolve, the compliance base shifts from expedienceto social obligation.

Mechanism: At the onset the mechanism of developing influence isregulatory (coercive), then it shifts to normative by giving identity tomembers, knowledge sharing(c.f. Möller & Svahn, 2006) and develop-ing goal alignment, and finally after internalization of the institutionalinfluence, members' behavioral consistency sustains itself by imitationof peers (mimetic tendency).

Logic: The regulatory base for influence is established by contractualprovisions inwhich rules, laws and sanctions are put in place for instru-mentality of the influence. Normatively, on the other hand, the systemis governed by a moral code, a silent acceptance of social order whichis implemented in certification and accreditation of members. Cogni-tively, an embracing culture is instilled which endorses isomorphicbehavior of members.

Legitimacy: At the onset, the acceptance of the partner as part ofthe institution is sanctioned by contractual specifications. Second,the moral and social acceptance emerges in the normative venue byinteraction, training and social governance. At the end, cognitivemechanism dominates and the legitimacy emerges in the process bycreating a common understanding of what is understood as normalin the system.

This is a qualitative examination of a single firm and its supplierrelationships. One of the strengths of this study is the offering of arich, in-depth understanding of the mechanisms at work and develop-ment of a theoretical framework. On the other hand, the study doesnot provide a basis for statistical generalization and it remains tobe seen whether the proposed framework applies to global firms ingeneral. A large number of important international firms may notshare many of IKEA's characteristics or business format. All in all, how-ever, the framework and propositions in this article offer a rich basis forfuture studies on a broader sample of firms representing differentindustries and characteristics.

Acknowledgment

The authors thank Handelsbanken's Research Council; the JanWallander and Tom Hedelius Foundation for their financial supportand IKEA for their cooperation during the research process. Wethank Tamer Cavusgil, Georgia State University, USA and FatimaWang, King's College London, UK, for their useful comments.

References

Achrol RS. Changes in the theory of interorganizational relations in marketing: towarda network paradigm. Journal of the Academy of Marketing Science 1997;25(1):56–71.

Andersen PH, Christensen PR. Bridges over troubled water: suppliers as connective nodesin global supply networks. Journal of Business Research 2005;58(9):1261–73.

Andersen PH, Christensen PR, Damgaard T. Diverging expectations in buyer–seller re-lationships: institutional contexts and relationship norms. Industrial MarketingManagement 2009;38(7):814–28.

Anderson JC, Narus JA. A model of distributor firm and manufacturer firm workingpartnerships. The Journal of Marketing 1990;54(1):42–58.

Baraldi E. Strategy in industrial networks: experiences from IKEA. California Manage-ment Review 2008;50(4):99-127.

Baraldi E, Waluszewski A. Conscious use of others' interface knowledge. How IKEA cankeep the price of the Lack table constant over decades. In: Håkansson H,WaluszewskiA, editors. Knowledge and innovation in business and industry. The importance ofusing others. London and New York: Routledge; 2007. p. 79-108.

Barney JB. Strategic factor markets: expectations, luck, and business strategy. Manage-ment Science 1986;32(10):1231–42.

Barringer BR, Harrison JS. Walking a tightrope: creating value through interorganiza-tional relationships. Journal of Management 2000;26(3):367–403.

Brito CM. Towards an institutional theory of the dynamics of industrial networks. TheJournal of Business and Industrial Marketing 2001;16(3):150–66.

Buckley PJ, Ghauri PN. Globalisation, economic geography and the strategy of multina-tional enterprise. Journal of International Business Studies 2004;35(2):81–98.

Cavusgil ST, Knight GA, Riesenberger JR. International business: strategy, management,and the new realities. Upper Saddle River, N.J.: Pearson Prentice Hall; 2008

Coughlan AT, El-Ansary AI, Anderson E, Stern LW. Marketing channels. Upper SaddleRiver, N.J.: Prentice Hall; 2006

Crespin-Mazet F, Ghauri PN. Co-development as a marketing strategy in the construc-tion industry. Industrial Marketing Management 2007;36(2):158–72.

Dacin MT, Oliver C, Roy JP. The legitimacy of strategic alliances: an institutional per-spective. Strategic Management Journal 2007;28(2):169–82.

Dacin MT, Kostova T, Roth K. Institutional theory in the study of multinational corpora-tions: a critique and new directions. The Academy of Management Review2008;33:994-1006.

Day GS. The capabilities of market-driven organizations. The Journal of Marketing1994;58(4):37–53.

DiMaggio PJ, Powell WW. The iron cage revisited: institutional isomorphism and col-lective rationality in organizational fields. American Sociological Review1983;48(2):147–60.

Eisenhardt KM. Building theories from case study research. The Academy of Manage-ment Review 1989;14(4):532–50.

Elg U. Firms' home-market relationships: their role when selecting international alli-ance partners. Journal of International Business Studies 2000;31(1):169–77.

Elg U, Ghauri PN, Tarnovskaya V. The role of networks and matching in market entry toemerging retail markets. International Marketing Review 2008;25(6):674–99.

Ewing M, Salzberger T, Sinkovics RR. An alternate approach to assessing cross-culturalmeasurement equivalence in advertising research. Journal of Advertising2005;34(1):17–36.

Ford D. Managing business relationships. Chichester, England: John Wiley; 1998.Frazier GL. Organizing and managing channels of distribution. Journal of the Academy

of Marketing Science 1999;27(2):226–40.Garud R, Jain S, Kumaraswamy A. Institutional entrepreneurship in the sponsorship of

common technological standards: the case of Sun Microsystems and Java. TheAcademy of Management Journal 2002;45(1):196–214.

Gaski JF. The theory of power and conflict in channels of distribution. The Journal ofMarketing 1984;48(summer):9-29.

