2. Theoretical Foundations of the Relationship Management Mid-Range Theory

Since the 1980s, the dissatisfaction with the perception of, in particular, industrial marketing as a set of isolated dyadic transactions between completely unrelated business actors has caused numerous scholars to form groups developing studies on relationship marketing (Sheth and Parvatiyar 2000). One of the earliest contributions was the book co-authored by the founders of the Industrial Marketing and Purchasing Group (IMP; Håkansson 1982), which contested the familiar microeconomic paradigm and instead promoted the network approach to business marketing (Ford 2011). The representatives of other research traditions, such as the North American (e.g. Dwyer et al. 1987), Anglo-Australian (e.g. Christopher et al. 1991) and Nordic traditions (e.g. Gummesson 1987), followed the same logic and, although they highlighted various foci, centred their interest on the conditions shaping the buyer–seller relational exchange process (relationships with other stakeholders were added to the research agenda later).

In their seminal article J. Dyer and H. Singh introduced the relational view to the theory of strategic management (1998), thereby giving new vitality to the IOE/RBV dispute on the locus of competitive advantage. By placing the emphasis not purely on a single company but on its business network, they highlighted four sources of a relationship rent-based advantage: relationship-specific assets, knowledge-sharing routines, complementary resources and capabilities, and effective governance (1998, pp. 662–663).

The overall message of this approach is that because competition is not the only mechanism of market coordination, some of a firm’s critical resources and capabilities do not have to be owned but can be shared and co-developed with its cooperating partners (Sepulveda and Gabrielsson 2013; Sulejewicz 1997). In consequence, the relational view of strategic management is a vital extension of the RBV (Lavie 2006; Rudny 2014). On the basis of RBV logic, the search for business partners can be perceived as looking to improve one’s own imperfect assets or to create new capabilities faster and/or at lower cost, thus achieving competitive advantage (Czakon 2011; Sopińska 2019).

However, the relational approach to strategic management does not only address the issue of the locus of competitive advantage. It also contributes to a major debate that has been sparking among strategic management scholars from the 1990s onward on a no less fundamental issue: the balance between the strategic planning horizon and the strategy implementation cycle (Prahalad and Hamel 1994). The dominant product–market focus of the IOE suggests taking predominately short-term positions. In contrast, the development of VRIO resources and dynamic capabilities, which are highlighted by the RBV, takes some time, but it also occurs in the more controllable environment of the firm’s strategic networks, as well as with regard to its own human and processual infrastructure (Krupski 2012; Lichtarski 2015). The unit of analysis in the relational approach to strategic management is therefore, by definition, not solely the market or a company per se, but a company in relation to its external and internal stakeholders. Hence, the relational view enables the planning range to be somewhat longer than the standard planning horizon adopted in the given industry. This is because it is stabilized by the system of multiple interdependencies, which, in turn, can be decomposed into sets of human-to-human relationships.

Certainly, the overall view of a firm as a social construct is not new. For instance, the Evolutionary School presumes that companies grow both when they accomplish planned goals and when they exploit opportunities with the help of the ad hoc strategies emerging as a result of internal bargaining processes (Krupski 2009). In the RBV, path dependency has a clearly behavioural context embedded in the experiential and cultural dimensions of socialization processes influencing the mindset of managers and other internal stakeholders (Hooley et al. 1998). In addition, dynamic capabilities are viewed as intensely entrepreneurial, so long as they involve shaping (and not just adapting to) the environment (Teece 2007). In business network studies, which have traditionally analysed the formal relationships of the focal company and its partners (Dymitrowski et al. 2019; Ford and Håkansson 2006), the analysis nowadays includes the social exchange perspective—that is, the informal relations among individuals representing companies (Burt 2009; Chetty and Blankenburg Holm 2000; Deszczyński et al. 2017). The bedrock of relationship management is therefore of sociological origin.

Among all management disciplines that involve human relationships, social exchange theory (SET) is probably the most prominent source of inspiration. It is based on a central premise that the fundamental form of human interaction is an exchange and that the voluntary actions of individuals in social contexts are motivated by the returns (social and material) they are expecting to get in the course of such exchanges (Blau 1986). These exchanges can take the form of (Fiske 1991, p. 42):

In contrast to an economic exchange per se, social exchange goes beyond what was explicitly contracted—it focuses on the actors of exchange and their relations and only secondly on the resources and benefits being the subjects of a transaction (Shore et al. 2006). Therefore, social exchange is not necessarily governed by the principle of immediate maximization of profit as it is founded upon personal ties (of varying strength) that are, in turn, the result of successful interactions over time that produce trust, commitment and reciprocity of rewards (Gouldner 1960; Granovetter 1977).

By combining the economic and social perspectives, Adler and Kwon propose a three-dimensional model of relationships, which includes (2002, p. 20):

In classic form, market relationships involve mainly sellers and buyers and come as transactional interactions—so-called arm’s length relationships. However, in B2B markets and in some B2C markets (e.g. where contractual forms of purchase exist accompanied by relatively high transaction value), these relationships can take a durable form and involve multiple stakeholders (Deszczyński 2008; Fonfara et al. 2012). Hierarchical relationships belong to the intra-organizational human resource management perspective, as they involve employees and their principles. Social relationships highlight the individual dimension of interactions. They include exchanging favours and gifts, which can be a part of private life but also emerge over time in any social context.

