The relevance of interaction: Skånaliseter farm dairy and development of rural business

Magnar Forbord and Gunn-Turid Kvam

Paper no 1/05, ISSN 1503-2736

Revised version of paper presented at the 18th Annual IMP Conference, Dijon, France, September 5th-7th 2002

Centre for Rural Research Norwegian University of Science and Technology N-7491 Trondheim Norway magnar.forbord@rural.no gunn.turid.kvam@rural.no

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Interaction in different schools In an article Anderson and Jack (2002) examine the articulation of social capital in entrepreneurial networks. They raise the question whether the concept of social capital refers to a ‘glue’ forming the structure of such networks or a ‘lubricant’ facilitating their operation. Their answer is quite clear; social capital is a process, not a thing. Moreover, this process is said to lead to two ‘network outcomes’ − glue (structure) and lubricant (operation). But since ‘operation’ also intuitively evokes the idea of ‘something going on’ − a process and not outcome − this last statement is rather confusing. A question arises whether the first process (social capital) is the same as the last process (lubricant), in which case a process influences itself, or if these are two different processes. If the latter, then social capital becomes a process that seemingly is taking place outside the network. According to the dictionary capital has meanings like ‘wealth,’ ‘an accumulated stock of such wealth,’ and ‘any source of profit, advantage or power’ (Websters, 1989). Thus, capital seems to refer to resources and features, in other words something one has rather than something one does. However, we shall not be dealing in this paper with whether social capital is a fruitful characterisation of processes in networks. Rather, we are interested in just that − processes in networks. And we think that the article referred to raises a very important debate. What are ‘processes in networks’? The article discusses processes in entrepreneurial networks, and hence there is some economic rationale − ‘business’ − involved in the process. We also want to discuss ‘business processes’ in networks, but in somewhat different networks − business (or industrial) networks (Ford, 2002; Håkansson and Snehota, 1995). Also in such networks there can be entrepreneurship. But there can also be development in forms other than entrepreneurship, which we view broadly as human individuals or groups starting up new firms. Examples of other forms of development in business networks can be technical innovation, in the form of new products or new facilities. Moreover, it is not only processes of change that are crucial in business networks, but also processes of exchange − which could be regarded as the economising on development. We think that interaction is at the heart of both these network processes. In other words, processes in networks are basically of a reciprocal nature. This means adopting what Anderson and Jack (2002: 196) terms an ‘embeddedness perspective’ and not a ‘rational choice’ perspective. While the latter focuses on individual freedom of action (individualistic processes), the former highlights mutuality in action; that is interaction.1 What we want to do in this paper, then, is to identify and discuss central features and aspects of interaction that are related in some way to ‘business.’ Moreover, we make it no secret that in doing this we take a network approach. This means among other things that we view markets in which such business interaction is taking place as organized. The 1 We deliberately avoid the term collective action here as it can evoke the idea of a mass of individuals acting. A network is rather a system of interrelated elements, not a mass of elements (cf. Websters, 1989).

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network is developed and maintained by actors who interact. The actors can be individuals, companies, public agencies or organizations. Interaction between actors is obviously social in the sense that it is performed by human beings. But the interaction also involves resources − technical as well as organizational − under the influence of, at least some, economic rationality (Håkansson and Waluszewski, 2002). In other words, what this implies is that interaction is crucial for the substance and functioning of businesses and business networks. This is one reason why we should make an effort to gain a clearer understanding of ‘business’ interaction.2 We will do this by first visiting certain theoretical debates and thereafter discussing a case. Central in the case is a couple running a goat farm in a region of Norway and their struggle to develop better use of the milk they and other goat farmers in the same region produce. This struggle led to some success in terms of farm production of cheese being developed in the region. We will see that interaction played a role in accomplishing this. Even if outcomes of interaction are important, these are secondary in this paper. The nature of business interaction is our central interest. Important as well are the prerequisites for interaction, for example the institutional embeddedness (Johannisson et al., 2002). However, this topic is also beyond the primary scope of this paper.

Neo-classical theory Neo-classical economic theory can serve as a starting point for a discussion of interaction in business. In the neo-classical notion of a market we find a product, one or more producers of the product and one or more buyers.3 Each producer has set a price for the product. Seen from the side of the buyer the product and the price are given. Hence buyers can only choose between two options: ’buy’ or ‘not buy.’ In both cases a response is sent to the producer of the product in the form of a price ‘signal.’ The producer can then respond to this ‘signal’ by maintaining or changing the price of the product, to which buyers again can respond. Even if this example corresponds to the dictionary’s definition of interaction as ‘reciprocal action or influence’ (Websters, 1989), this particular interaction is nevertheless very ‘thin.’ It ‘contains’ only price signals and does not take place between concrete actors that know each other. Originally, argues Swedberg (1994), the term market referred to something concrete, a marked space within which concrete producers could meet concrete buyers for exchange of products. Then, through the development of neo-classical economics from the second part of the 19. Century, the market:

became an abstract concept that acquired tremendous analytical interest as a price-making … mechanism. … The concept of the market was thinned to such a

2 We are aware of that we in this paper, not at least because of the case that we present, strictly speaking can make claims only about business-to-business interaction and not about business-to-consumer interaction. Nevertheless, we think that the ideas that we develop also to some extent, with some modification, are relevant for the latter type of interaction. Maybe a clear distinction between the two types of interaction is not so fruitful after all. 3 Cf. for example Samuelson and Nordhaus (1998).

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degree that John Neville Keynes Sr.4 spoke of ‘the hypothetical market’. (Swedberg, 1994: 259). (Italics added)

On these grounds we will refer to neo-classical market interaction − as in the example above − as ‘thin’ interaction. In other words, it is not that in a neo-classical market producers and buyers do not give and receive responses. There is interaction, and it is not without merit. But it is very restricted and utterly abstract − in our terminology, thin. And then a question immediately arises: Is ‘thin’ interaction the only significant form of interaction in business? Or put differently: Does this thin presentation of business interaction do justice to the interaction that takes place in ‘real’ business life? Are not forms of ‘thick’ interaction of importance? If so, an interesting question becomes what this ‘thickness’ consists of. In other words, what content should we − eventually − give to a concept like ‘thick’ interaction?

