Creating relational capital through socialization in project alliances

2.1 Socialization in OSCM research

The concept of “socialization” was introduced to the OSCM research as a way to manage BSRs to the best of our knowledge by Cousins and colleagues (e.g. Cousins et al., 2006, 2008; Cousins and Menguc, 2006)[3]. Socialization refers to “the level of interaction between, and communication of, various actors within and between organizations, which leads to the building of personal familiarity, improved communication and problem solving” (Cousins and Menguc, 2006, p. 607). It facilitates building of inter-personal relationships, trust, interaction, and knowledge sharing (Cousins and Menguc, 2006; Lawson et al., 2009), leading to increased relational capital (i.e. personal relationships people have with each other through a history of interactions, which facilitates trust and reciprocity in the relationship (Cousins et al., 2006; Lawson et al., 2008)[4] and ultimately to better performance (Cousins et al., 2008; Cousins and Menguc, 2006). At the organizational level, it is a member’s social relationships within the group and with the broader social structure (Cousins et al., 2006; Oh et al., 2004).

Socialization can be facilitated with various mechanisms, including workshops, conferences, cross-functional teams, and matrix-style reporting structures (Cousins et al., 2008; Gupta and Govindarajan, 2000; Van Maanen and Schein, 1979). Socialization mechanisms can be divided into informal and formal mechanisms (Cousins et al., 2006; Lawson et al., 2008; van de Vijver et al., 2011); informal socialization mainly occurs outside of the workplace, increasing the level of trust and giving greater time, opportunity, and motivation to strengthen social relationships, whereas formal mechanisms are structures and processes designed to communicate expectations and behavioral guidelines as well as share useful information and knowledge between members (Cousins et al., 2006; Lawson et al., 2008).

Research on socialization in OSCM (see Table I) has mainly assessed dyadic BSRs in ongoing operations settings with large-scale surveys (e.g. Cousins and Menguc, 2006; Lawson et al., 2008). This research concludes that both historical ties (“shadow of the past”) and previous interaction have implications for socialization mechanisms and development of relational capital (Lawson et al., 2008; van de Vijver et al., 2011).

2.2 Socialization in temporary organizational settings

Organizing operations with temporary organizational forms – defined as organizations working on a complex task over a pre-defined, limited period of time (Lundin and Söderholm, 1995) – are typical, for example, in construction (e.g. Gann and Salter, 2000) and film industries (e.g. Manning and Sydow, 2011). Temporary organizations are characterized by a pre-defined limited timeframe and discontinuity (Bakker, 2010; Lundin and Söderholm, 1995), distinguishing them from enduring organizations and ongoing operations. In addition, projects as temporary organizations proceed through a set of predefined stages that each have distinctive features, posing different managerial requirements (Morris, 1994).

Research on temporary organizations and complex projects brings forth a variety of interorganizational collaborative practices and “socialization tactics” to facilitate collaboration and trust among the participating organizations, including workshops, relationship programs, co-locational collaborative spaces, use of facilitators, and joint training (e.g. Hietajärvi and Aaltonen, 2017; Suprapto et al., 2015).

2.3 Project alliances

Project alliance is a distinct multi-organization project form to deliver major capital assets, in which the owner and one or more providers are tied together with a multi-party contract (Lahdenperä, 2012). In contrast to traditional project delivery forms where the client, contractors, and designers work under separate dyadic contracts and manage their relationships separately, project alliances rely on early integration of key actors, joint organization, and a contractual framework to align goals and share risks and rewards (Department of Treasury and Finance, 2010; Walker and Lloyd-Walker, 2015). They feature a significant philosophical change from competition-based models and optimization of single actors’ performance to highly collaborative models, ensuring maximum value for all participants. Project alliances emerged in the early 1990s’ industrial North Sea oil projects in UK and have been developed further in the Australian infrastructure and construction sectors’ public projects (Walker and Lloyd-Walker, 2015). During the recent years, they have increasingly been used in public infrastructure projects in Europe. Currently, project alliances are considered as the optimal solution to manage complex projects, including adversarial attitudes and opportunism (Suprapto et al., 2016).