It is clear that managing relationships by definition spans both social and economic perspectives. This duality is reflected in the broad definitional basis of the relational phenomena given by Morgan and Hunt, who explain that managing relationships is “all marketing activities directed towards establishing, developing, and maintaining successful transactions” (1994, p. 22). This definition indicates that the company’s response to the need to manage relationships is materialized in marketing activities, which marketing scholars call ‘relationship marketing’. In turn, strategic management scholars tend to use the expression ‘relationship management’. This apparent double voice has been accompanying the academic discourse on managing relationships from the early beginning. Even in 1983, which marks the starting point of the major interest in studying relationships in management (Payne and Frow 2017), L. Berry at an American Marketing Association conference spoke about ‘relationship marketing’ (1983), whereas T. Levitt, in his pioneering article published by Harvard Business Review, used the expression ‘relationship management’ (1983). However, the relationship between marketing and other disciplines of management is, in the end, only a matter of perspective (Gummesson 1999; Zineldin and Philipson 2007). For example, so-called market orientation, which is an original marketing contribution to business strategy that explicitly draws on the marketing concept, is considered to be both: as a ‘bridge’ between corporate strategy and the organization’s business culture/philosophy, but also as a measure of the implementation of a marketing concept’s components (Hunt and Lambe 2000; Slater and Narver 1995). Hence, both terms—relationship management and relationship marketing—may be used interchangeably and should be understood as closely related components of the same phenomenon, which can be labelled ‘marketing-oriented management’. Nonetheless, in this book, relationship management (RM) works as a basic term, while relationship marketing will only be used to reflect the original work of a particular author.

RM is not a monolith, as it is a theoretical-methodological direction in management science that draws upon almost all orientations of management, including market, strategic, process, human, change and knowledge orientation (to mention only the most important; Lichtarski 2010). To be effective, it requires a coordination of the main building blocks of a company: strategy; organizational structure and culture; human, knowledge, financial and IT resources; and processes (Gordon 2001). Hence, RM can also be defined as ‘strategic management of relationships with all relevant stakeholders’ (Payne and Frow 2013, p. 4), which is a part of the incremental strategic management process reflected in the corporate business model (Deszczyński 2011; Tvede and Ohnemus 2001).

K. Möller and A. Halinen argue that the main demarcation line between different traditions in RM research corresponds to the basic division of B2C and B2B markets (2000). According to their meta-theoretical analysis, market-based relationships (B2C) are fairly simple and substitutive connections immersed in the market exchange context, whereas network-based relationships (B2B) have much more complex, idiosyncratic and context-rich natures (2000). The differences between these two main approaches are not only of semantic incommensurability (Tadajewski 2008). Research streams focused on the exchange of mass-type products and services, such as CRM (Customer Relationship Management), behaviourally driven relationship research and services research, apply reductionist causal structural equation models to identify the antecedent factors that shape (predominately) dyadic customer–supplier relationships and to explain how relationship characteristics influence relational outcomes (Anderson and Narus 1990; Cho 2006). The network-based approach takes a fuller view of relationships and tries to incorporate the IOE theory of competition, albeit changing the unit of analysis from a single company in an industry setting to a network (or a focal network) and the method of industry statistical analysis to (preferably) longitudinal case study research (Ford et al. 2011; Hunt and Lambe 2000; Möller 2013). According to K. Möller, the ontological and epistemological premises of these two approaches to RM are so distinctive that “blending or combining these approaches [in a single theory is] untenable or at least useless in any pragmatic sense” (2013, p. 331). As the aim of this book is to contribute to the development of the RM mid-range theory, such a statement demands further comment. I will address this in the section ‘The boundaries of RM mid-range theory’ in this chapter. First, however, it is necessary to get a more comprehensive perspective of RM by introducing the RM business model and RM factors.

A business model is the representation of a firm’s underlying logic and its strategic choices for creating and capturing value (Shafer et al. 2005), a general construct explaining how a firm interacts with its customers, suppliers and other important partners (Zott and Amit 2010). S. Nenonen and K. Storbacka specify 12 building blocks of business models (in a 4×3 matrix: market, offering, operations and management matrixed against design principles, resources and capabilities; 2010, p. 50). Hence, the RM business model can be perceived as an organizational philosophy oriented to value creation (Piercy 2016; Rudawska et al. 2016), a managerial process aimed at meeting shareholders’ goals by reinforcing relations with selected stakeholders (Doyle 2000; Grönroos 1996), and, more specifically, a bundle of strategies and methods devoted to strengthening customer loyalty and reducing the operating costs of sales, promotion and acquisition (Reichheld and Markey 2011). The core characteristics of the RM business model, which should be addressed by every relationship-oriented company, are (Chen and Popovich 2003; Grönroos 2004; Kumar et al. 2018):Relationships are built from continuing and meaningful interactions. In this respect, a company is not only a broadcaster of a marketing message but has to ‘listen’ to what customers (and the other stakeholders) have to say. A dialogue necessitates interactive communication tools and planning, but also a corporate memory (Shukla and Pattnaik 2019). This can be generated by an information management process, which connects all customer contact points and shares customer insight to all responsible corporate units, thus facilitating appropriate marketing responses (Payne and Frow 2005). Such a systemic approach to all transactional and non-transactional interactions with customers is a distinctive feature of RM, which enables a continuum of events to be encompassed without treating them as discrete, separate contacts (as is the case in mass marketing; Dwyer et al. 1987).

Seeing beyond the horizon of a single, immediate transaction enables a company to take more intelligent decisions, which take into account the relationship economics represented by precise measures, such as CLV (Customer Lifetime Value) and cost-to-serve customer scoring (Venkatesan and Kumar 2004). Such a strategic view of marketing redirects company focus from simply attracting new consumers to the development of closer relationships with selected existing customers and giving them reasons to remain loyal (Berry 1983). Especially in a B2B setting, a long-term strategic partnership is not a simple extension of a long-term contractual relationship, in which both parties maintain their initial bargaining positions and look for better prices or conditions. On the contrary, a long-term partnership is a philosophy of trust and cooperation based on a mutual expectation that coordinated activities will enable better understanding, creation and delivery of value for the end markets (Anderson et al. 2009; Dwyer et al. 1987).

