Thesis for the degree of Licentiate in Business Administration, Sundsvall 2016 ON THE NATURE OF THE MULTIDIMENSIONAL FIRM–BANK EXCHANGE Magnus Norberg Supervisors: Professor Martin Johanson Professor Peter Öhman Faculty of Human Sciences Mid Sweden University, SE-851 70 Sundsvall, Sweden Mid Sweden University Licentiate Thesis 127 ISSN 1652-8948, ISBN 978-91-88025-78-4 Akademisk avhandling som med tillstånd av Mittuniversitetet i Sundsvall framläggs till offentlig granskning för avläggande av ekonomie licentiatexamen tisdag, 27 september, 2016, klockan 13.15 i sal L 111, Mittuniversitetet Sundsvall. Seminariet kommer att hållas på svenska. ON THE NATURE OF THE MULTIDIMENSIONAL FIRM–BANK EXCHANGE Magnus Norberg Department of Business, Economics and Law Faculty of Human Sciences Mid Sweden University, SE-851 70 Sundsvall Sweden Telephone: +46 (0)10-142 80 00 Printed and bound by Mid Sweden University Press, Sundsvall, Sweden, 2016 Fonts: Arial and Palatino Linotype Cover idea: Magnus Norberg Cover image: Örjan Furberg, Nopolo © Magnus Norberg, 2016 i This work is dedicated to my family and my best friends. Without you, this would not have been possible. ii ON THE NATURE OF THE MULTIDIMENSIONAL FIRM–BANK EXCHANGE Magnus Norberg Department of Business, Economics and Law Faculty of Human Sciences Mid Sweden University, SE-851 70 Sundsvall, Sweden Mid Sweden University Licentiate Thesis 127 ISSN 1652-8948 ISBN 978-91-88025-78-4 ABSTRACT The purpose of this study is to explore the nature of firm–bank exchange. Using a qualitative research method and existing theory, by capturing transaction-based and relationship-based elements, I examine ten firms and eight different bank services important for the exchange between the firms and their banks. The study indicates that the exchange is more complex than previous theories have proclaimed, since the nature of the exchange differs when central elements of different bank services are compared. There are bank services, such as bank account and loans, which have a high degree of both transaction-based and relationship-based elements. Saving and investment are also indicated as consisting of both transaction-based and relationship-based elements. Other services, such as depositing of cash, digital depositing and payments clearly have a higher proportion of transaction-based elements than of relationship-based elements, but depositing of cash differs somewhat from digital depositing regarding some of the elements investigated. The study suggests that advising has a high level of relationship-based elements, while the transaction-based elements are much less evident. For the service exchange of money, both transaction-based and relationship-based elements are present at a level below medium. This demonstrates that firm–bank exchange has a multidimensional nature. Keywords: Exchange, Firm, Bank, Bank Services, Transaction-based elements, Relationship-based elements. iii SAMMANFATTNING Syftet med denna explorativa studie är att undersöka beskaffenheten på utbytet av olika banktjänster mellan små och medelstora företag och banker. Med hjälp av befintlig teori och kvalitativ metod identifieras transaktionsbaserade och relationsbaserade element. Tio företag och åtta banktjänster studerades och resultaten indikerar att utbytet är mer komplext än tidigare studier antyder. Utbytet skiljer sig nämligen åt när de olika banktjänsternas transaktionsbaserade och relationsbaserade element jämförs. Banktjänster som bankkonto och lån karaktäriseras av en hög nivå av både transaktionsbaserade och relationsbaserade element. Även för sparande och investeringar förekommer såväl transaktionsbaserade som relationsbaserade element, men på en något lägre nivå. Tjänster som insättning av kontanter, elektroniska insättningar och betalningar har en klart högre nivå av transaktionsbaserade element än relationsbaserade element, men insättning av kontanter skiljer sig något från digitala insättningar för de element som undersökts. Tjänsten rådgivning karaktäriseras av en hög nivå av relationsbaserade element, medan de transaktionsbaserade elementen är mindre framträdande. Växling indikerar en nivå under medium för både transaktionsbaserade samt relationsbaserade element. Sammantaget påvisar detta att utbytet mellan små och medelstora företag och deras banker har en multidimensionell karaktär. Nyckelord: Utbyte, Företag, Bank, Banktjänster, Transaktionsbaserade element, Relationsbaserade element. iv PREFACE In August 2012 I started the endeavour of writing this licentiate thesis, but the journey began long before that. For as long as I can remember, I have been interested in understanding the logic behind what is taking place in our universe. Besides my own experience and other peoples’ experiences, science has been a guide. Understanding the world and the nature of social life has been central, besides the hard facts that I could come across. However, the theories that I came across did not explain everything, but applying theories to reality makes