‘Thick’ interaction We can identify many debates in the literature about the existence and significance of what we can term ‘thick’ interaction. Within the Transaction Cost Approach (New Institutionalism) there has for some time been a debate about bilateral modes of governance between the (supposedly main) modes ‘market’ and ‘hierarchy’ (Williamson, 1996). Macneil (1980) for example argues that the distribution of transactions in reality is ‘bell shaped’ along the continuum ‘market − hierarchy’ (Williamson, 1996: 90). If this is true, bilateral governance is a more common form of governance in ‘real economic life’ than market and hierarchy. Bilateral governance refers to the existence of long term, more stable exchanges in which both parties mutually benefit, and it calls attention to the social aspects − particularly social norms − that accompany business transactions and contracts (Macneil, 1980). Nevertheless, the Transaction Cost Approach portrays economic actors as having one single goal, cost reduction, and that, given prevailing behavioural and structural conditions, actors can ‘choose’ the appropriate governance form from the shelf, so to speak.5 From a somewhat different disciplinary view point, industrial marketing, Blois (1998) finds that:

…unless a counter-intuitive definition of a “relationship” is used, it is impossible for firms not to have relationships − indeed that a firm does not have the choice as to whether or not it has relationships. (p. 95)

4 Swedberg’s (1994) reference on this point is Keynes Sr. [1891] (1955, pp. 247-249). 5 Williamson (1979) describes three broad types of governance on a continuum with the two archetypes market and hierarchy at each end and in the middle intermediate forms, of which there are two: bilateral governance (e.g. joint venture) and trilateral governance (e.g. project organisation). In a later contribution Williamson (1996) uses the word ‘hybrid’ for intermediate governance forms. There he describes trilateral governance as ‘interdependencies among dyadic contracting relations’ (p. 231). Trilateral governance has clear parallels to the concept network (Illeris and Jakobsen, 1990), and Williamson (p. 231) states that: “network analysis is [not] beyond the reach of transaction cost economics.” Nevertheless, our impression is that TCA basically builds on a mechanical and for the most part static view of business life where cost efficiency is the paramount goal. In many respects TCA resembles the machine image of organisation (Morgan, 1997).

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According to the view of the Industrial network approach (Håkansson, 1982; Håkansson and Snehota, 1995) business relationships develop from repeated interaction between concrete actors over time. Since this interaction is obviously thicker than the neo-classical interaction described above, Blois’ (1998) statement can be read that economic actors have no choice as to whether or not take part in thick interaction.

Co-operation Co-operation can be regarded as one expression of thick interaction. Gadde and Snehota (2000) discuss co-operation in a specific field, between firms and their suppliers. These authors warn against suggesting that co-operation is the superior solution for firms in dealing with suppliers:

Developing partnerships with suppliers is resource-intensive and can be justified only when the costs of extended involvement are exceeded by relationship benefits. (p. 305).

This means that there may be ‘degrees’ of thickness in interaction and, moreover, that there is a kind of economic logic with respect to interaction. This has the consequence that two firms can interact very ‘thickly’ − spend much time and involve many persons in it − as long as they find that the thickness ‘pays off.’ Richardson (1972) has tried to explain the economic rationale behind the form of thick interaction called co-operation. He contends that as long as a buyer does not need a product in specific qualities and/or extraordinary amounts he or she can rely on the ‘impersonal aggregate of supply and demand’ − that is the neo-classical market. Many consumers, for example in the food market, often, but not always, do just that. To the extent that the neo-classical market cannot be relied on, which according to Richardson (1972) is a common situation in business markets, the product (its quantity, terms of delivery and even quality) has to be specifically adapted to the buyer. This can, of course, be done through the buyer making the product for him or herself. But co-operation is the most economical alternative for the buyer if his/her existing capability is very different from the capability needed to make the product in question. How different the capabilities need to be before co-operation becomes the most economical alternative needs not bother us here. What is important to note in relation to our research question, is that there is economic rationale involved in thick interaction. Moreover, this thick interaction goes ‘in all directions’ in a business market. This makes, according to Richardson (1972), such markets more complex than assumed in neo-classical economics:

If ‘products’ are thought of as items of final expenditure such as cars or socks, then it is clear that very many different firms are concerned with the various stages of their production, not only in the sense that firms buy in components and semi-manufactures from other firms but also in that there may be a separation of manufacture and marketing … or of development and manufacture … (p. 887).

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This is why researchers within the Industrial network approach have labelled business markets ‘organized’ (Johanson and Mattson, 1987). The point is that without thick interaction, that is thin interaction only, a market could hardly become organized. This accords with Weick’s (1979: 89) view on organisation and the importance of interaction in this respect. He defines interaction as a contingent response pattern, where an action by actor A evokes a specific response by actor B, which is then responded to by A.6 This is a double interact. According to Weick (1979) double interacts are the basic elements in organizing. Because this interaction takes place between concrete actors it is in our terminology ‘thicker than thin interaction,’ in other words it makes some sense to talk about thick interaction. We could therefore state that thick interaction is the basic organising element in business. The type of thick interaction Richardson (1972) is describing − co-operation − concerns co-ordination of activities within a business market (Dubois, 1998), and takes place within the ‘stable state’ (Argyris and Schön, 1996). Here actors interact ‘thickly’ in order to differentiate products (Håkansson and Snehota, 1995) and exchange them. The interaction may be repeated over time and become routinised (Nelson and Winter, 1982). This tendency to become institutionalised may be thought of as one way in which interaction ‘thickens.’

Interaction and change But interaction is not only relevant when it comes to exchange; it is also relevant when it comes to change − development. Interaction can lead to ‘the stable state’ being questioned, new knowledge may arise and development occurs. This means that interaction is not only co-operative; it can also bring about conflict (Håkansson and Snehota, 1995). This element of conflict, or more precisely the co-existence of co-operation and conflict, makes interaction even more thick. This thickness can give birth to new solutions and thus represents innovation,7 either through confrontation and use of knowledge from different sources or combination and confrontation of resources by parties (those who interact) that represent different established knowledge areas (Håkansson and Snehota, 2000). A new solution resulting from interaction can relate to a product. In this case we can talk about interaction over ‘buying-and-selling’ (Håkansson and Waluszewski, 2002). Then we are ‘close to’ the interaction that Richardson (1972) is discussing − co-operation. But we can also find empirical examples of actors interacting over facilities. Håkansson and Waluszewski (2002) term this interaction ‘producing-using,’ because it involves more than simply ‘buying-selling.’ Moreover, interaction can also relate to organizational resources. ‘Co-operation’ can have an effect on business units. Through interaction in the shape of ‘networking’ economic actors can try to develop new or existing business relationships. All these four types of interaction point to certain interaction ‘thicknesses.’ 6 This corresponds to ‘reciprocal action,’ one of the two types of interaction mentioned in the definition (Websters, 1989). Since only human beings can act, reciprocal action then can only take place between humans. The other type of interaction, reciprocal influence, can in addition also take place between dead things or among abstract categories. 7 This does not mean that there is no development unless actors interact. But then development only takes place internal to actors.

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In a way they may be said to represent various degrees of involvement; from ‘product interaction’ where the buyer does not want any involvement with any of the counterpart’s resources except the product; to interaction in the form of ‘networking’ where more than two parties are involved. On the other hand, we should use the term ‘degree’ (of thickness) with caution. Our discussion so far has revealed that thickness of (business) interaction has to do with more than degree; it is also about different aspects (or forms) of this interaction. Through a case story we may be able to understand this a little better.

