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Collocation for Supplier–Client Knowledge-Based Coordination: Niche Positioning, Task Complexity, and Comparative Costs
Abstract
We examine how clients and suppliers govern vertical relationships for knowledge work. Collocation—having supplier personnel interact with the client’s personnel and systems at the client’s site—is a contractual mechanism that facilitates coordination for knowledge co-creation. Using a sample of 1609 credit unions’ relationships with 50 IT suppliers during the rise of Internet-based banking from 2000 to 2004, we examine the initial development of arrangements for online share account and loan processing. Results show that client positioning and task complexity partially determined the choice of collocation vis-a-vis a supplier delivering standard services from a remote location. However, as broadband communications reduced the costs of remote service, clients moved away from collocation.
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Interorganizational relationships have attracted much scholarly attention in the last two decades. Despite the significant advances made in this field, the literature still largely relies on assumptions that overlook core features of interorganizational relationships. We build on the organizational research on pluralism to evaluate and identify opportunities to extend the literature on interorganizational relationships. Drawing on a synthesis of the last 20 years of research (1996–2016) on interorganizational relationships, we discuss four major “blind spots” concerning (1) the assumption of symmetry between parties or the focal party’s perception is taken to reflect the whole relationship (single-party focus), (2) the assumption of uniform relationships between parties (single-valence focus), (3) the assumption of an interorganizational phenomenon within one level of analysis (single-level focus), and (4) the assumption of universal time (focus on a single conceptualization of time). Through an analysis of exemplary studies, we discuss how and when overcoming each of these blind spots provides novel insights to revisit theoretical mechanisms concerning the functioning of interorganizational relationships. We also identify a coherent set of strategies to address each blind spot. We advance the literature by articulating a pluralistic perspective to guide future research into core questions about interorganizational relationships.
Credit unions differ in the types of financial services they offer to their members. This paper explicitly models this observed heterogeneity using a generalized model of endogenous ordered switching. Our approach captures the endogenous choice that credit unions make when adding new products to their financial services mix. The model that we consider also allows for the dependence between unobserved effects and regressors in both the selection and outcome equations and can accommodate the presence of predetermined covariates in the model. We use this model to estimate returns to scale for U.S. retail credit unions from 1996 to 2011. We document strong evidence of persistent technological heterogeneity among credit unions offering different financial service mixes, which, if ignored, can produce quite misleading results. Employing our model, we find that credit unions of all types exhibit substantial economies of scale.
The ongoing fragmentation of work has resulted in a narrowing of tasks into smaller pieces that can be sent outside the organization and, in many instances, around the world. This trend is shifting the boundaries of organizations and leading to increased outsourcing. Though the consolidation of volume may lead to productivity improvement, little is known about how this shift toward outsourcing influences learning by providers of outsourced services. When producing output, the content of the knowledge gained can vary from one unit to the next. One dimension along which output can vary-a dimension with particular relevance in outsourcing-is the end customer for whom it is produced. The performance benefits of such customer experience remain largely unexamined. We explore this dimension of volume-based learning in a setting where doctors at an outsourcing firm complete radiological reads for hospital customers. We examine more than 2.7 million cases read by 97 radiologists for 1,431 customers and find evidence supporting the benefits of customer-specific experience accumulated by individual radiologists. Additionally, we find that variety in an individual's customer experience may increase the rate of individual learning from customer-specific experience for a focal task. Finally, we find that the level of experience with a customer for the entire outsourcing firm also yields learning and that the degree of customer depth moderates the impact of customer-specific experience at the individual level. We discuss the implications of our results for the study of learning as well as for providers and consumers of outsourced services.
