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1996) and networks often compete for identical partners in order to secure or increase their share of the industry’s available rent (Uzzi, 1997; Gomes-Casseres, 2003). As a result, the fastest-moving network gets the most appropriate members, thereby improving its competitive position (Gomes-Casseres, 1994; Silverman & Baum, 2002). The urge to acquire new members is especially great if rival networks enlarge rapidly (Gomes-Casseres, 1994). Along with the growth of rival networks the pool of desirable members shrinks, provoking membership competition for appropriate partners (Möllering, 2010; Silverman & Baum, 2002). Due to the existence of dual membership and the usually fluid nature of network contracts, competition exceeds the remaining pool of available partners in the industry and also affects existing memberships (Möllering, 2010). Thus, networks need to deploy sufficient retention efforts, since the loss of a core member potentially reduces the network's viability (Gomes-Casseres, 1994). In the airline industry, for example, Austrian Airlines was a founding member of Swissair’s Qualiflyer Alliance that was formed in 1992. However, in 2000, Austrian changed to the Star Alliance, which contributed to the demise of Qualiflyer and eventually to Swissair’s 2002 collapse.
In one of the first empirical studies in this area, a research group was able to shed light on business networks’ internal organizational processes (Albers, Schweiger & Gibb, 2013) by examining the instruments and processes a network uses to retain extant members, as well as to acquire new ones. The chosen context involved a large German tire retailing network named “RubberNet”, an alias for a real network to ensure confidentiality.
TABLE 1: Leading Tire Retailers in Germany (2012)
| Rank | Retailer | No. of outlets (2012) |
| 1 | GDHS (Goodyear-Dunlop) | 962 |
| 2 | Point S | 552 |
| 3 | Vergölst (Continental) | 361 |
| 4 | Euromaster (Michelin) | 327 |
| 5 | Team | 320 |
| 6 | EFR | 310 |
| 7 | MLX (Meyer Lissendorf) | 301 |
| 8 | First Stop (Bridgestone) | 225 |
Source: BRV (2012).
The tire retailing industry in Germany was chosen for the window it offered into network rivalry. Today, 83 percent of German tire retailers are members of a network (BRV, 2012) that is used to increase purchasing power and enhance consumer awareness. Overall, the top eight retail networks each operate over 200 outlets within Germany (see table 1 for an overview).
RubberNet is a network of independent tire retailers operating as a legally constituted limited liability corporation. The relevant decision and activity levels in RubberNetare the network and retail member levels. The explorative empirical study identified three core acquisition and retention processes, that is, sensing, attracting, and securing, and found that the roles of two network organizational actor levels (the network’s central management unit, or headquarters (HQ)), and the retail member organizations, combine to serve as necessary linkers and enablers in acquiring and retaining members.
The sensing process refers to monitoring the industry context and the early identification of potential acquisition targets; that is, individual retailers in which changes in ownership and management have just taken place, or are likely to be effective soon. Rival networks members that are not satisfied with their situation in their current retailer system are also potential recruits. For RubberNet, sensing relies on an active membership base and strong connections with local small and medium enterprises. Another important factor is the availability of central management unit “coaches”; that is, network HQ employees that are assigned to a specific region in Germany to liaise with, and tutor regional members. They are the first contact for all members in case of any business-related issue and monitor relevant developments in the local industry environment, approaching competing retailers if they think this is appropriate. The network HQ itself also contributes to sensing by its central management team which systematically collects and analyzes industry news, both formal (for example, in industry news) and informal (for example, rumors on trade fairs). Overall, combining local retailers (member level) and network management (network HQ, network level) seems to be an effective means of increasing the membership base.
The second process, attracting, was found to be more analytical, and includes specific predefined service components, roles, procedures and even norms. These are driven and administered by the network HQ, with network members being comparatively passive. They can be activated if the need arises since a retailer-to-retailer talk is sometimes more effective than a manager-to-retailer talk, but the actual approach, negotiation, and contract closure is performed centrally via the network HQ and its staff.
This contrasts with the key process of securing, which addresses retaining existing members. In case of rival networks addressing RubberNet’s members, it is again a joint effort by the network HQ and co-members to retain them. However, in contrast to attracting, the extant member-retailer base plays the essential role since social mechanisms seem to be the most effective retention method. However, the network HQ plays a central role in encouraging and offering opportunities for these social bonding mechanisms. For example, the general assembly of all members is organized such that it allows members to meet and chat even before and after the “formal” meeting parts; a big and swaying dinner party is an important ritual that is included in the annual meeting program, as is the desire to involve the retailers’ families to allow for additional social bonds to develop. These social events are also encouraged on the regional level, and actively supported by the coaches as well. Potential candidates to leave the network are then addressed by co-members rather than the network HQ; this process is surprisingly effective.
Overall, this study shows that networks can have effective processes in place to attract and keep members in competitive environments. It also shows that, at least for networks of a non-trivial size, a balance between centrally administered, analytical processes and resources (for example, through a network central management organization) and more evolutionary, social processes is useful in achieving these goals (Albers et al., 2013).
The results of the study also indicate that networks should develop process and mechanism repertoires that enhance tactical flexibility. As shown herein, the two top level processes of attracting and securing follow different logics (analytical attracting process vs. evolutionary securing process) and involve the network actors in different roles.
Networks should also consider employing exit barriers for their members to inhibit members that want to leave. The distinct logic and the degree to which such barriers are used needs to be considered carefully as the ongoing membership of an unwilling and potentially destructive member might come at higher total costs than its value for the network.
Firms in network-intensive environments should watch networks closely and critically assess the perceived membership imperative. To do so, adequate criteria to evaluate membership benefits are required. Also, firms need to monitor attractive industry partners and pay attention to their network affiliation, as well as their goals and satisfaction degree, to optimize timing in their approach.
3.3. Competition in Network Governance
A final domain of decisive influence on network performance is its organization and ongoing management, an issue that is often addressed under the label of network, or alliance, governance (Albers, 2005). The failure of many networks is attributed to ineffective governance structures, involving either misaligned organization in their formation, or failure to adapt over time (Reuer, Zollo & Singh, 2002; Sampson, 2004).
At any given point in time, various governance solutions exist (Albers, 2010; Albers, Wohlgezogen & Zajac, 2013; Ebers & Oerlemans, 2013); therefore, networks compete on structures to manage their processes and members. Independent of their concrete parameter values and desig+n nuances, and thereby paying tribute to the sheer amount of possible configurations of organizations, institutional economists describe three essential forms of economic coordination: markets, hierarchies, and hybrids (Williamson, 1985, 1991). Each of these forms is, according to transaction cost economics (TCE), suitable (that is, efficient) in a different context. However, in some industries, different governance forms exist under seemingly similar conditions, also with regard to TCE’s criteria. For example, in the German less-than-truckload