Research process The following case, or case story, about Skånaliseter − a farm firm − was not developed originally and specifically in relation to this paper. The idea that relations in business life are ‘thick;’ in fact, that there are relations at all and that business life (largely because of this) is richer than portrayed in economics (and other uni-disciplinary studies for that matter), is something that we have realised gradually. To a great extent this gradual development in understanding can be attributed to a certain theoretical framework that we have used − the Industrial network approach (cf. e.g. Ford, 2002; Håkansson and Waluszewski, 2002). We have described this approach to some extent in the introduction. But the case itself and our experience of working with it have, of course, also been important. Both authors met and came to know, separately, the main actor in the case (‘Ola’8) around 1996/97. Later Ola allowed one of the authors to use ‘his’ case as empirical material in a doctoral thesis (Forbord, 2003). The original purpose of this thesis was to study farmers that ‘did new things’ − that is, entrepreneurial farmers. But during the research process the focus of the thesis shifted; from actors to how agricultural resources can be used better through entrepreneurship as well as development in large, existing organisations (like Tine). The case as it is presented in this paper builds on the Skånaliseter case in the thesis, but is made shorter and somewhat more structured and ‘tight.’ For example, in this paper we make a clearer division between the period before the farm dairy was established (1995) and the time afterwards (until 2002). Through writing up the case once more for the purpose of this paper we have also had a chance to drop material that is less relevant. The research process ‘behind’ the case is thoroughly described in the thesis. Here are some of the main points in this description and reflection about method. When Forbord met ‘Ola’ in 1996 he at once became interested in Ola’s story about his recent undertakings on the farm. This story was about how he and his wife had struggled for permission to process their goat milk on the farm (for cheese making) and how they had developed rather sophisticated and innovative solutions, e.g. concerning logistics, to be able to do this. Beyond doubt these people could be regarded as entrepreneurs. This was all the more interesting as they operated in a branch of production that for decades 8 We use fictitious names in the case.

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had been almost closed and highly regulated. Hence, hearing about a small actor processing his own milk was extraordinary at the time. (‘Ola’ had started cheese production the year before, on special conditions.) Later Ola let Forbord use his farm as a case in the thesis. Five interviews (2 personal and 3 on telephone) with Ola and his wife were carried out in 1999 and 2000. One of the interviews (in 2000) was accompanied by one day of observation and, in part, participation in the activity in the farm dairy at Skånaliseter. It soon became obvious that both during the time leading up to the farm dairy (until 1995) and after its establishment other actors in the ‘environment’ were significant for Skånaliseter; e.g. customers, suppliers of equipment, knowledge and rules, and actors with a logistical function. Tine was important among these actors as it had more or less all these functions vis-à-vis Skånaliseter during the time of the story. Interviews − most by telephone, some face-to-face − with such (related) actors were carried out from 1999 to 2002. The interviews lasted from 20 to 120 minutes and can be characterised as semi-structured. We had listed some items that we wanted to discuss, but as the interview progressed we could jump to new issues that came up or turned out to be important, or go into more detail on some issues. Some of the interviews were made previous to writing the case, others were carried out to clarify or elaborate on things that we had already written. There were 15 interviews with actors that were related to Skånaliseter. Hence, all in all there were 20 interviews. Early interviews (4 altogether) were audio recorded. Of these one was transcribed. In addition to the interviews we relied on various sources of written documentation about Skånaliseter and some of the other actors and their resources and activities. We found some of this information on the web, typically home pages of the firms and organisations. Other information came from scientific documents (among them a report written by one of the authors (Kvam, 1999)), newspaper articles and company and branch histories. In this way we have approached the case from different angles. We have been working on the case for a long time − nearly 10 years. We have been steadfast but also flexible and capitalised on new evidence during the construction of the case. In addition the description of the case is ‘thick’ enough for a reader to relate to his or her own experiences. And we have let the informants check the story and other researchers criticise it on the way. Therefore we assess the case story on the following pages as trustworthy (Lincoln and Guba, 1985).

A story

Background Up to around the mid 1990s almost all goat farmers in Norway sold their goat milk to a farmers’ dairy co-operative. These co-operatives had over the years undergone considerable change; fewer in number and increased size of factories with more efficient production. Most of this goat milk was used for making brown cheese, a product mainly consisting of the lactose component of the milk and where the casein component – the

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main component in real (white) cheese – is removed. Some regional dairy companies made a few real goat milk cheeses also, but none of them were commercial successes compared to brown cheese, which, according to the companies, almost ‘sold by itself.’ One reason for the lack of success with white goat cheese was that features of goat milk casein differ from features of cow milk casein. This difference is not critical as long as one uses small-scale production methods. But when production becomes larger in scale it seems to be easier to produce a good white cheese from cow milk than from goat milk (Forbord, 2003). Each regional dairy company was owned and supplied by dairy farmers in the region. Cow milk constituted around 98,5% of the supplies, goat milk the rest. Moreover, all the regional companies co-operated through a nation-wide, common organization, Norske Meierier – from 1992 named Tine.9 This organisation developed products and – with the exception of fluid products – also marketed the products, which the companies produced. Norske Meierier also controlled all the returns, which were distributed to the companies according to standard product calculations. This meant that the regional dairy companies had no budget of their own for developing and marketing solid (non-liquid) products. To the extent that goat milk was used in food products, it was almost without exception solid products, for the most part cheese. Thus, the use of Norwegian goat milk contrasted with its use in countries on the European continent – for example France, where white goat cheese was regarded as a delicacy that ‘experienced’ significant sales and brown cheese was an unknown phenomenon (Alme, 1999). Moreover, brown cheese implied a rather ‘undemanding’ use of goat milk and ‘cheap’ marketing of goat milk products within the system of Norske Meierier (Skeie, 1998). And neither goat farmers nor Norske Meierier found it necessary to do much development in relation to goat milk. One of the regional companies purchasing and using goat milk around 1980 was Namdalsmeieriet. This company was owned and supplied by milk farmers in Namdal, a region ‘around’ the river Namsen about 250 km north of Trondheim. Namdal even includes mountainous municipalities bordering Sweden in the east and coastal municipalities to the west. Nearly all milk supplied to Namdalsmeieriet was cow milk. A few (about ten) goat farmers operating in the northeast of the region delivered the goat milk. As from 1979 Namdalsmeieriet’s dairy in Namsos (on the coast to the west) processed all this goat milk into brown cheese. The following story shows how different actors in the subsequent years up to 2001 acted and changed the use of this resource.

Phase 1: The time until establishing the farm dairy Ola took over the goat milk farm Skånaliseter from his uncle in 1981. Skånaliseter is located in Røyrvik. Røyrvik is one of the mountainous municipalities with rather monotonous and sparse business life in the east of Namdal. Skånaliseter then delivered all its goat milk to Namdalsmeieriet. Soon after Ola had taken over the farm he heard –

9 For the sake of simplicity we use the name Tine also concerning Norske Meierier before 1992.

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informally – from a co-worker at the dairy in Namsos that the goat milk that he and the other goat farmers delivered was not popular in the company:

But then it was, that we heard a little bit, that the goat milk was not so very popular in the dairy company. It was regarded somehow as a bit of rubbish in the machinery. It was a dairyman in Namsos, he said something like: ‘This is some junk.’ (Ola)