The ability of employees to collaborate with remote colleagues is now essential for most large corporations and organizations. Decades of research have identified the conditions that must be present for remote collaboration to succeed. We present a set of studies of remote collaboration within a technology company (Google) that has not only met these conditions but gone beyond them by providing ubiquitous video conferencing (VC). We looked at how well remote collaboration can now work, whether travel is still required, and what impediments still remain. We found that several factors contributed to the success of remote collaboration. Visual real-time communication via video conferencing is ubiquitous and easy to use, VC is integrated with calendar software, and most Google employees have laptops with VC capability. Collaborative tools such as Google Docs, email, and instant messaging make working together, sharing information, and keeping in touch easy. Finally, there is a culture of trust and sharing within Google. We also found that initial face-to-face meetings remain crucial for enhancing subsequent remote interactions. There were two findings of particular interest. First, video conferencing has completely replaced audio conferencing for internal company communications. Second, video portals (always-on video connections between two or more locations) have sprung up spontaneously throughout Google. We categorize their use into four different styles of interaction, and describe how they can be effective not only in facilitating communication, but also in providing presence and status information, helping to establish mutual trust and common ground, and preventing misunderstandings. Video portals reduce the behavioral costs of communication and for the first time allow tightly coupled remote work to succeed. Although there are some lingering problems in technology-mediated distributed meetings, a combination of a collaborative culture with appropriate infrastructure, software, and access to technology can radically narrow the gap between co-located and remote collaboration.
Customer participation is considered necessary for the delivery of effective Knowledge Intensive Business Services (KIBS). However, for different reasons, KIBS customers are not always able to participate actively during the delivery process and providers have to compensate for this in order to deliver effective solutions. We conducted case-based research to understand how KIBS providers do this. The three cases studied suggest that, besides customer education, providers use preventive and problem-management strategies to counterbalance limited customer participation. These three strategies are used in a complementary way and are enabled by the expertise of KIBS providers. They also contribute to the delivery of effective KIBS. The research outcomes refine the existing knowledge of customer participation in KIBS, which has so far focused mainly on the causes and consequences of it and overlooked other related issues. Our results also suggest that practitioners could use the level of customers' ability and willingness to participate as segmentation criteria and then define their strategies and allocate their resources accordingly.
Professional services—advertising, financial services, legal services, management consulting, and others—are critical inputs and major corporate expenditures. Yet managers of suppliers of professional services lack a concrete management framework for enhancing value and controlling costs. This article provides a practical framework, based on extensive research, that incorporates four generic strategies for managing suppliers of professional services. These strategies can increase efficiency, reduce costs, improve quality, and strengthen bargaining power. While sole-source strategies often make sense for managing industrial parts suppliers, multiple-source strategies maximize the value of professional services. Corporate managers who resist offers for one-stop shopping and cross-selling—who instead develop credible internal alternatives, link pay and performance, and increase monitoring and auditing—can significantly enhance the value of professional services.
We address independent and joint effects of contractual hazards and technological capabilities on governance, arguing that strong technological capabilities improve a firm's ability to govern transactions, making outsourcing feasible despite certain contractual hazards. Examining a random sample of 405 service contracts from a single information technology firm, we found that contractual hazards encouraged internalizing transactions. Weak technological capabilities increased the likelihood of subcontracting, but strong technological capabilities had no independent effect. The latter had impact only in the presence of certain contractual hazards. These results illuminate why firms facing similar levels of contracting hazards organize their transactions differently.
This paper examines the effects of information technology (IT) on the governance of vertically related firms. We propose that a highly relation-specific IT system in inter-firm transactions plays a key role in the resulting inter-firm governance as a mutual sunk-cost commitment, in terms of leading to both less vertical integration (i.e., a change in governance mode as a first-order effect) and a smaller number of suppliers (i.e., a change within a governance mode as a second-order effect). As a result, this highly relation-specific IT system (bilateral investment) can be an alternative governance mode of electronic integration that acts as a substitute for managerial hierarchy and vertical financial ownership. From a strategic management perspective, this paper provides transaction costs and resource-based explanations on IT systems' impact on the organizational boundary decision and its impact on the likelihood of the firm achieving sustainable competitive advantage. Copyright © 2006 John Wiley & Sons, Ltd.
Because extant literature on the service logic of marketing is dominated by a metaphorical view of value co-creation, the roles of both service providers and customers remain analytically unspecified, without a theoretically sound foundation for value creation or co-creation. This article analyzes value creation and co-creation in services by analytically defining the roles of the customer and the firm, as well as the scope, locus, and nature of value and value creation. Value creation refers to customers’ creation of value-in-use; co-creation is a function of interaction. Both the firm’s and the customer’s actions can be categorized by spheres (provider, joint, customer), and their interactions are either direct or indirect, leading to different forms of value creation and co-creation. This conceptualization of value creation spheres extends knowledge about how value-in-use emerges and how value creation can be managed; it also emphasizes the pivotal role of direct interactions for value co-creation opportunities.