At this point all three basic elements of the RM business model are forming a circle. If marketing in a relational context should contribute to the superior delivery of perceived customer value, some time is needed to understand customers and to engage in their value creating processes (Eggert et al. 2006; Grönroos 2009). This is achieved by a dialogical exchange and fulfilment of promises that, if the company is doing its job well, makes it possible to maintain and enhance relationships with customers at a profit (Grönroos 1990). In other words, the RM business model only works if the customers’ investment (e.g. of money and time) is balanced by the value they get in the form of products/services satisfying their needs (Pluta-Olearnik 2017). This creates a win-win situation—the customer value creation is coupled with the corporate value creation (Reichheld 2001). Hence, under the premise of RM, customer relationships are the ‘raison d’etre’ of the firm (Sheth and Parvatiyar 2000). This may sound familiar to economic historians, as in the early beginnings of corporatism, corporations were founded only to coordinate joint efforts in meeting an important goal for the community (e.g. building a bridge), and once this goal was met, they were dissolved (Davis 2016). Hence, relationship management is not so much a discovery as a re-discovery (Payne and Frow 2017).

The discussion on the RM business model will be further continued in Chap. 3, where the notion of RM maturity is conceptualized. Now, however, comes the time to synthetize what the literature has to say about the varied effects of relationship management.

In the course of a successful relationship, something more than financial results or utility value is being produced. Relationships are based on mutual trust and commitment (Morgan and Hunt 1999). Trust can be perceived in two dimensions: as the credibility of a partner and as their benevolence (the degree of interest in their partner’s success; Ganesan 1994; Doney and Cannon 1997). Commitment means, in turn, the allocation of one’s own resources that are impossible or hard to recover (e.g. because of time or the idiosyncrasy of produced effects) and a partial sacrifice of the freedom of choice (Morgan and Hunt 1999). Trust and commitment are simultaneously the key characteristics and mediating variables of a successful relationship (1999). However, although these two remain the central constructs of RM, over the years RM research began to diverge extensively (Sheth 2017). A clear example is the plethora of studies trying to identify differently conceptualized dimensions of a relationship, including relationship quality, outcomes, benefits or assets. To ensure the clarity of further narration, this diverse relational taxonomy will be discussed in the following paragraphs. Figure 2.1, in contrast, represents the uniform taxonomy that will be used later in this book.

The term ‘relationship quality’ was first coined by L. Crosby et al. to reflect how a salesperson can positively influence customer behaviour by utilizing relational selling techniques (1990). From the corporate perspective, it can be conceptualized as the ability of a firm to identify, select and retain highly profitable customers and also to effectively manage the processes of converting potentially highly profitable customers into corporate accounts (Lau et al. 2016). In the original proposal, relationship quality was regarded as a higher-order construct composed of two core variables: trust in the salesperson and satisfaction with the salesperson (Crosby et al. 1990, p. 70). Other researchers supplemented relationship quality with additional elements, such as: conflict and continuity (Kumar et al. 1995); customer commitment (Geyskens et al. 1996); cooperative norms (Baker et al. 1999); opportunism and customer orientation (Dorsch et al. 1998); and relationship-specific investments (Nyaga and Whipple 2011).

A slightly different approach is taken by the authors who focus on relational outcomes. They generally try to position them as mediating variables between more complex constructs (such as relationship quality) and company financial performance. However, in the absence of a generally accepted definition of relationship quality, it is a common praxis to mix relationship quality and relational outcomes together, for example by incorporating some building blocks of the relationship quality construct as separate relationship outcomes (Wong and Zhou 2006).

The definitional problems also remain at the level of relational outcomes. Since, at first glance, the term seems to be obvious and self-definable (as the outcomes/consequences/effects of a relationship), some misunderstandings arise in the classification of particular RM factors as relational outcomes (understood as phenomena that directly influence the bottom line; Azza and Norchene 2017). For example, loyalty is in fact a psychological outcome (a state of mind), while repurchase activities are its behavioural manifestation (Blodgett et al. 1997). Hence, loyalty does not produce financial results per se, while repeatable purchases do. In the psychological context, the relational outcomes should be defined as “the feelings, thoughts and perceived relationships arising from the social interaction” (Butcher et al., p. 314), while in the behavioural understanding, they are the activities that directly produce the payoff of a relationship (Lacey et al. 2007). However, psychological and behavioural RM factors are relatively freely applied in various models as changing constellations of antecedents, mediators or effects of each other; as meta-constructs or as stand-alone factors; and as alternatives ignoring the existence of each other. Examples of these include benevolence, bonding, co-creation, communication, customer competence, customer empathy, customer feedback, integrity, idiosyncratic investment, increasing current purchase levels, preferential treatment, reciprocity, customer retention, customer satisfaction, service quality, shared values and word-of-mouth referrals (different cross-matches can be found, inter alia, in: Franklin and Marshall 2019, p. 170; Hennig-Thurau et al. 2002, p. 235; Jones et al. 2007, p. 337; Lacey et al. 2007, p. 244; Macintosh 2007, p. 151; Prior 2012, p. 100; Sin et al. 2005, p. 38).