As an organizational entity, the alliance organization conceptualizes, develops, and executes the project innovatively together, requiring continuous management of organizational interfaces (Baiden et al., 2006; Ibrahim et al., 2013; Kumaraswamy et al., 2005). Therefore, significant emphasis is needed on building the relationships, collaborative culture, and trust between the participating organizations, which are considered as core elements of an effective project alliance (Lahdenperä, 2012). The alliance contract includes two parts (Lloyd-Walker et al., 2014): a contract, which ensures that the financial reward and penalty provisions drive motivation, and a behavioral agreement, which requires partners to work together in good faith, acting with integrity, and making decisions that are best for the project. Such collaborative identity, no-dispute culture, unanimous decision-making processes, sink-or-swim attitude, and mutual respect and trust have been found to be salient to project alliances (Clegg et al., 2002; Hietajärvi and Aaltonen, 2017). Achieving quickly behavioral unity, personal affinity, and collaborative culture in the project alliance organization has, however, proven to be challenging: conflicts with the traditional buyer and supplier roles and tensions between the alliance participants’ home organization values and values of the temporary project alliance organization can cause challenges as well as result in struggles with identity among the alliance participants (Clegg et al., 2002).

Project alliance starts with a client’s strategic procurement phase when the project delivery form is decided. This is followed by competitive tendering phase with the offering consortium. In the development phase, then, the client and the providers jointly develop the project concept under a development phase alliance agreement (Walker and Lloyd-Walker, 2015). The commercial model’s structure and key target areas are developed jointly during this phase and the project plan is produced. If in an agreement, the parties then proceed to the execution phase in which the actual product/services are produced. Finally, the project ends with a post-project phase typically including a guarantee period (Department of Treasury and Finance, 2010). In this study, we focus on the alliance tendering and development phases, which include preparing the tender within the consortium of providers as well as joint concept development and planning in the joint alliance organization, consisting of the client, and the tendering consortium.

3.1 Case selection and empirical context

The selected case projects are a railway renovation project (Case Railway) and a light rail construction project (Case Tramway), both located in a Northern European city and embedded in the same infrastructure industry context. Theoretical sampling logic was guiding the selection of the cases. Both multi-organizational projects are organized as alliance projects and are large and highly complex in terms of their technical content and organizational context, requiring particular emphasis on socialization mechanisms. Case Railway can be characterized as a vanguard project (Brady and Davies, 2004); it was the first project to be using the alliance model in the industry, introducing a significant change in the logic of managing complex projects. Case Tramway, in turn, is the largest project alliance in terms of its budget and scope in the country to date. The two project alliances were chosen as both projects were pioneering with regard to the use of the alliance method, were ongoing at the time of the data collection, and conducted approximately during the same time period in the same industry, which minimized the potential variance produced by cultural, temporal, or organizational orientations in terms of socialization. The cases were also selected so that the participating organizations and key individuals had only limited co-operation experience with each other in the previous projects to control for the potential effect of the “shadow of the past” (van de Vijver et al., 2011). Finally, we had a unique access to collect in-depth data in the early project phases, including interviews and attending lessons learnt sessions and project workshops. While the unit of observation in this study is the project, the unit of analysis is the organizational interfaces within the consortium/alliance organization. A detailed description of the cases is in Appendix 1.

3.2 Data collection

Data collection concerning socialization in the tendering phase primarily focused on activities within the tendering consortiums, while data collection in the development phase broadened the scope to the entire alliance organization. The collected data on both cases include semi-structured interviews as well as research and validation workshops and observations in the lessons learned sessions of the two project cases. The data were complemented with project documentation, including organizational charts of the project, process descriptions, behavioral guidelines, public value-for-money reports, and implementation plans developed in the development phase. The data collection addressed organizational issues, such as integration, socialization, and contractual issues. For this particular paper, we focus on analyzing the data from the perspective of socialization. Details of data and data collection are available in Table II. In Case Railway, the interviewees were selected by first contacting the assistant project manager, who knew all the key actors in the project and was able to identify the relevant interviewees; all interviewees represent the three organizations constituting the core alliance organization and had been actively involved in the tendering process and project development. In Case Tramway, the interviewees were selected by first contacting the key development persons from the participating organizations, who were able to select the most appropriate interviewees. The interviews were also scheduled and arranged by a project engineer and organized in the co-locational space of the project.

All the interviews were recorded and transcribed into text. In addition, notes were taken during the interviews. The interviews were conducted in the local language and the quotes were translated into English by the authors for the purposes of the paper. The semi-structured interviews covered general themes related to the project alliance (key events over the lifecycle, processes, people, tools, and techniques), and more focused questions related to organizational integration and socialization in the different phases of the project lifecycle (see the detailed research protocol in Appendix 2). To ensure the validity of the data, all interviewees were given an opportunity to check the transcripts and analysis. In addition, the results of the Case Tramway were also validated in workshops.