Organization scholars have highlighted the value of relationships in fostering effective exchange, suggesting that repeated exchange creates a relational asset with latent value derived from elevated social connections, norms, and simple expectations of exchange continuity. Yet the empirical evidence supporting such claims remains largely indirect. As a consequence, few studies have been able to directly examine how contextual factors shape the accumulation of this relational asset or define its value in application. We directly measure the value of relationships between suppliers and a large buyer, using the buyer’s choices in Internet-enabled procurement auctions to estimate the degree to which stronger relationship histories with suppliers increase willingness to pay for high-volume commodity-like parts. Our setting also allows us to examine how this willingness to pay for relationships is shaped by the social context in which they develop and by the exchange context in which they are subsequently deployed, while minimizing the confounding influence any private individual interests have on the choice of exchange partners. Our empirical analysis suggests that, even for commodity parts, prior repeated exchange between firms constitutes a valuable relational asset. We also find evidence that suggests that both social mechanisms and incentive considerations underpin the value of relational capital. Further, we find that relational capital exhibits more value when exchange hazards are greater.
Our aim is to unpack contract design capabilities for detailed commercial contracts, to draw out implications for the locus of such capabilities within the firm, and to examine implications for exploiting those capabilities as a potential source of com- petitive advantage. We argue that developing contract design capabilities involves learning how much and what kinds of detail to include in a contract. We further argue that knowledge about the management of these trade-offs resides differentially in managers, engineers, and lawyers regarding different types of contractual provisions.
Purpose – In successful purchasing relationships, effective communication is a key factor. The purpose of this paper is to explore whether the choice of communication media is affected by different stages in the relationship development process and by different purchasing contexts: product and service purchasing. Design/methodology/approach – The study initially reviews the literature on inter-organizational communication and purchasing relationships. In order to explore the research question, data were gathered through semi-structured in-depth interviews with purchasing managers, buyers and their suppliers in three product and three service purchasing relationships. Findings – The study identifies a relationship development framework that influences the communication media selection in two purchasing contexts. It confirms that communication media selection is affected by the communication needs of the participants, the stage of relationship development, and the purchasing context. Research limitations/implications – This research was limited to six buyer/supplier relationships involving a single multinational buyer organization, so although a range of purchasing contexts was considered, the findings have limited application. The relationship development process and the incidence of media selection should be further examined in varied contexts and a survey of buyers and suppliers should test the framework. Originality/value – This study is a refinement of the existing predominantly single-respondent, survey-based studies in the literature in that both parties in a series of purchasing dyads were interviewed. The paper makes a contribution as it illustrates the application of the media richness theory, explores the contextual factors surrounding media selection and provides a buyer-supplier relationship development framework based on behavioural and functional aspects of the relationship.
This paper combines institutional economics with aspects of contract law and organization theory to identify and explicate the key differences that distinguish three generic forms of economic organization-market, hybrid, and hierarchy. The analysis shows that the three generic forms are distinguished by different coordinating and control mechanisms and by different abilities to adapt to disturbances. Also, each generic form is supported and defined by a distinctive type of contract law. The cost-effective choice of organization form is shown to vary systematically with the attributes of transactions. The paper unifies two hitherto disjunct areas of institutional economics-the institutional environment and the institutions of governance-by treating the institutional environment as a locus of parameters, changes in which parameters bring about shifts in the comparative costs of governance. Changes in property rights, contract law, reputation effects, and uncertainty are investigated.
Given assumptions about the characteristics of knowledge and the knowledge requirements of production, the firm is conceptualized as an institution for integrating knowledge. The primary contribution of the paper is in exploring the coordination mechanisms through which firms integrate the specialist knowledge of their members. In contrast to earlier literature, knowledge is viewed as residing within the individual, and the primary role of the organization is knowledge application rather than knowledge creation. The resulting theory has implications for the basis of organizational capability, the principles of organization design (in particular, the analysis of hierarchy and the distribution of decision-making authority), and the determinants of the horizontal and vertical boundaries of the firm. More generally, the knowledge-based approach sheds new light upon current organizational innovations and trends and has far-reaching implications for management practice.