The dairy in Namsos used a rather old boiler to make brown cheese. In 1986 the boiler had become so worn out that it would have had to be renewed if production of brown cheese were to continue. However, through dialogue between Norske Meierier and Namdalsmeieriet it came out that the latter’s brown cheese production had become unprofitable; dairy companies in other regions where there were a lot more goat farmers could produce brown cheese more economically. Namdalsmeieriet therefore decided not to renew the boiler and terminated its production of brown cheese. This meant that Namdalsmeieriet finished making food products from goat milk. However, Namdalsmeieriet was a co-operative company, and its bylaws stipulated an obligation for it to purchase all milk from its members, goat farmers included. The company found that the ‘least unprofitable’ new use of the goat milk was to sell it as livestock feed to farmers, and this was done. This meant a low price, but nevertheless a price higher than zero.10 Ola married Kari in 1985. Even if their income from farming was unchanged by Namdalsmeieriet’s new use of goat milk, they both found the new use rather disappointing. In earlier days Ola recalled his mother making both brown and white cheese from goat milk on the farm, among other things so-called ‘coffee cheese.’ Because it contained many types of nutritious matter laps in the region brought such cheese on longer trips in the mountains. Thus, Ola knew of other uses for goat milk. Hence, the couple was convinced that they were producing a high-quality resource that deserved a better fate than being drunk by calves. Moreover, the year before (1985) they had made a visit to goat farmers in the neighbouring region in Sweden, Jämtland. They had heard that goat farmers there some years ago had started to process their milk on the farm because the dairy company which they delivered to (NNP11) had finally found it too problematic technically and economically to process the goat milk. After this trip Ola: “somehow saw ‘the Writing on the Wall’ and how things would turn out. So therefore we started a process to take responsibility for the goat milk ourselves.” In other words, Ola then realised that in his own region also, Namdal, the dairy company could sooner or later refuse to purchase goat milk. Moreover, he became convinced that customers existed that wanted to buy special cheese made of goat milk and that the farm

10 Norwegian goat farmers are still paid full price for their milk even if the dairy company which purchases the milk are not able to make ‘fully’ profitable products of it, for example feed. The difference in price (value), which in 1999 all in all amounted to about 8,75 million Norwegian kroner, is compensated from a central, semi-public fund managed by Omsetningsrådet (Agricultural Distribution Board). Source: Omsetningsrådet, 1999. 11 NNP is short for Nedre Norrlands Producentförening (‘Producer Association of Lower Norrland’).

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might be an appropriate location for producing such cheese. So, when the outbuilding on Skånaliseter accidentally burnt down the same year the couple co-operated with the construction engineer to secure ‘space’ for a possible future dairy in the new outbuilding. In 1988 Skånaliseter, the other goat farmers and some politicians in the region and persons from the county agricultural authorities started a co-operative working group. The aim of the group was to search for new ways of utilising the goat milk in the region. Goat farmers in Jämtland were paid another visit. The members of the group also made a trip to the small community of Undredal in Western Norway where, because of lack of links to public roads, goat farmers still processed the milk themselves on their farms. The group reached a positive conclusion about farm processing of goat milk in Namdal. The group had also found that the subsidy rules were such that farmers that processed milk themselves lost some of their subsidies and thereby much of their net income. The group inquired of the Ministry of Agriculture about this problem. The Ministry then adjusted the rules on this point so that farms processing their own milk under certain circumstances could keep the actual subsidy. Norske Meierier objected strongly to this change because it meant changing some of their administrative routines, but had to accept it as the Ministry was in charge of the set of rules in question. Four years later (1992-1994) a project was carried out. Again, the goat farmers and the county agricultural authorities took part and were joined by Namdalsmeieriet, the dairy company in the region. The idea, at least of the two former groups, was to explore possibilities of establishing a special, ‘niche’ dairy in the region next to a newly established Deer Park with around 50.000 visitors annually. The group also requested the Ministry of Agriculture, which again changed a rule, this time a rule that had made it impossible for farmers who wanted to process their milk to keep their quota for milk production. The Ministry relaxed the rules for using goat milk quotas (although yet not cow milk quotas) for milk processing outside the Tine-system on the condition that the processing was done on a small-scale basis and was physically located on a farm. After two years − in 1994 − Namdalsmeieriet withdrew from the project because it did not find the planned dairy profitable. This again was due to its assuming standard milk products would be made in the new dairy. And standard products could only obtain standard prices, which meant rather low prices. With Namdalsmeieriet out of the picture the other goat farmers also withdrew. For all except Skånaliseter this meant continuing goat milk production as before. Ola and Kari on their part now decided to turn back to their first plan − a farm-based dairy. The project, however, had not been in vain. Earlier Namdalsmeieriet and the organisation it was part of – Norske Meierier (from 1992 Tine Norske Meierier) – had been generally opposed to milk producers processing milk. The thought of milk being exploited by any other actor than themselves made these organizations uncomfortable. The project helped to clarify this reluctance; more precisely, Namdalsmeieriet realised that their reluctance was contingent. It applied to a (perceived) situation were ‘other actors’ used milk to produce the same type of products as Namdalsmeieriet and Tine and hence would be

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competitors in traditional terms.12 Namdalsmeieriet and Tine had so far not imagined other market situations than this. During the project these organizations gradually came to accept the idea that ‘other actors’ could also use milk to produce types of products other than theirs, and moreover that there was a real chance of such products ‘finding’ customers. In such a situation ‘other actors’ would not be competitors in traditional terms. This could explain why Namdalsmeieriet at the end of the project declared that it was not Namdalsmeieriet’s (nor Tine’s) responsibility to produce ‘niche’ products. But at the same time these companies indicated that they would not hinder Ola and Kari in producing such products. In fact they declared that they were willing to facilitate conditions for members who wanted to serve ‘niche markets.’ For Ola and Kari, knowing this changed attitude, in addition to the Ministry’s specific adjustment of the milk quota regulations, was crucial when they started to realise their ten-year-old idea of a farm dairy. The dairy started to operate in 1995 when Skånaliseter was allowed by Tine to use 15% of their milk quota in the dairy. The rest was delivered to a Tine dairy in the region. When Ola and Kari asked, Tine allowed this proportion of their quota to increase to 50% in 1997 and 100% in 1999. In other words, from 1999 Skånaliseter was no longer a milk supplier to Tine. Hence, establishing the farm dairy meant a major ‘tapping’ of content of a long-lasting business relationship. But the establishing also represented the start of something new. It was not that the dairy was ‘ready made’ then in 1995. Rather, it was followed by new types of interaction and development of other resources.

Phase 2: After establishing the farm dairy

Products The coffee cheese – or more precisely, the knowledge disseminated to Ola through his mother regarding the tradition of coffee cheese in the region and how this tradition was about to vanish – was one of his first idea ‘elements’ for a renewal of goat milk use in the region. Therefore it was not surprising that coffee cheese, together with brown goat cheese, was Skånaliseter’s first dairy product. Ola’s mother, living on the farm, assisted in the start-up of these productions. However, while production of brown cheese involved few problems, making white cheese soon turned out to be more challenging. Because of this the couple decided that Kari should attend a practical and theoretical course in craft cheese making in 1997 at Åsbygdens Naturbruksgymnasium, an agronomic training centre in Jämtland, Sweden. They knew the centre from earlier visits. At the course Kari was instructed in the basics of making white cheese on a small-scale, craft-like basis. At the same time she learned the recipes of some ‘basic’ cheeses. Kari started to produce some of these cheeses at

12 By traditional terms here we mean competition on price, i.e. the notion of competition that prevails in economics. Namdalsmeieriet and Tine seemed to be thinking of competition along this line. However, one may also think of competition on quality (Alderson, 1965). Namdalsmeieriet and Tine may have been aware of such competition but not seen it by far as ‘devastating’ as competition on price.