The positive problem of the rich and diversified approaches to RM factors also exists in the case of so-called relational benefits. The authors who focus on relational benefits mainly (but not exclusively) have a service marketing background. They predominately take the customer perspective on relational exchange, looking for relationship-specific reasons for customers to stay loyal. Therefore, they generally define relational benefits as benefits that “exist above and beyond the core service provided” (Hennig-Thurau et al. 2002, p. 234). In the original study on relational benefits, K. Gwinner et al. quote three types of such factors (1998, p. 109):These are believed to be antecedents of customer loyalty, satisfaction and positive word-of-mouth communication, which, in this research tradition, are not labelled ‘relational outcomes’ but ‘relational consequences’ (Gremler and Gwinner 2015). Sometimes they are causally linked with alternative ‘relational consequences’ including customer active voice (e.g. willingness to complain), customer feedback (e.g. willingness to cooperate with the company), customer value clusters and share of customer (Lacey et al. 2007, p. 244; Spake et al. 2003, p. 323).

Although the original three relational benefits are widely accepted by the authors who followed Gwinner et al., a gradual fragmentation of the concept has distended its compact form, just as in the case of relational outcomes and relational quality. The examples of additionally proposed benefits include advice, confidence, comfort (including psychological comfort), convenience, customization, identity-enhancement, relation to history and structural time-saving (different cross-matches can be found, inter alia, in: Colgate et al. 2007, p. 217; Hennig-Thurau et al. 2000, p. 377; Hennig-Thurau 2005, p. 14; Paul et al. 2009, p. 222; Reynolds and Beatty 1999, p. 13; Spake et al. 2003, p. 328). Some scholars extend the original construct of relational benefits to all kinds of benefits that a customer may generate in the course of a relationship and adopt very broad definitions (such as the following one in a B2B setting): “benefits and rewards manufacturers have perceived from doing business with L[ogistic] S[ervice] P[roviders]” (Li et al. 2012, p. 5445). In turn, new relational benefits are proposed, sometimes structured as components of a higher-order benefit including economic, functional and quality benefits (Hennig-Thurau 2005, p. 14; Lin et al. 2003, p. 112; Marzo-Navarro et al. 2004, p. 427; Ruiz et al. 2008, p. 5). This makes studying them an even more challenging endeavour.

Quite similar is the case of relational assets, which are the other side of the same coin. While relational benefits can be regarded as the payoff of a relationship, relational assets are more a stock of possibilities to generate such a payoff, which has been traditionally studied from the corporate perspective (Dunning 2003). In the course of any balanced relationship, a company will generate some intangible resources in the form of positive associations with the organization, its brand(s) and its representatives, as well as useful knowledge. This, in turn, should bring benefits to particular individuals working for the company (e.g. due to salesperson preference) and reinforce its overall competitive position (due to company/brand preference; Chen et al. 2011; Deszczyński 2014; Hsu and Wang 2012). This makes relational assets a similar concept to relational outcomes, with all the associated consequences of psychological versus behavioural definitional problems. Accordingly, relational assets seem to have more of a psychological nature (e.g. trust). However, it is hard to measure an amount of trust, while the customer preferences it produces can be empirically captured. Therefore, the behavioural/practical manifestation/outcome of relational assets (e.g. referrals or mutual alignment) is sometimes regarded as a part of the same phenomenon (Ng et al. 2013) and technically comes as, for example, ‘customer assets’, which are a part of the intangibles and goodwill section in financial accounting reporting (Lusch et al. 2011). Nevertheless, conventional accounting is far behind the needs of the precise measurement of relational economics (Håkansson and Ford 2010).

A natural extension of the notion of relational assets is the concept of relational (social, relationship) capital. As a higher-order construct, this can be defined as some kind of network structure that facilitates certain actions of partners, which mobilize and enhance assets embedded within the network (Burt 2009; Coleman 1988). Relationship capital therefore comprises a network setting, individual relationships (known as ‘actor bonds’ in the B2B research tradition; Håkansson and Snehota 1995) and their characteristics (e.g. trust, respect, friendship; Nahapiet and Ghoshal 1998). Hence, it generally relies upon interaction at a personal level (Kale et al. 2000), although some institutional frameworks, such as formal contracts, also facilitate the relationship network (Hoetker and Mellewigt 2009).

From the SET perspective, the strength or value of relationship capital depends on the durability of obligations arising from the feeling of reciprocity, which is immersed in an environment of complex informal social interdependencies and formal norms, guaranteed rights and sanctions (Bourdieu 1986; Coleman 1988). From the economic point of view, relationship capital is an idiosyncratic investment in the socialization processes that produces efficiency in the form of goodwill between the partners and a stock of other intangible benefits, which have the potential to generate financial benefits (Cousins et al. 2006; Crawford 1990). Hence, the existence of relationship capital may precede a successful collaboration, but in the longer run a business relationship cannot be fed only on future expectations (Deszczyński 2019). Therefore, the technical and organizational competences/potential of partners should be comparable in scale and scope before the cooperation begins, and benefits consumption should be maintained in relation to the partners’ contribution and degree of dependence, as well as the sense of fairness (Mowery et al. 1998; Urbańczyk 2012).

Relationship capital is, by definition, dormant unless it is used to produce an interaction and dialogue, and this always generates some knowledge (Gummesson 2004). Therefore, besides its apparent cost-effectiveness, the most important function of relationship capital is the diffusion of information through minimizing redundancy (Burt 2009). Hence, in the relationship context, a firm can be understood as “a social unit specializing in speed and efficiency in the creation and transfer of knowledge” (Kogut and Zander 1996, p. 503).

The notion of knowledge links relationship capital with a broader concept of the intellectual capital of a firm (Bontis 1998; Stewart 2007) and other conceptualizations of its intangible resources (Falkenberg 1996; Gummesson 1999). Sticking to the terminology proposed in intellectual capital research, it refers to the explicit and implicit knowledge and knowing capability of individual employees, the whole firm-wide collective wisdom, and the overall knowledge governance manifested in the organizational structures, processes, systems and other intangibles (Spender 1996). Therefore, its three base building blocks—human capital, relationship capital and organizational capital—outweigh the importance of the firm’s financial and physical resources, which they precede in the value creating mechanism (Roos et al. 2001).