Theories on the motivation underlying firm boundaries have recently sparked renewed debate. What best explains whether a firm relies on market control or hierarchical control to secure required resources? How do the characteristics of the resources come into play? In this study, we consider a comprehensive path model of the governance mode decision for sourcing tech-nological know-how. By integrating different perspectives on firm boundaries, including transaction cost economics, a resource-based view, and an options perspective, we link characteristics of the technology (i.e., uniqueness, barriers to imitation, com-mercial uncertainty, technological dynamism) to the perceived threat of opportunism, the potential for sustainable advantage, and the pursuit of a licensing agreement vis-à-vis the outright acquisition of the firm that possesses the desired know-how. We use structural equation modeling to analyze 127 sourcing arrangements. Our results show that technological dynamism and barriers to imitation indirectly influence the governance mode decision by increasing the perceived threat of opportun-ism. Commercial uncertainty directly influences the governance mode and decreases the likelihood of an acquisition vis-à-vis a licensing agreement. Although uniqueness and barriers to imi-tation are also positively associated with the perceived potential for sustainable advantage, the potential for sustainable advan-tage had no direct effect on governance mode. Implications and suggestions for further research are offered.
This paper develops a theory that predicts why firms organize their knowledge workers as employees versus independent contractors and predicts the performance implications of this choice. It then empirically examines this organizational choice--which our theory predicts will be driven by contracting difficulties arising from expropriation concerns, measurement costs, and interdependence--and its implications for profitability for 190 information technology service projects. Using a two-stage switching regression model, our analysis shows that projects aligned according to our theory are on average more profitable than misaligned projects and that firm capability impacts organizational choice but not profitability.
We examine how firms use the experiential learning of certain supply-side agents - technology solution providers - to overcome technological, organizational, and market-related knowledge hurdles to adopting innovations. Studying the electronic banking innovations of 4,293 credit unions that had relationships with 55 such providers during 2000-04, we found that their technical experiential diversity positively influences client innovation adoption, although benefits taper off at high levels of diversity. A provider's organizational experiential diversity, however, exhibits a U-shaped relationship with client innovation adoption. Also, the conditioning effect of a client firm's marketing intensity on the diversity-innovation link varies with the type of technology solution provider experience.
How should we understand why firms exist? A prevailing view has been that they serve to keep in check the transaction costs arising from the self-interested motivations of individuals. We develop in this article the argument that what firms do better than markets is the sharing and transfer of the knowledge of individuals and groups within an organization. This knowledge consists of information (e.g., who knows what) and of know-how (e.g., how to organize a research team). What is central to our argument is that knowledge is held by individuals, but is also expressed in regularities by which members cooperate in a social community (i.e., group, organization, or network). If knowledge is only held at the individual level, then firms could change simply by employee turnover. Because we know that hiring new workers is not equivalent to changing the skills of a firm, an analysis of what firms can do must understand knowledge as embedded in the organizing principles by which people cooperate within organizations.
Based on this discussion, a paradox is identified: efforts by a firm to grow by the replication of its technology enhances the potential for imitation. By considering how firms can deter imitation by innovation, we develop a more dynamic view of how firms create new knowledge. We build up this dynamic perspective by suggesting that firms learn new skills by recombining their current capabilities. Because new ways of cooperating cannot be easily acquired, growth occurs by building on the social relationships that currently exist in a firm. What a firm has done before tends to predict what it can do in the future. In this sense, the cumulative knowledge of the firm provides options to expand in new but uncertain markets in the future.
We discuss at length the example of the make/buy decision and propose several testable hypotheses regarding the boundaries of the firm, without appealing to the notion of “opportunism.”
We develop in this paper a knowledge-based theory of the firm. While existing knowledge-based theory focuses on the efficiency of hierarchy in economizing on knowledge exchange, we develop a theory of the firm which focuses on the efficiency of alternative organizational forms in generating knowledge or capability. Our theory begins with the problem as the basic unit of analysis, arguing that a problem's complexity influences the optimal method of solution search and the optimal means of organizing that search. The distinguishing feature that differentiates among organizational alternatives is the different way in which each resolves conflict over the selection of solution trials, i.e., the way it chooses the path of search. Our theory predicts that efficiency demands these governance alternatives be matched in a discriminating way to problems based on their associated benefits and costs in governing solution search. In doing so, our theory is among the first to treat simultaneously both the boundary choice (i.e., internal vs. external) and the choice among alternative internal approaches to organizing.
