Managing stability and crises in business relationships : The case of Ericsson in an emerging market

Purpose – Adding to the theoretical view of relationship development, this paper holds the view that relationship change encompasses not only smooth incremental change but also includes crises which can trigger relationship weakening, dissolution and/or recovery. The aim is to develop a theoretical view that allows understanding of both smooth incremental and critical changes in the process of relationship development. Design/methodology/approach – Based on a business network perspective, the paper's relationship view holds uncertainty, commitment and trust as central explanatory elements. The process view is composed of three episodes: incremental relationship development; relationship crisis; and ending or survival. The paper employs a longitudinal case study method and discusses how the relationship between the Swedish firm, Ericsson, and its counterpart, Telefónica, develops in the emerging market of Argentina during the period of 1998-2004. Findings – Conclusions demonstrate the vulnerability of relationships due to counterparts' behaviour and network embeddedness. This is a risk of commitment deterioration, and remedial actions like investment in new commitments will reduce distrust and uncertainty. Re-energizing relationships incrementally requires behaviour like waiting strategies, when otherwise the choice is to exit. Originality/value – Few researchers have combined the findings from stable relationship development studies with the findings from research on crisis into one model handling both stability and instability in business relationships. This is despite the fact that episodes of turbulence and instability are becoming more common in business relationships, due to entrance into more unstable markets, and markets crises of various types.