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Skånaliseter, among other things moulded cheeses. All in all, then, the course led to more stable production, better product quality and a broader range of products at Skånaliseter. Ola and Kari gave many of their products unique names. Some were taken from Norse mythology, e.g. Balder (a solid and ripened white cheese) and Heidrun (a formed, solid brown cheese). Other names were taken from fairytales, like Snøkvit (‘Snow white’ − a semi-hard, ripened cheese with white mould). Together with the physical features of the products these names contributed to making Skånaliseter’s products distinct from Tine’s products. As already mentioned this was Tine’s condition for ‘allowing’ Skånaliseter to use its goat milk itself. Skånaliseter also produces other goat cheeses not found in Tine’s assortment, e.g. coffee cheese and a Feta cheese named ‘Gjeta.’ In addition Skånaliseter produces more ‘common’ cheeses like gum, prim and brown cheese that is not specially formed. The couple has also realised that packaging and design can also make a cheese product ‘outstanding’ in the eyes of a customer. All in all, then, Skånaliseter over some years in co-operation with other parties (of which Ola’s mother and Åsbygdens Naturbruksgymnasium were two) developed a portfolio of goat milk products that clearly differed from Tine’s portfolio and that varied totally from the portfolio that Namdalsmeieriet once made. This opinion is confirmed by one of Skånaliseter’s customers, Ost and Bakst (‘Cheese and Baking’ − a specialised food shop):

There is a huge difference between the goat cheese that I got from Tine and the one I got from Skånaliseter. (…) The cheese from Skånaliseter has a rich taste – it is not insipid, it is sufficiently firm so that the cheese slicer can cut all the way through, (…). (Shop keeper)

Facilities The products that little by little were developed at Skånaliseter needed facilities to be produced and marketed. Like the products, the facilities were developed gradually and differed from the ones Tine used, in respect of production, distribution and retailing. For example, it was meaningless for Ola and Kari to use the same cheese making technology as Tine, which was designed for large-scale, continual processes and highly automated. Skånaliseter sought a vat for making batches of cheese manually. First, the couple contacted one of Tine’s suppliers of technical equipment, Landteknikk, which could deliver a small vat. However, because the company normally did not make such products, the price far exceeded Skånaliseter’s budget. Instead Ola and Kari bought an ordinary cooling tank for milk, which they used for making cheese for some time. But it did not function very well. At the course at Åsbygdens Naturbruksgymnasium in 1997 Kari had used a vat specially made for small-scale cheese making. She now contacted the training centre and was informed that they had bought their vat from a Dutch producer, Rademaker, and that both the centre and farm dairies in Jämtland were very satisfied with this make of vat.

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Ola and Kari then contacted Rademaker and ordered such a vat. In addition Rademaker could offer cheese moulds specially designed for small-scale production. Moreover, by contacting a mechanical firm Skånaliseter was able to obtain a manual cheese press; Institutt for Næringsmiddelfag (‘Department of Food Science’) at the national university of agriculture (NLH) made a special cheese press for them. Landteknikk directed them to a French firm that could deliver cheap chip boxes to hold cheese. The firm, however, demanded a minimum quantity purchased that exceeded Skånaliseter’s need. This problem was overcome when Skånaliseter came in contact with another small-scale food firm, which also had been looking for the same type of packaging. By co-operating the two firms were able to place an order that the French supplier could accept. When it came to distribution the couple developed the opinion that: “The distribution system that Tine is part of will not suit our products.” They were convinced that Tine’s delivery times were too long and hence would make their types of customers dissatisfied. Skånaliseter found that cheese could be satisfactorily stored in boxes filled with expanded polyester for up to two days. With the help of this facility they were able to exploit, in a rather ‘unconventional’ and innovative way, existing distribution networks. One route used the distribution facilities of the Postal Service. Most private customers were reached via this route. Another route used the resources of a regional bus company. In this way a tourist firm and a food shop in the region were reached. Via the railway other food shops were reached. However, the customer can also be transported to the product. This requires facilities other than the box filled with expanded polyester. Skånaliseter built a farm shop after some years. In this shop the couple have sold products to customers that either have transported themselves to Skånaliseter by private car or been transported there by bus by some travel company. Skånaliseter’s products and customers even meet ‘halfway,’ by virtue of some third party. For example a tourist firm in the region (Mo Gård) buys cheese from Skånaliseter, which is served to visitors, many of them coming regularly from different parts of the country to hunt.

Relationships The business relationship between Mo Gård and Skånaliseter was established as a result of the latter joining a national project aimed at helping small food producing firms. One of the consultants there was Frida, trained in food science and settled in the region. She also worked for Mo Gård giving advice about food and dishes. Mo Gård served cheese to their meals but felt that it lacked cheese with a specific regional identity. When Mo Gård via Frida discovered that Skånaliseter produced such cheese it did not hesitate to make contact. Since then Skånaliseter has been a supplier of goat cheese to Mo Gård. In the same way in another project aimed at promoting ‘food-from-the-farm’ Skånaliseter got to know a couple that made food on their farm and ran a farm shop. The two couples decided to co-operate. From then they have been selling each other’s products in their respective food shops.

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Skånaliseter became a customer of a specialised food shop in another part of the county due to the shopkeeper being the spouse of the co-worker in Landteknikk who earlier had been helping Skånaliseter with the cheese making vat. This co-worker had become fascinated by the farm and its production. On their way to a wedding up north the co-worker and his spouse made a stop at Skånaliseter. During the short visit Kari and the shopkeeper agreed that Skånaliseter should supply the food shop with most of its products. This business relationship still existed in 2001.

Ola and Kari want to provide customers with rich information about their cheeses. Thus, they have avoided the large retail chains, which usually have no manned cheese counter in their shops.13 Instead their products are sold in specialised food shops where there are assistants who can inform customers about each specific cheese and cut it individually. The shop run by the spouse of the co-worker in Landteknikk is such a shop. In this way Ola and Kari obtain nearly double price for their cheeses compared to Tine. And ‘within’ each cheese they can, against a 50 to 100% increase in price, make customised variations regarding for example ripening. This applies even to private customers. In one case Kari received late in the year, unexpectedly, a big order for 1000 cheeses of the Blåmann type from Fenaknoken − a specialised food shop in Oslo and an important customer for Skånaliseter. Skånaliseter could not produce enough goat milk within the actual milking season to meet the whole order. But Kari immediately postponed the making of other cheeses and manufactured several batches of Blåmann in row to meet as much of the order as possible. Such a sudden change in the production to meet an extraordinary request for a certain product from a customer would not have been possible in an automated, process-based and large-scale dairy like those in Tine.

Analysis In this case a lot of action is taking place. We could pick out single acts and analyse them, for example the act: ‘the outbuilding is built up after the fire.’ But it is also possible to see that different single acts are connected − in time and in space. Moreover, even if much of the action in the case is seen and described from the perspective of one person − the owner of Skånaliseter, we observe that many actors perform these (connected) acts. In other words the actors interact, and this has some consequences. And since the case describes a piece of business life, this interaction can be termed ‘business interaction.’ We will analyse the ‘business interaction’ in the case in light of some other studies of business interaction. The central question is: to what extent and in what way is business interaction ‘thick’? By using the word business interaction we implicitly say that interaction in business life is something ‘of its own’ − a particular phenomenon that deserves specific study. For example, it contains social interaction but more than that. It also contains technical interaction but obviously more than that. The main insight thus seems to be that business interaction breaks traditional disciplinary borders in science; it cannot be captured by one discipline only. The simple reason is, we think, that business is

13 In the 1990s and to date there have been four dominating retail chains in Norway: The Hakon Group (ICA), REMA, The ‘Norge’ Group and Coop.