3.3 Data analysis

The data analysis started by building a brief case description of the cases from the beginning of the tendering phase until the end of the development phase. We then proceeded to more systematic coding of the data. One of the authors was primarily responsible for coding of the data, but the analysis was discussed and reflected among the authors as the analysis proceeded. The interview transcripts, other documentary data, and observation memos were coded with NVivo and Excel in several rounds.

First, we searched the text data for descriptions of the use of socialization mechanisms. This open coding resulted in identifying the variety of mechanisms in both cases such as informal workshops outside office, development of joint behavioral guidelines, use of liaison persons for socialization when using Last Planner, visualization methods, etc. In this round of coding, also any indication of timing or emphasis related to the use of socialization mechanism was coded. Furthermore, all data indicators concerning a change in their use were coded.

We then classified the first-order codes into more general socialization mechanism categories consisting of the following categories: informal socialization events, communication guidelines, co-locational space’s informal premises, organizing structures, workshops and meeting, co-locational space, visual management, formal evaluations of collaboration and guidelines and rules. These identified categories could then be classified under the categories of informal and formal socialization mechanism used in prior research (Cousins et al., 2006, 2008; Cousins and Menguc, 2006). The categories with illustrative quotes are presented in Tables AI and AII of Appendix 3.

Coding of relational capital followed the established definition (e.g. Cousins et al., 2006); we first coded all incidents related to the degree of mutual respect, trust, and close interaction within the alliance organization at multiple levels (project leadership team, project management team, and project team) in the interview transcripts, secondary data, and observations as well as any indication of timing. This procedure allowed us to get a more profound and in-depth portrayal of how the key individuals in the alliance projects experienced the atmosphere and collaboration in the daily project work during the tendering and development phases. Mutual respect, reciprocal trust, and personal interaction were also key themes discussed in the lessons learned sessions, allowing us to develop a deeper understanding of how they were developed. Second, we assessed how people at different hierarchical levels perceived the level of trust, respect, and interaction but significant differences across organizational levels were not observed; the interviewees have a rather similar assessment of relational capital in the project alliances. Finally, based on the coded indicators of relational capital, we then assessed the level and development of relational capital during the tendering and development phases. We used a qualitative classification scheme where the level of relational capital could vary between low, medium, high, and very high. Examples and illustrative quotes are presented in Tables AI and AII of Appendix 3.

Finally, we engaged in cross-case analysis to find the similarities and differences across the two cases concerning the use of formal and informal socialization mechanisms during the tendering and development phase and the development of relational capital.

3.4 Validity and reliability concerns

We paid special attention in establishing high validity and reliability (e.g. Voss et al., 2002; Yin, 2009). Means used in the context of this study are summarized in Table III.

4.1 Socialization mechanisms in Case Railway

4.2 Socialization mechanisms in Case Tramway

4.3 Level of relational capital during the tendering and development phases

In addition to the use of informal and formal socialization mechanisms, we analyzed the level of relational capital in the project tendering and development phases. Examples from data and illustrative quotes are presented in Table AIII.

4.4 Synthesis of findings

In the following, we conclude the analysis about the use of socialization mechanisms as well as relational capital with summarizing observations based on the two cases.

First, the analysis indicates that significant emphasis was put on both informal and formal socialization mechanisms during the project tendering phase in both cases to facilitate the development of trust and cohesion within the tendering consortium. Especially the use of diverse informal socialization mechanisms was found to be crucial for the development of inter-personal relationships, team spirit, personal affinity, as well as collaboration and interaction in the tendering phase. The analysis also indicates that the level of relational capital was developed very fast and was high in both Case Railway and Case Tramway during the tendering phase. Hence, we conclude our findings:

1. Observation 1. In the context of project alliances, both informal and formal socialization mechanisms are important in creating relational capital.

2. Observation 2. In the context of project alliances, informal socialization mechanisms can be used in the tendering phase to build relational capital, especially in terms of developing personal relationships, trust, and interaction.

