The modes of supply net management: a capability view Senja Svahn School of Business and Economics, University of Jyva ¨ skyla ¨, Jyva ¨ skyla ¨ , Finland, and Mika Westerlund Helsinki School of Economics (HSE), Helsinki, Finland Abstract Purpose – The purpose of this paper is to identify the key capabilities required in supply net management. Design/methodology/approach – Uses the Management Capability Framework to break down supply net management into different modes and identify capabilities required in them. Findings – Reveals that the supply activity of companies increasingly takes place in intentionally developed strategic networks called supply nets. These networks pose distinctive challenges for supply chain management. Identifies four diverse but simultaneously extant modes of management in the supply net context, and discusses the key managerial capabilities in each mode. Originality/value – Provides a conceptual framework to fulfill the identified need to understand management in the network management context. This paper enables researchers and business practitioners to identify the strategic focus and key capabilities required in managing supply nets. Keywords Supplier relations, Networks, Management effectiveness, Strategic management Paper type Conceptual paper Introduction The way economic activities are carried out is changing. Business practitioners and academics alike are being encouraged to adopt a multi-firm network context (Achrol, 1997; Axelsson and Easton, 1992; Jarratt, 2004; Knoke, 2001; Snow et al., 1992). Furthermore, collaboration among suppliers is more intense than ever. The increased importance of knowledge, amplified technological complexity, the growth of global competition, and novel digital information technology tools are drivers of intentional business networks (Castells, 1996). Firms are less able to develop major process or business innovations in isolation because of the dispersion of knowledge and technological resources driven by organizational specialization. In order to achieve higher effectiveness in their supply activities, an increasing number of companies elect to focus on their core competencies. This leads to the externalization of their other activities to business partners and makes them dependent on other actors’ resources and capabilities (Barney, 1991; Grant, 1996; Penrose, 1959; Prahalad and Hamel, 1990; Rumelt, 1974; Wernerfelt, 1984). Interaction between companies becomes a key aspect in accessing and utilizing these resources, especially in the supply network context (Cox and Lamming, 1997; Croom et al., 2000). The Industrial Networks Approach (INA) studies interaction between companies. Its focus is on how relationships between companies in industrial markets are formed and managed, and it creates conceptual frameworks for analyzing these relationships (Ha ˚kansson and Ford, 2002; Ha ˚kansson and Snehota, 1995; Mattsson, 1987). According to the INA, actors are dependent on each other’s diverse resources and capabilities to carry out value activities. These inter-dependencies are manifested in complex direct and indirect business relationships, forming borderless networks (Ha ˚kansson and Snehota, 1995). Researchers representing the INA have also studied the emergence and dynamics of networks, but primarily from the perspective of self- organizing. However, they have pointed out some key terminological issues: a “network” is used to refer to macro, industry-level or cluster-level networks, and a “net” is developed by intention and formed by a limited number of actors for a specific purpose (e.g. Mo ¨ ller et al., 2005). The concept of an intentional net presumes that an actor can, at least to a reasonable extent, influence and control the behaviour of other actors in managing a business net. An interesting issue in this respect is the recent emergence of intentional supply nets. Considering the increasing importance of supply nets there is surprisingly little research on their development and management. Our study focuses on the management strategies in supply networks. The supply activities of companies in these kinds of network are linked to each other through different flows, which can involve material, information, financial resources and relationships. These activities can be controlled by either one company or by an entire network. We examine value creation from the individual actor’s perspective and make clear conceptual difference between an intentionally-created net and a more general network that has evolved naturally or reactively. Furthermore, we consider nets as strategy-based networks with shared goals and objectives and a limited number of participating ties and actors. It is presumed that The current issue and full text archive of this journal is available at www.emeraldinsight.com/1359-8546.htm Supply Chain Management: An International Journal 12/5 (2007) 369–376 q Emerald Group Publishing Limited [ISSN 1359-8546] [DOI 10.1108/13598540710776944] This study is part of the Liike 2 programme of Academy of Finland. 369