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Strategic Alliances and Networks (Subject) / Lecture 4 (Lesson)

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  • Motives for Cooperation increase Revenues - Binding competitors as allies reduces competition - combination of complementary resources enhance competitiveness via better products, market access, etc.   Cost reduction - Economies of scale - network to reduce governance cost of joint activities - Enhance learning and aqcuiring skills - Risk reduction by spreading financial risks  
  • What is the rationale behind the Transaction cost theory? Cooperation reduces transaction cost in comparison to markets and hierarchy. Markets: - lower costs for searching suppliers and buyers - cost reductions in screening, negotiating and controlling contracts - improved information flows and knowledge transfer with simultaneous control of use of knowledge - faster realisation/implementaion of innovations Hierarchy: - reducing opportunistic behaviour - confronting hierarchical conditions with market incentives - better overcoming organizational conservatism - direct cooperation on functional levels - increased responsiveness of a decentralized organized system
  • Critical Issues of Transaction cost Theory Issues: Individualistic concept social exchange relations are regarded as static neglect of power and conflict Focus on transaction costs, relation to other cost categories remains vague presuppositions of bounded rationality and opportunism problematic focus on the perspective of one firm, even though exchange is in the center of the theory neglect of "transactional value"
  • What is the Structure-Conduct-Performance Model? Basic Conditions: 1. Supply - Raw materials, technology, public policies 2. Demand - Price elasticity, substitutes, rate of growth Industry structure Number of sellers and buyers, barriers to entry, product differentiation, cost structures, vertical integration, conglomerateness(Mischkonzern) Conduct Quantity and pricing behaviour, product strategy and advertisement, research and innovation, plant investments, legal tactics Performance Firm Level, Financial Performance, Society, Production and allocative efficiency, progress, full employment, equity Firms try to restrain productive output through exercise of monopoly power by colluding with other firms in order to gain monopoly rents SCP Logic for cooperation: 1. By forming and sustaining a protective industry structure, build high barriers such as high capacities. 2. by collectively restraining productive output
  • Resource based model of competitive advantages Firm resource heterogeneity, resource immobility -> Value, rareness, imperfect imitability, substitutability -> sustained competitive advantage -> cooperation allows firms to access resources which they do not possess themselves or even cannot build up themselves
  • RBV alliance logic Two motives explained by RBV: 1. Obtain resources: Cooperation provides access to a strategic resource in shorter time and/or at lower c ost selective access to relevant resources 2. Retain resources: Strategic resources that are currently and temporarily unemployed by the firm Instead of permanently separating these resources the firm may temporarily use them in joint projects with other firms
  • Relational view of competitive advantage Productivity gains along the value chain are achieved by investments into relationships Inter-organizational strategic resources, embedded in interorganizational routines and processes Inter-organizational relations as the source of inter-organizational rents(quasi-rents) Unit of analysis: inter-organizational networks. Relational Rent: supernormal profit jointly generated in an exchange relationship that cannot be generated by either firm in isolation and can only be created through the joint idiosyncratic contributions of the specific alliance partners
  • Critical appraisal of the Relational View Analysis of resources and external industry structure are insufficient for explaining competitive advantage Networks of relationships are present and important in economic reality Design of a firm's relationships can be a source of competitive advantage Overview of potential sources of such advantages: relational rents Management implications are partially opposed to those which are derived from IO or RBV Practicability and deduction of operational measures to follow the relational view are still limited
  • Sources of Relational Rents Relation-specific assets effective governance Complementary resources/Capabilites Knowledge-Sharing Routines
  • Other Theories that explain Cooperation Agency Theory (Principals ensure their agents act in their interest) Game Theory (Optimal strategy in games) Resource Dependence Theory(Organizations require resources, try to reduce interdependecies with other actors) Organizational Learning Theory (Access to and transfer of knowledge among organizations) Institutional Theory: (Organizational Strive for legitimacy)
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  • Overview of the TCT - Actors, characterized by (behavioural assumptions) (1) bounded rationality, (2) opportunism - Transaction characterized by (1) Frequency, (2) uncertainty, (3) asset specificity - Modes of governance (1) market, (2) hybrid, (3) hierarchy   --> Cost minimizing assignment ( sum of production and transaction cost)
  • Industrial organization perspective ratonale behind cooperations Improve positioning by: Achieving economies of scale and scope access to technologies and distribution channels financial capital, know-how increasing bargaining power influencing the industry structure directly Strategic costs: Coordination costs and management time threatening the own competitive position, e.g. unintended knowledge transfer threatening bagaining situations vis-a-vis the partner

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