Second, clear differences in the use of socialization mechanisms were observed during the early stage of the project’s development phase across the cases: while formal socialization mechanisms were actively used in both cases, the use of informal socialization mechanisms was more intensive in Case Railway. The importance of informal socialization mechanisms in building the joint collaboration within the whole alliance project team was also valued and nurtured by the whole alliance organization across different hierarchical levels. In Case Tramway, on the other hand, especially the use of co-locational space and diverse workshops ensured that designers and constructors were collaborating on project-related tasks and also other formal mechanisms were in place. However, more investments in the facilitation of socialization within the team were called for by the participants. While the level of relational capital increased steadily in Case Railway in the development phase, being very high toward the end of the development phase, the early development phase of Case Tramway was characterized by a slow development of team spirit and visible boundaries between the alliance organizations indicating medium level of relational capital. Toward the end of the development phase, Case Tramway, however, indicates that more efforts were directed at, for example, visual management facilitating informal interaction in the co-locational space and team-building events outside the office. Toward the end of the development phase, the level of relational capital was assessed to have improved, and was considered at a high level. Hence, we conclude:

1. Observation 3. In the context of project alliances, informal socialization mechanisms can be used in the development phase to further enhance the level of relational capital, especially in terms of integrating the new alliance organization members.

2. Observation 4. In the context of project alliances, formal socialization mechanisms, such as co-locational space and project visualization can be used in the development phase especially to maintain relational capital.

5.1 Contribution and implications

The study provides the further understanding of management of complex projects and also contributes to the OSCM research on socialization. For the OSCM research on socialization, the study provides contextualized understanding of socialization (e.g. Cousins et al., 2006, 2008; Cousins and Menguc, 2006; Lawson et al., 2009); while prior research has focused on dyadic BSRs in ongoing operations, this study provides elaborated understanding of how socialization is managed in the context of temporary operations. As the findings indicate, both informal and formal socialization mechanisms are important to develop and maintain relational capital and their use depends on the project lifecycle phase. These findings complement prior large-scale surveys on socialization in ongoing operations and dyadic BSRs (Cousins et al., 2006, 2008; Cousins and Menguc, 2006; Lawson et al., 2009); socialization depends on the relationship history of the organizations (van de Vijver et al., 2011) and by providing in-depth understanding of socialization in a multi-party setting.

For the management of complex projects (e.g. Brady and Davies, 2014; Davies and Hobday, 2006), the study provides novel insights into the management of organizational relationships, especially during the tendering and development phases in complex projects, which are critical for project success (Samset and Volden, 2015). The findings increase the understanding on managing the relationships and development of relational capital with formal and informal socialization mechanisms, complementing prior research on temporary organizations and projects, which has assessed a variety of collaborative practices to manage organizational relationships in temporary settings (e.g. Bresnen, 2007; Ericksen and Dyer, 2004). Moreover, assessing how the use of socialization mechanisms varies across project lifecycle in a complex project provides more in-depth understanding on socialization in temporary settings; prior research has acknowledged that temporariness may have significant implications for socialization but has not addressed it explicitly (e.g. Bakker, 2010; Bresnen, 2007; DeFillippi and Sydow, 2016; Saunders and Ahuja, 2006). Particularly the findings of the criticality of the continuous and systematic use of informal socialization mechanisms in building relational capital in the tendering and development phase of project alliances are novel: prior research on project collaboration has tended to highlight the importance of formal socialization mechanisms in establishing trust, collaborative spirit, and co-operation in complex projects (Bresnen, 2007).

Our findings also show how the focus on formal mechanisms, such as the use of co-locational space among constructors and designers is not sufficient in ensuring high levels of relational capital in temporary organizational context, but that the use of informal socialization mechanisms is particularly critical also in the development phase when the alliance organization needs to facilitate mutual trust, commitment, and co-operation across organizational interfaces. In Case Railway the dominant focus during the early development phase was on building social relationships and cohesiveness within the alliance organization across multiple levels which supported the development of relational capital and facilitated inter-personal familiarity and joint problem solving, whereas in Case Tramway the alliance organization was at first very task-driven emphasizing primarily the use of formal socialization mechanisms resulting in lower levels of relational capital. Consequently, our results suggest that a highly task-driven focus instead of investing in informal social collaboration during the project development phase may potentially explain some of the faced relational challenges of complex projects. Therefore, our findings increase the understanding of how the task-driven focus of project work and limited understanding of the joint future may affect relationships (Saunders and Ahuja, 2006). The results of the study also reveal the critical role of the client in establishing and facilitating the use of informal socialization mechanisms and consequently relational capital in the context of project alliances, which has been largely unexposed in prior literature on project alliances.

By focusing on socialization mechanisms in the development of relational capital, the study also contributes to research on alliance projects, which has mainly focused on exploring the contractual and technical features of these arrangements (Ibrahim et al., 2013; Walker and Lloyd-Walker, 2015). This deeper understanding of how to facilitate relational capital in alliance projects may also help to explain why some alliance projects perform better than others (e.g. Jefferies et al., 2014). The findings of Case Tramway also reveal how project alliances, even though putting significant emphasis on formal collaboration and co-operative practices, may face relationship dynamics where collaboration and conflict exist simultaneously.