The interaction between relationship capital and the other two building blocks of intellectual capital indicates that organizations develop some particular capabilities which enable them to transform individual action into a collective endeavour, which in a given organizational setting and market situation underpins organizational advantage (Nahapiet and Ghoshal 1998). The resemblance to the RBV enhanced by the notion of dynamic capabilities is, at this juncture, very clear. Therefore, relationship capital may be viewed as an upper-range VRIO resource and, from a processual perspective, as a competence or capability aimed at maintaining a balance between relationship exploration, cultivation and exploitation (Loufrani-Fedida et al. 2019; Mitręga and Pfajfar 2015).

Meanwhile, in strategic management, there is an ongoing trend to describe almost every activity of a company in the context of relationship management capabilities. Examples include absorptive capability (Cohen and Levinthal 1990), customer agility (Roberts and Grover 2012), customer response capability (Jayachandran et al. 2004), dynamic marketing capability (Mitręga 2019), employee capability (Kim & Kim 2009), network capability (Mitręga et al. 2012), portfolio management (Möller and Halinen 1999), relationship learning and renewal capability (Jarratt 2008), social media capability (Wang et al. 2017) and supplier relationship management capability (Forkmann et al. 2016). However, the view of a company from the RM capabilities perspective faces the same prescriptive limits as the traditional RBV (Pukas 2019). If there are so many causally ambiguous resources/capabilities, which of them actually generated the advantage (Barney and Arikan 2017)?

Finding a satisfactory answer to this question may be a matter of finding a proper context. For example, there seems to be less room for relational exchange in stable markets with well-known players and standardized value creating activities and processes than in more volatile markets (Möller 2006). Within the consumer market, high-contact customized service providers are able to generate more relational benefits for their consumers than standardized commodity manufacturers (Kinard and Capella 2006). Unfortunately, the more detailed the focus, the less transparent the theory (Scott and Davis 2015). The body of strategic management research is full of conceptualizations which seem to be important in a given context on the strategic, functional or even operational level (Hooley et al. 1998). This high context-sensitivity even affects the work of individual researchers. For example, in their comparative longitudinal analysis of the theoretical perspectives of inter-organizational relationship performance, R. Palmatier et al. found that trust, commitment and relationship-specific investment are the key drivers behind the relational outcomes directly and indirectly mediating financial performance (2007, p. 186). A year later, based on a different sample of companies and research method, R. Palmatier published a paper in which he only confirmed the roles of trust and commitment, without mentioning relationship-specific investment at all. Instead, he added the number and decision-making authority of inter-firm contacts and (in specific circumstances) the overall contact density as important relational factors (2008, p. 76). Unfortunately, in economics, there has traditionally been a problem of only reaching partial answers with limited reproducibility (Zawiślak 2010). Hence, it seems the promise of multidimensional profiling and typologies to better uncover the roots of competitive advantage has to be confronted with the fact that the identification of all such micro-foundations will always be incomplete (if not opaque) and implausible to communicate and implement (Barney 2001; Teece 2007).

Or perhaps one just has to look for a different kind of context? A context that is stable enough to offer some room for generalization, but still meaningful enough to avoid oversimplification.

Finding a context in which a new theory can be embedded is a matter of setting its boundaries in relation to the already established one(s). This applies especially to mid-range theories, which are always subsets of a grand theory with more specific, narrower boundaries (Pinder and Moore 1980). As the focus in this book is on whether and how RM can improve a firm’s sustainable competitive advantage, the most appropriate grand theory to relate to will be a theory of competition. Further on, as RM is embedded in the RBV’s logic of primarily endogenous growth, a corresponding grand theory of competition should explain firm diversity, be genuinely dynamic and accommodate path dependencies in a Lamarkian sense. All these conditions are met by S. Hunt and R. Morgan’s Resource-Advantage Theory of Competition (1996; R-A theory).

To justify its claims as a grand theory of competition, the R-A theory has a dual macroeconomic and management focus. Therefore, it goes beyond the research agenda of strategic management and the theory of the firm embedded in management sciences and includes such problems as institutional economics, public policy making and economic growth (Hunt 2000). However, it will only be briefly introduced to sketch the broad context in which the envisioned RM mid-range theory should be located.

The R-A theory is congruent with the IOE in stating that the market position of a firm directly influences its financial performance. In turn, a range of external factors, such as the activities of competitors, suppliers, distributors and customers, as well as the availability of societal resources and the ‘rules of the game’ set by societal institutions, affect this position (Hunt and Morgan 1996). Nonetheless, R-A theory takes the relationship-based view that the fundamental source of competitive advantage is situated inside the firm (Hunt and Morgan 1995). The best companies are simply the best combiners of heterogeneous, imperfectly mobile resources, and both—the firms and their resources—are historically situated entities (Hunt and Lambe 2000). Thus, competitive advantage is a dynamic, disequilibrium-provoking category, which may be periodically achieved within the realm of segments of rather high granularity (Hunt and Morgan 2005). The sustainability of the market position of a firm is, in turn, a function of the learning processes and the purposeful investment in resources and capabilities, which enable a firm to capitalize on (relative) innovations, bringing better value for customers, or lower prices, or both (Hunt 1997a). Importantly for RM, the R-A theory permits that not all of the applied resources and capabilities are directly owned by the company. It is enough that the company can gain access to them, which is true in the case of many relational assets. As these assets are heterogeneous and immobile, they can potentially result in achieving the position(s) of (sustainable) competitive advantage (Hunt 1997b), which implies that RM should be encompassed in the process of strategic planning.