Gattorna J. Living supply chains : how to mobilize the enterprise around deliveringwhat your customers want. Harlow: Financial Times Prentice Hall; 2006.

Ghauri PN. Designing and conducting case studies in international business research. In:Marschan-Piekkari Rebecca,Welch Catherine, editors. Handbook of qualitative researchmethods for international business. Cheltenham: Edward Elgar; 2004. p. 109–24.

Ghauri PN, Firth R. The formalization of case study research in international business.Der Market Journal fur Marketing 2009;48:29–40.

Ghauri PN, Grønhaug K. Research methods in business studies: a practical guide. Lon-don: Financial Times Prentice Hall; 2005.

Ghauri PN, Holstius K. The role of matching in the foreign market entry process in theBaltic States. European Journal of Marketing 1996;30(2):75–88.

Ghauri PN, Tarnovskaya V, Elg U. Market driving multinationals and their global sourc-ing network. International Marketing Review 2008;25(5):504–19.

Greenwood R, Hinings CR. Understanding radical organizational change: bringing to-gether the old and the new institutionalism. The Academy of Management Review1996;21(4):1022–54.

Grewal R, Dharwadkar R. The role of the institutional environment in marketing chan-nels. The Journal of Marketing 2002;66(3):82–97.

Hadjikhani A, Ghauri PN. The behaviour of international firms in socio-political envi-ronments in the European Union. Journal of Business Research 2001;52(3):263–75.

Hadjikhani A, Lee JW, Ghauri PN. Network view of MNCs' socio-political behavior. Jour-nal of Business Research 2008;61:912–24.

Heide JB, John G. Do norms matter in marketing relationships? The Journal of Market-ing 1992;56(2):32–45.

Hirsch PM, Lounsbury M. Putting the organization back into organization theory. Jour-nal of Management Inquiry 1997;6(1):79–89.

Hitt MA, Ahlstrom D, Dacin MT, Levitas E, Svobodina L. The institutional effects on stra-tegic alliance partner selection in transition economies: China vs. Russia. Organiza-tion Science 2004;15(2):173–85.

Jaworski BK, Ajay K, Sahay A. Market-driven versus driving markets. Journal of theAcademy of Marketing Science 2000;28(1):45–54.

Kraatz MS, Zajac EJ. Exploring the limits of the new institutionalism: the causes andconsequences of illegitimate organizational change. American Sociological Review1996;61(5):812–36.

Kumar N. The revolution in retailing: from market driven to market driving. LongRange Planning 1997;30(6):830–5.

514 S. Deligonul et al. / Journal of Business Research 66 (2013) 506–515

Author's personal copy

Larsson R, Brousseau KR, Driver MJ, Homqvist M, Tarnovskaya V. International growththrough cooperation: brand-driven strategies, leadership, and career developmentin Sweden. The Academy of Management Executive 2003;17(1):7-21.

McDermott GA, Corredoira RA. Network composition, collaborative ties, and upgradingin emerging-market firms: lessons from the Argentine autoparts sector. Journal ofInternational Business Studies 2010;41(2):308–29.

Miles MB, Huberman AM. Qualitative data analysis: an expanded sourcebook. ThousandOaks: Sage Publications; 1994.

Möller K, Svahn S. Role of knowledge in value creation in business nets. The Journal ofManagement Studies Oxford 2006;43(5):985-1007.

Morgan RM, Hunt SD. The commitment-trust theory of relationship marketing. TheJournal of Marketing 1994;58(3):20–38.

Noorderhaven NG. Transaction, interaction, institutionalization: toward a dynamic theoryof hybrid governance. Scandinavian Journal of Management 1995;11(1):43–55.

Oliver C. Sustainable competitive advantage: combining institutional andresource-based views. Strategic Management Journal 1997;18(9):697–713.

Parkhe A. “Messy” research, methodological predispositions, and theory development ininternational joint ventures. The Academy of Management Review 1993;18(2):227–68.

Pelton LE, Strutton D, Lupkin JR. Marketing channels: a relationship managementapproach. Boston: Irvin/McGraw-Hill; 1997.

Ranson S, Hinings B, Greenwood R. The structuring of organizational structures.Administrative Science Quarterly 1980;25(1):1-18.

Scott WR. Institutions and organizations. Thousand Oaks, Calif: Sage; 2001.Sinkovics RR, Penz E, Ghauri PN. Analysing textual data in international marketing

research. Qualitative Market Research: An International Journal 2005;8(1):9-38.Spekman RE, Isabella LA, MacAvoy TC. Alliance competence: maximizing the value of

your partnerships. New York: Wiley & Sons; 2000.Stake RE. The art of case study research. Thousand Oaks, Calif. ; London: Sage; 1995.Streeck W, Thelen KA. Beyond continuity: institutional change in advanced political

economies. New York: Oxford University Press; 2005.SuchmanMC. Managing legitimacy: strategic and institutional approaches. The Academy

of Management Review 1995;20(3):571–610.Torekull B. Leading by design: the IKEA story. New York: HarperCollins; 1996.Wu F, Sinkovics RR, Cavusgil ST, Roath AS. Overcoming export manufacturer's dilemma

in international expansion. Journal of International Business Studies 2007;38(2):283–302.

Yeniyurt S, Townsend JD, Cavusgil ST, Ghauri PN.Mimetic and experiential effects in inter-national marketing alliance formations of US pharmaceuticals firms: an event historyanalysis. Journal of International Business Studies 2009;40(2):301–20.

Yin RK. Case study research: design and methods, Vol. 5. Thousand Oaks, CA: SagePublications; 2003.

515S. Deligonul et al. / Journal of Business Research 66 (2013) 506–515