The proximity concept is used in many different ways in the literature. These dimensions of proximity are, however, defined and measured in many different (sometimes even contradictory) ways, show large amounts of overlap, and often are under- or over-specified. The goal of this paper is to specify the different dimensions of proximity relevant in inter-organizational collaboration more precisely and to provide definitions of these dimensions. The research presented contributes to reducing the ambiguity of the proximity concept as used in the literature.
Based on the above, the following research question is addressed in this paper: ‘Which dimensions of proximity are relevant in inter-organizational collaboration and how are they defined?’ A systematic literature review is presented in order to disentangle the dimensions of the proximity concept. Based on this literature review, three dimensions of proximity relevant in inter-organizational collaboration are distinguished: geographical proximity, organizational proximity and technological proximity. Examples (case studies) from the literature are used to illustrate the current conceptual ambiguity as well as to clarify how the proposed dimensions of proximity reduce this conceptual ambiguity.
One of the main reasons that firms participate in alliances is to learn know‐how and capabilities from their alliance partners. At the same time firms want to protect themselves from the opportunistic behavior of their partner to retain their own core proprietary assets. Most research has generally viewed the achievement of these objectives as mutually exclusive. In contrast, we provide empirical evidence using large‐sample survey data to show that when firms build relational capital in conjunction with an integrative approach to managing conflict, they are able to achieve both objectives simultaneously. Relational capital based on mutual trust and interaction at the individual level between alliance partners creates a basis for learning and know‐how transfer across the exchange interface. At the same time, it curbs opportunistic behavior of alliance partners, thus preventing the leakage of critical know‐how between them. Copyright © 2000 John Wiley & Sons, Ltd.
This study uses a causal modelling methodology to examine competing methodological and theoretical hypotheses concerning the effects of product quality on direct costs and business unit return on investment (ROI). Results show that the PIMS’ measures under study exhibit high reliability across all samples. The findings fail to support the widely held view that a high relative quality position is incompatible with achieving a low relative cost position in an industry.
Global Software Engineering requires supporting distributed collaboration for the majority of software development activities. However, geographic distance challenges effective collaboration. Nowadays, we witness significant advances in communication and collaboration technologies. We, thus, explore whether these advances enable effective remote collaboration. To this end, we studied the design activities of both co-located and distributed professional software designers. Based on our observations, we report findings based on analysis of video recordings of design sessions and questionnaires. Ultimately, we found that despite comprehensive technological improvements, distance still matters. We suggest that extra (non-technical) details have to be considered in order to ensure effective distributed software design.
In spite of the increasing demand for virtual cooperation, still relatively little is known about the knowledge, skills, abilities, and other characteristics (KSAOs) individuals need for virtual teamwork. Thus, the current paper aims at synthesizing the existing literature into a comprehensive model of virtual teamwork KSAOs. To this end, we review (a) existing frameworks of KSAO requirements for virtual teamwork, (b) challenges posed by different facets of virtuality, and (c) KSAOs particularly relevant for meeting the identified challenges. The results of this review are integrated into a holistic model of virtual teamwork KSAOs with distal characteristics (personality, experience) and more proximal qualities (knowledge, skills, and motivation). Research gaps as well as avenues for future research will be outlined and applications for virtual team staffing and training will be discussed.
This study seeks evidence for a positive moderating role of relationship learning in the relation between manufacturing firms' knowledge-intensive business services (KIBS), i.e., product-related services for developing customized solutions, and firms' customer-specific sales performance. Our findings from a survey of 91 supplier–customer relationships indicate that KIBS offerings do not generate performance per se; instead, supplier–customer relationships must be characterized by relationship learning to co-create value from the supplier's KIBS offerings. Our findings extend the literature on industrial service businesses by shedding a more nuanced light on the core activities that enable value co-creation and value appropriation in the KIBS context.