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an applied undertaking and does not fit nicely with disciplinary divisions. Hence, understanding and conceptualising business interaction has to draw upon insights from different sciences; at least different social sciences. Let us go straight on target and suggest that the following are aspects of business interaction: 1) personal interaction; 2) technical interaction; 3) networking; 4) buying and selling, and 5) time. These aspects, individually and in combination, contribute to thickness of business interaction. Ultimately this leads to markets and business life being more ordered − institutionalised − than described in neo-classical economics. Markets and business life are also more multidimensional than portrayed in, for example, economic sociology (cf. e.g. Swedberg, 1994), which draws attention especially to social aspects of business and markets. This understanding of business and markets also has some consequences for entrepreneurship. Let us explain what we mean by the five aspects.

Personal interaction As mentioned one of the characteristics of interaction portrayed in neo-classical economics is its abstractness and absence of direct and concrete interaction between (real) persons. The case offers a different picture. Here real persons appear, and these persons act directly and very concretely towards each other. Note for example when Ola travels to Sweden in 1985 to visit particular goat farmers personally (namely goat farmers who had shared the experience that their only customer had stopped buying their main product and who had been able to build up their own use of this resource). Another example is the interaction between Ola and the technician in Landteknikk; one of the companies providing Skånaliseter with cheese making equipment and service. The technician visits Skånaliseter many times to solve technical problems, but the two cannot ‘avoid’ developing a personal relationship as well, which later has some positive commercial consequences. It is not our purpose here to specify the outcomes of personal interaction in business life. But we are convinced by the case and other scientific contributions (e.g. Ford, 1980) that there is a human factor in ‘business interaction’ worth noting. What kind of unique qualities does interaction on the personal level have? First of all, through interacting directly with people you obtain richer and more varied, perhaps therefore more valid pictures, not only of the person himself but also of things, for example important resources. Recall for example the emotionally loaded comment about goat milk by one employee in Namdalsmeieriet directed to Ola soon after his taking over Skånaliseter. Receiving the same message formally, for example through a letter from the company Namdalsmeieriet, would surely be something else. This letter would have words, but not be accompanied by facial expressions, bodily gestures and tone and pauses in the speech (Giddens, 1993). Personal interaction then has a capacity to reveal emotions and sometimes, through ‘slips of the tongue,’ more honest information than a formal conversation or technical interaction would provide.

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In sum, personal interaction represents a unique, strong force in business in two ways. Because it is emotional it gives life and temper to business interaction. As such it is an important source of motivation,14 but also concern and worry. It gives a sense of common identity between the parties (Håkansson and Snehota, 1995). It may even be a major reason for engaging in business at all – or not engaging. The other thing is that personal interaction has a cognitive side; it is a way to clarify things. Personal interaction is in fact a way to develop new knowledge, which moreover − at least to some extent − can be shared by the parties. This does not mean that personal interaction is always harmonious. All business interaction is more or less frictional (Håkansson and Waluszewski, 2002) and therefore costly. Hence, personal interaction involves co-operation, but sometimes also conflict. However, conflict is not always counterproductive. Sometimes a conflict between two parties represents an opportunity to bring into the open the actors’ incomplete and diverging ‘pictures’ of a matter. In this way conflict can be a springboard for development and improvement. All this implies that interaction on the personal level in business life in itself is comprehensive and ‘thick.’

Technical interaction Another aspect of business interaction has to do with techniques and physical resources. Neo-classical economic theory sees this aspect as lying outside economics. More specifically, ‘technique’ and ‘physics’ affect economy but there is no reciprocal effect. When it comes to sociology this discipline recognises interaction in the form of social interaction (Giddens, 1993), but seems mostly to downplay technical interaction. However, there are exceptions. Actor Network Theory (ANT) recognises the impact of ‘things’ on society and human behaviour (Latour, 1987). The concept ‘thing’ in ANT corresponds very much to what we mean by the concept of technique here. One of the views in ANT is that things in a way live their own life; that is, they ‘act,’ and as such they are ‘actants’ (Latour, 1987). To some extent the acting of actants is beyond human control, even human knowledge. What we would like to emphasise here is that ‘things’ not only act; they also interact, and this has consequences in business life. We can use an example from the case. One of the problems of manufacturing a good white goat cheese in Tine had to do with technical interaction. Combining goat milk with small-scale machinery gave a different result in the form of products than combining goat milk with large-scale machinery. Moreover, cow milk did not ‘interact’ in the same way with ‘machinery,’ which in fact strengthens the impression of technical interaction. In a way we can say that Skånaliseter ‘enters’ this technical interaction and is able to profit from it through being ‘small;’ by using small-scale equipment. This is an example of interaction between two types of technical resources: a product and a facility (Håkansson and Waluszewski, 2002). Another side of technical interaction is the interaction between persons and technical resources. One of the main arguments of Penrose (1995) is that actors seldom regard

14 Confer the famous Hawthorne Studies in the 1920s and 1930s, which could document a strong relationship between the satisfaction of needs of a social kind − e.g. attention from other persons, interaction with other people − and productivity (Morgan, 1997).

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technology as fixed. Often the first thing a manager or a technician starts to do after having installed, for example, a new machine is to look for ways to improve or broaden the use of it. There are two examples in the case that illustrate this point. The first is when Ola and Kari search for a suitable cheese vat (a facility) for their special dairy. They turn down, on economic grounds, an offer of a specially made vat from Landteknikk. Instead they buy a facility that is not designed for cheese making, but which they can afford. They use this facility for a time but find it to be impractical. This makes them search for a third solution (Rademaker’s cheese vat), which they discover through interaction with another actor (Åsbygdens). They even interact with Rademaker and discover that this actor can provide them with yet another facility that they need (cheese moulds). Within the discipline of economics, facilities are taken for granted. That for example a producer co-operates with a user to improve a facility that the latter uses for a product that the former produces, is beyond the scope of economic analysis (Håkansson and Waluszewski, 2002). Another example of the technical aspect of interaction has to do with Skånaliseter’s products. They do not develop their products fully on their own, but neither do they only copy the products of others. To some extent there is interaction between their own development of products and other actors’ product development. For instance Kari obtains recipes for suitable white cheeses at Åsbygdens, starts to manufacture some of them, but soon starts to adapt and change them, for example by giving them specific names and packaging. This means that interaction between persons and technical resources may also occur in situations other than ‘producing – using,’ typically in education and research. Åsbygdens, for example, is an educational centre. Technical interaction involving academia in some way may thus be an important source of innovation (von Hippel, 1988) and entrepreneurship (Sexton and Kasarda, 1992). What this means is that technique is part of business. Technique cannot be treated as an exogenous ‘factor.’ Actors do not as a rule take products and facilities as given. They interact with them, adapt them, change them. This does not, however, imply that the actors have ‘full’ knowledge of the technical and physical entities that they use. Interaction between technical entities is even more difficult to obtain insight into. Nevertheless, technical interaction affects firms, and actors may obtain knowledge of some of this interaction. Sometimes knowing a certain technical interaction may represent an enormous business opportunity. At other times actors may know that there is an important technical interaction somewhere in, for example, their production system, but choose not to investigate it (Håkansson and Waluszewski, 2002). But we have also seen that human beings, like Ola and Kari, endeavour to get more out of a physical resource and succeed, even if they are far from knowing exactly the nature of the interaction between goat milk and facilities for making white cheese. With hindsight we may ‘realise’ that the success in part was caused by a certain favourable technical interaction between, in this case, a product and a facility.