Placing the envisioned RM mid-range theory in the context of the R-A theory and in congruence with the RBV necessitates positing two assumptions, which delimit and direct its focus. Since external factors influence the competitiveness of a firm to some extent but, in a market economy, their influence should not have a systematic discriminatory effect (e.g. the availability of basic resources which are being transformed into heterogeneous resources, such as inexperienced into experienced employees, is relatively freely granted), it is the firm itself that decides on its success. Accordingly, to establish a relationship, a company needs a partner, but as external partners are potentially available to any market player, it is the relationship capability of the player that decides their competitive advantage generated through relationships (relationship-based competitive advantage). Of course, any well-established business or social network is not freely accessible for a newcomer, and in that sense a market for relational assets in the neoclassical understanding of perfect competition could only serve as a ‘special case’ (Hunt 2000). Thus, the structural dimension of RM and the so-called fit (strategic, operational and personal) among business partners (Shi et al. 2005; Toulan et al. 2006) does matter and differentiate among firms. However, under the core premise of the RBV, these are only second-order, resulting factors in essence, external to the firm. Therefore, fully incorporating studies on the quality and diversity of a firm’s external partners into the RM mid-range theory would unnecessarily add to the complexity of the analysis. Moreover, this would require blending the environmental conditions of the B2C and B2B markets together, which, according to the earlier quoted argument of K. Möller, would deprive such a theory of any pragmatic utility (2013, p. 331).

Of course, such an epistemological self-restraint may be criticized. Nonetheless, the potential critique would, nolens volens, have to adopt the IOE’s ontological basis and assume (after M. Porter) that the external environmental conditions determine managerial choices in a decisive way and therefore push further back in the ‘chain of causality’ of the origins of competitive advantage (Porter 1991, p. 106). The view embedded in the RBV takes a different vantage point: it is the managerial reactions that are primarily decisive in studying the roots of competitive advantage, not the external conditions which trigger them (Barney and Arikan 2017; Hansen and Wernerfelt 1989; Hunt and Morgan 2005; Obłój 2007). Given a hypothetical situation of a brand new beginning of a given economy or market, similar initial conditions cannot explain the likely differences in firm growth rates or financial performance that will occur as time goes by. Therefore, the position of the firm in a given market or network is first and foremost the function of its own capabilities and attractiveness to potential partners. Ergo, the RM mid-range theory should primarily not concentrate on the structural dimension of a firm’s relationships.

Note that whether to grant the dominant position to the endogenous or to the exogenous perspective in studying the roots of competitive advantage will always remain in dispute (De Wit and Meyer 2010). Moreover, the research on competitive advantage (indifferent to the principal position of the authors) usually reports mixed but not unilateral results, mainly arguing about the proportions of industry-, segment-, network- or intra-firm-specific factors, or the research methodology, or only focusing on a specific performance trait (Ciszewska-Mlinarič et al. 2015; Coyne and Dye 1998; Datta et al. 2005; Gulati et al. 2011; Ma 1999; McGahan and Porter 1997; Robins and Wiersema 1995; Powell 1996; Rumelt 1991). Thus, staying in line with K. Möller and A. Halinen’s meta-theoretical analysis excerpted in this chapter, provided that the universal principles applicable to all RM-oriented firms are given, the RM mid-range theory should not completely ignore the particularities of market segments or clusters. Within the same segment, the general rules of market activity remain the same, but between segments they may not. Thus, studying the ability of RM-oriented firms to adequately respond to specific market circumstances may be interesting and practical. However, first the principles for managing market, hierarchical and social relationships by such entities have to be determined (for further details on levels of granularity of the RM mid-range theory, please refer to Fig. 2.4 and the accompanying discussion).

To be successful, the RM mid-range theory will also have to navigate between two extreme approaches in studying human relationships in the business context. First is the reductionist transactional approach of ‘homo economicus’, inherited from the classical economy, stating that human decisions are solely a function of economic stimulus (Romanow 1997). The other assumes that human behaviour is extremely complex and therefore that developing a theory with broad applicability would require identifying and specifying countless variables and linkages among them and still many exceptions would potentially remain unaddressed (Johnson et al. 2019). Nonetheless, there exist some distinct features of human culture, society and behaviour which are universally found among all peoples (Brown 2004). In a business setting, the relational roots of competitive advantage can be examined by transposing such human universals as the admiration of trustworthiness into a model of business practices which potentially foster relationships, and by searching for their occurrence among the most successful companies. Incorporating some stable rules that govern human social behaviour can help to establish the principal forms of RM theory and may provide it with an epistemological and normative power, while leaving room for the countless possibilities for its firm-specific reinterpretations and reconfigurations. Ergo, the starting point of analysis for the RM mid-range theory development should be internal relationship management (IRM) and its direct impact on the ability to execute effective external relationship management (ERM).

Note that to avoid overloading the RM mid-range theory its content should be focused on meaningful but individual company context-free (widely replicable) relational factors, activities and approaches distilled from idiosyncratic product-service contexts, such as the marketing-mix or employee remuneration schemes. Hence, at this level of theorizing, it is not so important what kind of utility benefits the company provides (as a supplier, employer or business partner), but how it can boost the quality of its relationships in general and whether this affects the bottom line.