sense in many cases. The first university course that I studied was a course in the history of physics that I had a chance to take before I graduated from senior high school. But what has physics has to do with a licentiate thesis in social sciences? The simple answer is that understanding physics gives a better understanding of our reality, not least as it is so influenced by technology and it has become more difficult than ever to distinguish reality from virtual reality. In 1997 I took my Master of Science in Business Administration. I had decided that I wanted to study market places on the Internet and the exchange that was taking place between firms. This area was novel and underdeveloped. There were a few scholars that had started to study electronic commerce, but few could explain what was taking place in reality. An internet year was said to develop seven times faster than a normal year. One thing that I had realized was that the Internet was going to revolutionize business. The Internet was about to transform how business was conducted and exchanges were made. The Internet could allow businesses to reach a world-wide market in microseconds at a much lower cost than ever before. As the Internet was a network and the exchange that was taking place was essentially transactions, it was logical to combine network theories and transaction cost economics. This was not as simple as I initially thought when considering basic philosophical assumptions. After having finished my degree, I wanted to get into scientific research, but I had almost no real experience from business, so it felt naïve to try to really understand business as a science with very little hands-on business experience. The knowledge about reality and the action was not taking place at university. In addition, getting an offer as a doctoral student was not easy. v At the beginning of 1998 I got a position as a management consultant trainee for a company with a business idea to integrate banks’ and insurance companies’ mainframe systems with the new Internet applications. I got to work with experienced colleagues with 30 years of experience in IT development at banks. They had worked as senior management consultants and IT architects with considerable experience gained from professional services at IBM and other companies in the financial industry. The vision on this firm was to build the new Internet banks and we did. A little over three years later, I got an offer from Carnegie Investment Bank that I could not resist. I got a role as project manager and I became the link between the IT functions and the front office in the securities department and managed some really interesting projects at that time. It was a great experience, working in the centre of the financial market in Sweden and understanding a business where all the financial transactions were taking place in real time based on the information that the firm had. After a couple of years, the financial market suffered from 9/11 and the IT bubble that had ruptured. There were many lay-offs and in the third round I had to leave the firm with a six-month salary pay-off, since the firm did not make as much money as before and they decided to cut personnel. I had no better alternative than starting my own business as a consultant, so I became an entrepreneur, which was something that I had wanted to do for a long time. I was involved in a few projects, but it was not easy being a consultant with just a few years of experience at that time. After a while I got an assignment for about one year at The Swedish Financial Supervisory Authority, which gave me a broader experience from the authority that was supervising the financial industry. After some years in Stockholm, I decided to move north closer to my family and I established a jewellery business in Åre, a growing ski resort where I had learned to ski when I was a child. I also started to trade some gold as a supplement to my other business. In some sense, this was like going back to a type of business from which modern banks originated. Sound knowledge about gold prices and trust from customers was essential, but competition became fierce and competing firms that were spending large amounts on marketing campaigns took over the market. Some firms even said that they offered a higher price than the gold price on the spot market, which is very devious, but their customers were unaware of the scam these firms used to attract the customers. However, it was somewhat shocking to see how the market worked at that time and how some firms managed to do business under the regulatory radar. vi In 2011 there was a doctoral student appointment at Mid Sweden University and that was how I got my first ticket into the research project that I started 2012. As a researcher in training there are questions that I have to answer in my thesis. One is what my worldview looks like, i.e. how do I look at reality? That is clearly not an easy question and the answer depends on more or less everything.