5.2 Managerial implications

The socialization mechanisms as well as pattern of use of informal and formal mechanisms identified in this study may serve as a basis for managerial decision making in the tendering and development phase of future project alliances. Understanding the variety and use of informal and formal socialization mechanisms as well as the relationship with relational capital may facilitate organizational improvements both in developing relational capital as well as in crafting more effective socialization mechanisms in organizations.

The findings of the study imply that managers and core members of alliance projects need to be aware of the changing nature of how socialization mechanisms facilitate relational capital in tendering and development phases and adjust their managerial approaches and organizing accordingly. While informal socialization mechanism are especially critical in the tendering phase to develop the personal relationships and mutual trust, informal socialization mechanisms are critical in the development phase to integrate the new organizational members. Moreover, formal socialization mechanisms are required in the development phase to maintain the achieved level of relational capital. The findings concerning the dynamics of socialization mechanisms emphasize importance of continuous reflection, adjustment, and adaptation of the used socialization mechanisms. Developers and promoters of complex projects need to also be aware of the critical role that the buying organization i.e. the client plays in the facilitation of the relational capital in alliance projects: According to our findings, the client’s driving and active role in establishing informal co-operation and commitment within the alliance organization seems crucial for facilitating high levels of relational capital.

5.3 Pedagogical implications

The study can be used for pedagogical purposes with different student audiences in various ways. As such the study is most suitable to be used as a pre-reading material based on which students can address different themes in the class discussions and learning essays.

The study offers ideas on the use of formal and informal socialization mechanisms in the context of temporary operations and can therefore be used to facilitate discussions on the enablers and challenges of team building and establishment of relational capital in projects with undergraduate students. With them, the study can also be utilized to address the key features of project alliances and how these characteristics facilitate the co-operation and collaboration in project contexts.

With graduate students, the study can be used to address in a more in-depth manner the use, timing and balancing processes of informal and formal socialization mechanisms in different lifecycle phases of projects. Graduate students could also be encouraged to discuss analytically the distinct role of project alliance set-up in enabling socialization in temporary operations and, to reflect, following contingency thinking, whether the identified socialization mechanisms could be used in other types of project delivery arrangements and operational contexts and to what extent. Here, the processes of establishing mutual trust, behavioral unity, and commitment quickly in temporary operations contexts brought up by the study could be reflected, e.g. against the ideas on swift trust in temporary teams (Meyerson et al., 1996). The potential dangers and implications of overinvesting in the development of relational capital in temporary operations contexts could also be addressed, e.g. in the light of the paradox of embeddedness (Uzzi, 1997). Furthermore, as the study generally adopts a rather favorable approach toward the use of project alliances, the paper could also be used to challenge the students to reflect on the use and suitability of project alliances in the management of complex projects from a more critical perspective (see, e.g. Merrow, 2011).

For executive audiences, the paper can be used in various ways. A practical starting point would be to use the classification templates of formal and informal socialization mechanisms and ask the managers to map and analyze the use of the different mechanisms in their projects. Then, based on these analyses, a discussion on the challenges and best practices of using socialization mechanisms in projects could be carried out. Furthermore, the findings of the study could be used to reflect on the socialization processes during the project tendering phase, which is a rather overlooked area in practice.

The study can also be used for research methods teaching. The methodology chapter could be used as a catalyst for a discussion on theory elaboration approach as a case research strategy (Ketokivi and Choi, 2014) and the appendices that entail detailed research protocol and analysis templates could be used as examples for facilitating discussions on the reporting of empirical evidence and data analysis.

5.4 Limitations and future research

The two rail infrastructure cases provide interesting findings about how socialization mechanisms facilitate the development of relational capital in project alliances. Future research could assess socialization in other types of project alliances, taking also into consideration the potential industry and cultural differences. This would also provide an avenue to further enhance the contingency approach to OSCM (Boer et al., 2015). Moreover, research could dig deeper into the organizational relationships in alliance projects, assessing, for example, the potential complementary effect that organizational integration (e.g. Flynn et al., 2010; Turkulainen and Ketokivi, 2012) has on achieving the benefits of socialization.

The project alliances under analysis are ongoing projects. While this is essential to allow us, for example, to observe managerial decision-making, it also poses limitations. The empirical analysis focused on the tendering and development phases. While socialization is particularly critical in these phases (Samset and Volden, 2015), future research could extend the analysis to the entire project lifecycle to develop understanding of socialization over the project lifecycle.