Relationships as entry barriers: a network perspective

Recent literature on the European Union has focused to a great extent on the growing competition that the creation of the union was expected to generate on the former national markets. And yet, as we have moved into the new millennium, cross-border competition in many sectors is still at modest levels. One explanation for this could lie in firm-level strategies that involve relationship-building on the home-market and abroad with a view to creating new entry barriers to deregulated national markets. However, entry barrier literature, is dominated by economics-oriented frameworks in which relationships and collaboration take second place to horizontal competition. The adoption of a network perspective helps to reveal what happens when a market is deregulated. Anyone in Europe can become an actor overnight, whereas previously all kinds of regulations limited the number of actors, essentially, to the national ones. However, to be able to establish itself on the new market, a firm needs to establish relationships. The main aim of a defending firm is then to strengthen its relationships to prevent entrants from establishing a position in the national network. This article, mainly theoretical and using a network perspective, seeks to develop a framework for analysing relations as entry barriers. It also presents some general propositions as to how relationships, as entry barriers, may influence firm strategies in general, and discusses some implications for mainstream entry barrier research and for policy-makers. The empirical material, namely strategic developments in the Swedish food industry during the 1990s, has had a purely illustrative function.