Again, this assumption may well be criticized, this time by the proponents of the RBV. Setting apart the idiosyncratic product-service factors seems to be partly leaving the company out of its internal context. However, for theory building purposes in management sciences, it is more important to search for the quantum that immutably transpires to be essential in all business realities, as well as to explain and predict its occurrence, even if the theory does not encompass all particularities of the studied phenomenon (Czakon 2018; Hunt 1991). The essence of strategic management research, by contrast, is not exactly to propose an all-weather strategy, but more importantly to illuminate how to make good strategy choices and how to implement them (Porter 1991). Therefore, for the generic activities which form the core of RM strategy one should look not towards products and markets, but towards qualified management of internal interactions, which directly impacts the quality of ERM (Ballantyne 2000). The content of the envisioned RM mid-range theory amid the other basic questions on the nature of an RM-oriented firm is depicted in Fig. 2.2.

Of course, if all firms were to simultaneously and effectively implement the envisioned generic RM strategy, it would eventually lose its competitive leverage. J. Barney calls this paradox a ‘rule for riches’ and states that even if such a rule existed and “created economic value, that value would be fully appropriated by those who invented and marketed [it]” (2001, p. 50). P. Schoemaker notes in the same vein that rent seeking is creativity seeking, and voices doubts as to whether organizations can be systematically creative, adding that if there were a general formula for this, it would soon vanish through diffusion (1990). However, as to hierarchical and intra-organizational social relationships, which are proposed to constitute the bulk of RM mid-range theory, the rules for successful human resources management have been easily accessible in various forms for decades. This body of knowledge includes general theories directly drawing on psychology and behavioural studies, such as the already mentioned SET, and diverse human content and processual, intrinsic and extrinsic motivation theories (Hackman and Oldham 1976, 1980; Frey and Osterloh 2001), or more tactical Human Resource Management (HRM) techniques. Despite this tremendous pool of knowledge, it is estimated that many frequent modern toxic management practices which neglect the well-being of employees may cost up to 120,000 excess deaths a year and produce more than $300 billion in losses annually for American business alone (Pfeffer 2018, pp. 1–2). It seems, therefore, that management is widely ignoring what is, at least theoretically, right, and creates an environment of active employee disengagement (Bonner et al. 2016; Deszczyński 2016; Kelleher 2011). A partial reason for this could be managerial temporal myopia (Miller 2002), a consequence of the more general phenomenon of economic short-termism (a short-term transactional approach to business; Laverty 1996), which obscures plain greed (Haynes et al. 2015). The other factor is that human relationships are hard to master in practice because to be sustainably successful, the partners need to constantly show relational humility and readiness for progression of their own self (Davis et al. 2011, 2013; Van Tongeren et al. 2014; Wirzba 2008). This implies that, in case of hierarchical and intra-organizational social relationships, to ensure the high quality of a supervisory alliance, especially in managing conflicts, the supervisors need to demand more from themselves than from the supervisees and take responsibility for their reportees’ well-being at work (Watkins et al. 2016). Drawing on W. Kim and R. Mauborgne’s ‘blue ocean leadership’ concept, the overall RM formula would therefore be to distribute authentic leadership at senior, middle and frontline level to unlock the dormant talent and energy deposits that stretch deep into a company (2014). More concretely, the content/research programme for the RM mid-range theory delimited by the two basic assumptions discussed up to this point aims to define the systemic links among:

Having defined the content of the envisioned RM mid-range theory, this is the time to locate the theory in the formal system of theories. Theories, in general, are “a series of logical arguments that specify a set of relationships among concepts, constructs or variables” (Doty and Glick 1994, p. 231). Their purpose is to parsimoniously organize a complex empirical world, to raise non-trivial questions of ‘how’ and ‘why’, and to clearly communicate the proposed answers (Bacharach 1989). The boundaries of a theory (e.g. spatial or temporal) dictate its general empirical generalizability. Hence, there exist different levels on which one can theorize (1989). Mid-range theories lie at the intersection of axiomatic positivism and phenomenological empiricism, which implies that they simultaneously embody abstraction and groundedness (Shott 1998). According to R. Merton, whose critique of ‘totalism’ of abstract universal theories prompted him to enunciate his programme for middle-range theories in sociology, they “lie between the minor but necessary working hypotheses that evolve in abundance during day-to-day research and the all-inclusive systematic efforts to develop a unified theory that will explain all the observed uniformities of social behaviour, social organization and social change” (1968, p. 39). Being an intermediate body of theory, the role of mid-range theories is to link the macro and micro theoretical levels by explaining the relationships between some delimited important constructs without, however, falling into an extreme reductionism (Haynes et al. 2015; Hedström and Udehn 2011). Further on, they should also guide the empirical research, highlighting theoretical problems and gaps in knowledge, and integrating separated theoretical generalizations from interrelated domains of research (Kaidesoja 2019; Merton 1968).

To preserve its utility, a mid-range theory has to be focused on certain elements and intentionally ignore others (Merton 1968). Such an isolating mechanism consolidates the research field by choosing the explanatory factors and defining the phenomenon explained (Mäki 2006). Figure 2.3 positions the envisioned RM mid-range theory against other types of theories based on these two dimensions.

R-A theory attempts to comprehensively define the roots of competitive advantage of any firm, and a hypothetical single entity case study does so in terms of a particular RM-oriented one. The RM mid-range theory concentrates on the universal conditions for relationship-based sustainable competitive advantage. Moreover, the exclusion of the structural dimension of a firm’s relationships and the idiosyncrasy of its product-service offer concentrates the theory’s focus mainly on the firm’s internal relationship management landscape, whereas the other two depicted types of theories are more inclusive at their respective phenomenological levels: R-A theory attempts to include all the internal and market factors that matter as far as the competition is concerned (Hunt 2000), whereas the hypothetical single entity case study would encompass all the factors relevant for a particular RM-oriented firm in a given market situation.