Networking With the term ‘personal interaction’ we mean one-to-one interaction (bilateral interaction). Persons normally interact with many persons over time, sometimes also in space. For example, in the case Ola interacts over time with over 20 different persons in relation to his activities on the farm. (In addition there is interaction with persons having

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nothing to do with his farming activities; ‘encounters’ that are left out of the study). Some of these persons, like his wife, Ola interacts with almost continually during the story. Others, like the other goat farmers in the region, Ola interacts with more than once, but not continually. Others he interacts with only once, for example the person who plans the new outbuilding after the fire in 1985. In some cases Ola interacts with more than one other person at the same time. This is the case when Ola participates in the working group (with others from different institutions in the region) in 1988. Some members of this group visit and discuss with persons from the Ministry of Agriculture the proposed change of a certain facility (subsidy rules), which the latter institution accepts despite strong opposition from Norske Meierier/Tine. Here we have an example of multilateral interaction. Like Håkansson and Waluszewski (2002) we will refer to this aspect of (business) interaction as ‘networking.’ What does this imply? The working group had first talked to Norske Meierier/Tine about changes but the latter refused to co-operate. There has been a relationship between Norske Meierier/Tine and the Ministry for a long time, but at the time in question the Ministry was beginning to dislike the rather rigid regulations in agriculture, largely because it hindered development. So when the working group appeared, the Ministry found that the two had the same interests, while the Ministry and Norske Meierier/Tine had different interests. Here we can talk about interaction (a coalition) between two parties in order to influence a third party. Hence, this is an example of political networking (Håkansson and Waluszewski, 2002; Morgan, 1997).15 16 In this case the networking is also functional as it not only affects another actor (and eventually relationships with this actor) but also is directed towards a change in a resource, in this case a facility (the subsidy rules). A purer example of functional networking is when Skånaliseter co-operates with another small-scale producer in order for the two of them to reach a minimum purchase order (of chip boxes) required by a certain supplier. Here, hardly any conflicting interests and ‘power play’ (politics) are involved; the interaction is primarily functional − it solves a techno-economic problem. But the crucial point is that the problem cannot be solved bilaterally, only multilaterally − through ‘network logic.’17 A third party (Burt, 1992) has to be involved − a triangle of relationships activated, eventually developed (Granovetter, 1973). In addition we have to take into consideration influence the other way − from a third party on the interaction between two parties. Such impact can also ‘thicken’ interaction.

15 Morgan (1997, p. 166) uses the concept of network to describe the political inner life of organisations: “…interactions between … key actors and their supporters illustrate the thick and rich political dynamic of organizational life … organizations as loose networks of people with divergent interests who gather together for the sake of expediency…” Our case shows that this view also holds for life between organisations. 16 Håkansson and Waluszewski (2002, p. 37) mention ‘systematic networking,’ which they refer to as “using existing relationships to influence other relationships.” 17 Another thing is that other suppliers of the same product (chip boxes) may calculate the lower limit of purchase differently (Forbord, 2003, p. 185). The view that actors are particular is important within the Industrial network approach (Ford et al., 1986).

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For example, the state can affect interaction between a producer and a user. Regional authorities participating together with goat farmers (producers) and Namdalsmeieriet (a user) in the project 1992-94 probably affected what happened between the goat farmers and Namdalsmeieriet. Like all actors the state is a unique actor; it has persons with specific legitimacy and unique ‘facilities’ (e.g. laws etc.) that can affect interaction in society, including business life. Other actors than the state can also influence interaction. Imagine that the outcome of the project in 1992-94 had been Namdalsmeieriet and the goat farmers co-operating over a niche dairy. This would represent a small, new actor. This actor would have made subsequent interaction between Namdalsmeieriet and the goat farmers more serious, more ‘thick.’18 The reader can find many more examples of such network effects in the case. The conclusion is that networking is an aspect that makes business interaction ‘thick.’ Networking can be political as well as functional.

Buying and selling Selling has traditionally been a central, perhaps the central, issue in business research. It has also been regarded as a prominent aspect of and a success criterion in business practice. However, selling has its opposite side − buying. In fact, buying and selling presuppose each other, but this insight is not very often reflected in business research. It has been common to study and regard these two activities separately. However, economics serves as an exception as e.g. diagrams showing supply and demand curves together are central in this science. Nevertheless, we then only talk about aggregated (‘thin’) buying and selling, not concrete buying and selling, which is what interests us here. Hence, buying and selling may be studied as more intertwined activities carried out by concrete, particular actors (Håkansson, 1982). Thus, buying and selling together constitutes an aspect of thick business interaction. For example, a sale may contain several sales acts, and the corresponding buying may consist of many buying acts. One sales act is typically responded to by a buying act, which then is followed by a sales response. In the end, which can last from some seconds to many years,19 a sale may occur − or may not. Without sales a business would have no income. And unless there were free gifts of some sort and presupposing a capitalist economy, the business would sooner or later go bankrupt and cease to exist. Buying and selling is therefore a dimension of business life that cannot be left out. What we want to emphasise here is that there is a great span in the ‘thickness’ of buying and selling. The thinnest form is buying and selling standard products in a mass market. Several examples of more or less ‘thick’ buying and selling can be found in the case. One is when Kari receives an unexpectedly large order for a specific cheese and responds by adjusting her original production plan in order to meet the order as far as she can. In this 18 Our thinking here is very much inspired by Berger and Luckmann (1967, pp. 76-77) who describes how the appearance of a third party (in their example a child) changes the character of the interaction between a man and a woman: “Their interaction becomes more of a fact; … the institutional world ‘thickens’ and ‘hardens’ not only for the child, but (by a mirror effect) for the parents as well.” 19 In one case that we know of (from the defence industry) the time between initial conversations and first sale was 15 years (personal communication).

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case the interaction is thick in the sense that the production is carried out after the parties together have decided upon the conditions of the sale and purchase (product specifications, price and conditions of delivery). The seller’s response deviates a little from the specifications originally given by the buyer; Kari is not able to produce quite the amount ordered. Nevertheless, the buyer adjusts his request a little on this point as he agrees to receive a bit less of the product than originally ordered. In this case the thick ‘buying − selling’ interaction results in a sale (and a purchase). What we can see here is that thick ‘buying − selling’ interaction is essential for differentiation (Porter, 1985); in other words effectiveness (Pfeffer and Salancik, 1978), which is somewhat the ‘opposite’ of efficiency (Håkansson and Snehota, 1995).20 For a firm like Skånaliseter farm dairy and other ‘small-scale’ entrepreneurs, we think, being able to differentiate is of special importance. Differentiation requires some form of thick interaction in the buying and selling of products.

