Use of the Internet in maintaining networks in small businesses - a study in European art markets

This paper focuses on networks and relationships in an unusual type of market that is characterised by high uncertainty, the markets of contemporary arts. We discuss the importance of reputation and legitimacy in entry to the network and argue that the ways in which actors adapt to each other are changing due to the use of new media. However, the role of new media does not seem to affect the importance of personal contact in creating relationships, particularly in these highly uncertain markets where relationships are still founded on trust and friendship. Results are based on extensive qualitative interviews in four European countries. Purpose of the Paper Traditionally, small business networks have been built on the owner-manager’s personal communications with colleagues and other entrepreneurs. This has meant establishing relationships on a face-to-face basis or through other means of social interaction. Currently, we are witnessing a change in the ways in which these relationships are upheld: the Internet has proved an effective substitute for conventional social interaction. This is taking place even in markets with high uncertainty that have traditionally relied on face-to-face presence in relationship building. Findings from the contemporary art markets in four European countries are discussed. The aim of the research is to discuss how networks are created and how a new player enters the network in art markets. Particularly, the paper focuses on distinguishing possible changes in the way the actors adapt themselves to each other in the process of network creation and what the use of new media might imply there. The emphasis is on trust building and the role of legitimisation and reputation within this adaptation process. The empirical analysis is based on 80 interviews on art managers, artists and other informants within the contemporary art market. E-mail was used to complement interviews for up-to-date information on the Internet use of galleries with current email addresses. The interviews were conducted in Finland, Sweden, France, and Great Britain. The contemporary art market was chosen because of the high uncertainty in the market and the high importance of personal relations. The qualitative study is carried out using an explanatory idiographic approach (Tsoukas 1989, Sayer 1992) viewed from the realist paradigm. Two Scandinavian markets and two more mature Middle European markets are chosen to reduce the dependency of the analysis on the particular features of one country. The focus of the paper is on art markets as a whole, and cross-country analysis is not the primary focus. The structure of the paper is as follows: We will begin the discussion with an analysis of the market of contemporary arts to establish why it is a suitable context for the study. The section focuses on the importance of reputation and legitimacy in net entry, and the adaptation process involved. We will then identify possible benefits of Internet use in relationship activities in art markets. The focus is on issues of trust and what implications it may have in this particular context. Finally, we will sum up the findings and conclusions. The characteristics of art markets and networks in art markets The network approach on markets suggests that industries should be described as networks of intertwined actors (Möller & Wilson 1995). Relationships are created to exchange resources, material or immaterial, such as knowledge. These relationships within a network are not dyadic but create a “net” that includes several actors. Within network theories, various approaches exist. Here we have adopted an approach, which emphasises the relationships within a network and their embeddedness in the social context. Hence, network studies discuss and develop ideas in many ways similar to those developed by institutional approaches (see for example Salmi 1995). Håkansson and Snehota (1995) discuss how networks are created through individuals in companies and how actors are constrained in their choices by rules and norms, as in the institutional approach. Moreover, the role of trust and reputation is emphasised in creating and maintaining network relationships. (See also Salmi 1995, Easton & Araujo 1994). In network creation the actors engage in a mutual adaptation process through which the actors gradually become to share similar values and norms. They may start to share similar technologies and ways of operating. Thus they may become more dependent on each other (Easton & Araujo 1994, Möller & Wilson 1995). In the case of the art markets it has been found that the actors within the network share similar values and norms, and more specifically, a similar taste in art. The art taste seems to be the basis of relationship creation in many cases within the art field. Moreover, it needs to be emphasised that within the art field the relationships are usually both social and business by nature and they often are based on friendship rather than primarily originating from pure business aims. Within the contemporary art market networks are overlapping, consisting of various networks starting from quite small nets around one gallery and extending to large loose international networks. (Jyrämä 1999). Networks are often studied from the point of view of a focal firm, its direct and indirect relationships. The notion of a focal net has been introduced by some researchers. For example, Salmi (1995) defines a focal net as a “unit of analysis, (which) is a net of direct and indirect interorganisational relationships that the focal firm perceives as affecting its (eastern) business”. In this study the focal net is perceived as a net of key relationships for an art gallery. Thus, the focal net consists of actors around one gallery: artists, collectors, other galleries, and art critics and other experts interested in the exhibition programme. The focal net here implies the smallest basic network structure, where the relationships are strong and contacts occur on regular basis. For example, on the level of the focal net the actors meet regularly and they all perceive themselves belonging to a gallery. The relationship is not formal, but is based on personal relations and implicit acceptance by other actors from the field of “belonging”. The creation of a relationship and adding new actors to the network seem to occur mainly through personal contacts. Often the galleries follow an artist’s work for years before adding him/her to the gallery’s focal net. Also, the opinions and recommendations of focal net members are listened to when changing the network structure. Thus, personal face-to-face contacts are preferred when creating the networks. Figure 1 shows the relationships between the actors in the market of contemporary arts.