Certainly, the design of RM mid-range theory could be more inclusive. However, the choice made was inspired by S. Bacharach’s definition of a good theory, which should be both falsifiable and of high utility (1989). Falsifiability is achieved when a theory is “coherent enough to be refuted”, while high utility implies that a theory establishes a substantive meaning of constructs, which it explains and enables the prediction of by comparing them to empirical evidence (1989, p. 501). The earlier discussion on the variety of relational factors and the fluidity in creating different relational constructs shows that we are currently suffering from an overabundance rather than from a scarcity of ideas. In the light of the eclectic character of RM research, the pursuit of greater theoretical clarity is therefore most welcome (Möller 2013). Moreover, as one might expect, after establishing the essence of RM-related competitive advantage, a relatively exclusive RM mid-range theory can pave the way for grounding the whole network of RM theories. Figure 2.4 shows the gradual descent from grand theory and mid-range theories of higher order to mid-range theories of a particular relational exchange type and lower-order specific theories in a hypothetical system of theories of competitive advantage. The practical difference between the two levels of RM mid-range theories will be manifested in the number of constructs and their generalizability. The envisioned higher-order RM mid-range theory (stronger mid-range theory; Möller 2013, p. 332) should operate on fewer constructs (or even on one construct) applicable to all types of companies and markets. Some constructs and factors used at the levels of network-based and market-based relational exchange mid-range theories will incorporate the specificity of ERM in these markets and thus will be disjunctive. Simultaneously, according to the definition of a mid-range theory, both theoretical levels have to remain empirically testable and actionable.

Meanwhile, the testability of the existence of a causal link between the relational approach to business and competitive advantage or market performance is uncertain, or, more accurately, not given. As J. Barney remarks, economic performance depends on both, whether corporate strategies create imperfectly competitive markets (where a company can best execute its competitive advantage) and on the costs of creating such markets (1986). By introducing their Commitment–Trust Theory of RM, R. Morgan and S. Hunt clearly emphasized that not all business relationships will flourish over time and specified some conditions partners have to fulfil in order to cooperate successfully. These include providing superior resources, maintaining high standards of corporate values, communicating valuable information and avoiding malevolent activities (1994; p. 34). Without the strategic and structural fit of partners, their relationship will tend to be unbalanced and non-reciprocal, which will likely result in its failure (Morgan and Hunt 1999; Toulan et al. 2006). Hence, the interactive nature of relationships posits that they are always multifaceted and ‘incomplete’ and impedes causally linking them with company performance metrics (Harvey et al. 2003). Moreover, some very costly and sophisticated ICT issues only add to the complexity of the relational business endeavour, highlighting the problem of proper implementation and tooling of the RM business model (Baran and Galka 2017; Deszczyński 2011; Payne and Frow 2013). It is therefore unsurprising that the literature comes with mixed results as far as RM and business performance/competitive advantage are concerned (Fonfara et al. 2019; Mumuni and O’Reilly 2014; Palmatier et al. 2007; Pillai and Sharma 2003; Reinartz et al. 2004; Wang and Feng 2012), including some very disappointing results (Bernd 2005; Coltman 2007; Keramati et al. 2010).

Some researchers have looked for the reasons for such an ambiguity and found that there can be severe differences in the ability to generate relational rents, depending upon the type of firm and its environment (Coltman et al. 2011). For example, N. Paparoidamis et al. found that smaller firms are more likely to be successful with RM by exploiting the trust–loyalty effect (2019); J. Zhang et al. highlighted the varied effects of RM mechanisms on customers in different relational states (transactional, transitional, communal and damaged; 2016); while J. Hoppner et al. and Ł. Małys et al. argued that the key mediating relational factors may not hold across all cultures as far as business performance is concerned (2015; 2017). A. Mumuni and K. O’Reilly took a different approach by deconstructing the measures of performance and checking which of them are positively affected by RM, claiming that in the overall composite measure of performance these correlations could be lost (2014).

Indeed, the devil may be in the detail. For the RM mid-range theory, it will be of utmost importance to define what it really means for a company to be relationally oriented. Even if one presumes, by deduction, that the RM business model is reasonably linked with sustainable competitive advantage, its partial imitation or unskilful replication may (as in the case of any business model) yield zero benefits (Teece et al. 1997; Witek-Crabb 2012). Moreover, as maintaining relationships is generally a positive concept, most companies can believe that they are already ‘customer-centric’, provided they are essentially trustworthy, even though their employees and customers might disagree (Peppers and Rogers 2013). This means in practical terms that, when managers fill in research questionnaires, they may, for example, interpret arm’s length market relationships as truly relational, even if, in fact, they are incapable of producing relational rents (Dyer and Singh 1998). It is also highly unlikely that a particular company possesses a superior position in every single aspect of its relational activities and operations (Ray et al. 2004). Hence, no company can be labelled totally relationship-oriented; there must be some ‘shades of grey’ among them.

Drawing on the notion that all sound empirical research necessitates an adequate definition of the maturity level of the implemented concept (Lichtarski 2015), there is also a need for an adequate definition of RM maturity. This, in short, translates into answering the question: What exactly does a company have to do in terms of RM to achieve a sustainable competitive advantage? The specificity of a mid-range theory as an actionable theoretical concept that offers simplification and focuses on decisions and results (Gummesson 2017) implies that the RM mid-range theory will use the RM maturity concept in a dual way. First, it will constitute the central theoretical construct addressing the complexity of relational strategies, resources, processes and ICT systems. Second, this construct, operationalized and tested through empirical research, will enable truly relationship-oriented companies to be distinguished from transactionally oriented ones (who only perceive themselves as relationship-oriented). In turn, the practices and approaches of such a purified group of companies who have achieved sustainable competitive advantage will define what exactly it means to successfully implement an RM business model. Since the development of the RM maturity concept is itself a serious task, it deserves an exclusive chapter.