Time So far we have discussed four aspects of business interaction. The fifth aspect, time, has been implicit in some of the discussion, but we have not explicated it. Now we will do that. What has time to do with ‘thickness’ of interaction? It depends on how we define and delimit interactions. A single interaction − an act, a response to that act and a response to the response (Weick, 1979) may take a very short time. A personal interaction and a buying-selling interaction can take a few seconds, networking and technical interaction may occur within a few minutes. On the other hand, the case that we have been studying contains an enormous amount of different interactions over a period of more than 20 years. The point is that an interaction in e.g. 1997 is not unaffected by an interaction that took place for example ten years earlier. For one thing the same persons take part in the interaction. Ola takes part all through the story. The same is the case for Norske Meierier/Tine as actor, even if we do not hear about any persons in Norske Meierier/Tine participating all these 20 years. Between Frida, the food specialist and Ola and Kari, interaction takes place over many years. (The story ends before they eventually completed 20 years of interaction...). Even though Ola and Kari develop different new products, they do not produce a new product every day. They produce the same products for years ‘week in and week out.’ By so doing they are able to develop routines (Nelson and Winter, 1982). Many of the suppliers and the customers whom Ola and Kari interact with have been the same for years. The very repetition of interaction, between the same persons and things, is a feature of interaction and contributes to making it thick; thicker than if there had only been single interactions (episodes). That interaction is repeated has some consequences in terms of outcome, for example cost efficiency but also effectiveness (value creation). But it is also a prerequisite for learning (Håkansson and Snehota, 1995).

20 As mentioned the Transaction Cost Approach (TCA) very much focuses on cost efficiency and how different governmental forms can be suitable for reducing costs under different specific behavioural and structural conditions. Effectiveness, the revenue side, is less in focus.

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But time also permits something else: variation. If one has time one can change whom one interacts with or what one interacts with. In the case it took a long time from Ola’s first encounter with negative views of goat milk in Namdalsmeieriet to the farm dairy being established − 14 years. A natural question is: would it not be desirable to reduce this time? Maybe not, because the long time span gave Ola and Kari an opportunity to look up and get to know many different ‘persons and things’ before the dairy was at last established. They learned a lot about different uses of goat milk for cheese production, which they could capitalise on once established. They became better acquainted with different actors and persons who later became valuable suppliers, customers, and co-operators. In short, by spending 14 years and not, say, 14 months on establishing the dairy they developed a much firmer network basis for their new business. This does not mean that the establishment of the dairy could have been more compressed in time. A project can to large extent be seen as ‘concentrated time;’ defining a time zone in which certain interactions shall take place (Giddens, 1993) and development eventually occur (Håkansson and Snehota, 2000). The project 1992-94 in the case is a good example. Under any circumstance time gives an extra dimension to business interaction in two ways; it renders possible repetition, and it makes it possible to vary who and what to interact with. Both are necessary in business life. Both contribute to thick interaction. Time gives actors a new chance.

A model We have identified and described five aspects of business interaction. For analytical purposes each aspect can be studied separately. However, in ‘real’ business life interaction is not that simple. In the story we have seen Ola visiting and talking with persons in Sweden about technical interactions on more than one occasion (time). In these interactions the commercial side (buying and selling) was also involved. We have been witnessing interest coalitions between two parties represented by persons against a third party – networking, but that this networking also had a functional (technical) side. In other words, in reality ‘interactions interact.’ This is not to say that analysing single aspects of interaction is wrong; in fact, such analysis can help firms to improve their business interaction. Since aspects of interaction interplay in real life, there is a reason to seek a conceptual representation of this interplay. Our suggestion is a model like that in Figure 1. Here the different aspects of interaction can affect each other mutually, but they do not totally overlap. The overlaps open some possibilities − and problem areas. We have touched upon several of these in the discussion of each aspect. For example, interest coalitions require interacting persons with emotions and cognition, but also networking. Interplay between persons interacting and technical interaction may lead to development of facilities and/or products (technical development). Knowing about a certain technical interaction can be used purposefully to differentiate in buying and selling. Using your network in buying and selling can open up possibilities for productivity. And in all these interfaces time plays more or less of a role and can be ‘used.’ For example, we can imagine routinisation of technical development, routinisation of differentiation, shift in interest coalitions, and further increase in productivity.

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Figure 1: A model of business interaction

Conclusion Interaction is part of existence – people’s existence and things’ existence. As human beings we interact with other human beings – more or less frequently, more or less comprehensively, more or less intensely. Also things interact. And people and things interact.21 Moreover interaction has consequences of various kinds and for different entities. Thus, we realise that the scope for the study of interaction is very wide and complex. This may be the reason why interaction is ignored and less prioritised in many studies. It is in many ways easier to study or consider action than interaction. And if one

21 This is in accordance with the dictionary’s definition of interaction as “reciprocal action or influence” (Webster’s, 1989). Reciprocal action points to interaction between human beings. Reciprocal influence may refer to interaction between things, but also between things and human beings, and between human beings.

Time

Repetition Variation

Buying and selling

Efficiency Effectiveness

Networking Political Functional

Technical interaction

Facilities Products

Personal interaction

Emotions Cognition

E.g. differentiation

E.g. interest coalitions

E.g. technical development

E.g. productivity

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chooses to study interaction, one may choose to isolate one effect of it. Considering interaction and many effects at the same time may be overwhelming. In this paper we have chosen to investigate interaction in a province of existence that involves ‘business’ in some way. This represents a kind of focus for the study – a limitation that makes the study feasible. A main assumption has been that ‘business’ consists of people as well as things (cf. Latour, 1987) and consequently that both these constituents and the interaction within and between them have to be acknowledged. Based on this assumption and a case story, we have developed a more specified model of interaction in business life. This model shows that there is close connection between processes of commerce (the traditional understanding of the word ‘business’), persons, technique and politics. That these processes take place over time and involve time makes them even more connected. We call it thick. Moreover, the thick processes take place between actors, which means that interaction counts. This picture of business life with thick interaction is very different from the picture one gets in neo-classical economics. In fact it renders a classical, strict academic delimitation of business problematic. It is not obvious where ‘business’ ends and other spheres of existence begin. So, business life and markets are more ordered − institutionalised, if you wish − than portrayed in neo-classical economics and approaches building on this school. On the other hand, business life and markets are not hierarchical either. They are more network like (Piore, 1992); semi-ordered, partly ‘under construction.’ This means that business is far from being a narrow, simple and given type of activity. Quite the opposite; business encompasses exceedingly diverse and many activities. It is thus meaningless to think of one actor doing all this, not to speak of being good at it. Even managing a limited set of activities can be difficult. If nothing else this provides a major reason and motivation for interaction in business life (Richardson, 1972) and in markets.

Acknowledgements We thank Håkan Håkansson for crucial comments and suggestions on several drafts of the paper. We are also grateful to colleagues in Trondheim Network Group; Tim Torvatn, Ann-Charlott Pedersen, Elsebeth Holmen and Espen Gressetvold, and researchers on the REGMAT-program. All informants, especially ‘Ola’ and ‘Kari’ at Skånaliseter, deserve great recognition. The research was funded by Interreg II/III (Jämtland and Trøndelag), the Norwegian Research Council, and Centre for Rural Research, Trondheim.

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