Participants in research and development alliances face a difficult challenge: how to maintain sufficiently open knowledge exchange to achieve alliance objectives while controlling knowledge flows to avoid unintended leakage of valuable technology. Prior research suggests that choosing an appropriate organizational form or governance structure is an important mechanism in achieving a balance between these potentially competing concerns. This does not exhaust the set of possible mechanisms available to alliance partners, however. h? this paper we explore an alternative response to hazards of R&D cooperation: reduction of the 'scope' of the alliance. We argue that when partner firms are direct competitors in end product or strategic resource markets even 'protective' governance structures such as equity joint ventures may provide insufficient protection to induce extensive knowledge sharing among alliance participants. Rather than abandoning potential gains from cooperation altogether in these circumstances, partners choose to limit the scope of alliance activities to those that can be successfully completed with limited (and carefully regulated) knowledge sharing. Our arguments are supported by empirical analysis of a sample of international R&D alliances involving electronics and telecommunications equipment companies. Copyright (C) 2004 John Wiley Sons, Ltd.
Recent scholarship on entrepreneurship suggests that the pre-entry know-how of start-ups, embodied in their founders, affects not only entry, but also performance. Although prior work focuses on new entrants from the focal industry (i.e., employee spinouts) and academic organizations (i.e., university spinoffs), this study identifies and examines a hybrid category of start-ups from downstream user-industries, which we call "user-industry spinouts." We draw from the literature on evolutionary theory, user innovation, and industrial dynamics to propose that, given the unique combination of knowledge inherited by these entrants, their choices at entry and their ability to survive in the focal industry will differ with respect to other start-ups. We do this by extending existing work on new firm creation to investigate entry and performance in different product markets. Our findings, based on a dataset of start-ups in the semiconductor industry over a 10-year period (1997-2007), show that user-industry spinouts are more likely both to enter and to survive in market-specific product categories. We suggest that the pre-entry knowledge resources of spinouts may support entry and survival across industry boundaries. However, the specific nature of these resources will influence which product markets they choose to enter. Our results have theoretical implications for the literatures on entrepreneurship, industrial dynamics, and strategy.
Interfirm cooperation and its performance implications are examined in the context of two widely cited theoretical approaches to organizations. Broadly speaking, the resource-based view suggests that firms seek to capitalize on and increase their capabilities and endowments, whereas organizational economics asserts that firms focus on minimizing the costs of organizing. Although these perspectives agree on managers' likely actions in many areas, their predictions diverge when interfirm cooperation is considered. We take a step toward reconciling these differences by positing that firms place resource-based concerns in front of considerations from organizational economics when deciding whether or not to engage in interfirm cooperation. We examined this prediction using data from 94 publicly held restaurant chains. The results support our integrated view, but also suggest that giving primacy to resource concerns detracts from the performance of some firms. We derive several implications of these findings in an effort to guide subsequent inquiry.
The role and responsibilities of the salesperson continually evolve as firms react to competitive pressures. This paper suggests that in some instances the salesperson will vanish as the contact person for firms engaged in deep relationships. Deep relationships involve the selling firm placing staff on the buying firm's floor space to coordinate acquisition of the product that the buyer needs. The tasks of selling, communication and coordination will remain but be carried out by operational-level people in the selling organization. The forces behind these changes and examples of how these deep relationships operate are described. Implications for the sales organization involve refocusing salespeople on transactional accounts while creating deep relationships with other accounts.
We examine transaction governance in the context of concurrent sourcing, where a manufacturer relies on sourcing from external suppliers and in-house production simultaneously. Our focus is on (1) a buyer's use of particular safeguards or governance mechanisms vis-à-vis an external supplier and (2) how the effects of these mechanisms on various performance outcomes are influenced by the joint presence of an internal manufacturing branch. We conduct two studies in the apparel industry and show that performance outcomes are a joint function of (1) the individual governance mechanisms that are deployed in a particular relationship and (2) the larger sourcing context (concurrent or singular). Copyright © 2013 John Wiley & Sons, Ltd.
Customer co-creation during the innovation process has recently been suggested to be a major source for firms’ competitive advantage. Hereby, customers actively engage in a firm’s innovation process and take over innovation activities traditionally performed by a firm’s employees. Despite its suggested importance, previous research has revealed contradictory findings regarding its impact, the nature of involved customers, and the channels of communication that enable co-creation. To provide a more fine-grained picture, customer co-created knowledge is first delineated into its key value dimensions of relevance, novelty, and costs, and then their impact on various innovation outcomes is investigated. Next, the study examines the antecedent role of customer determinants, i.e. lead user characteristics and customer-firm closeness, on these knowledge value dimensions. Finally, it is explored how these effects are moderated by the type of communication channel used. An empirical validation of the conceptual model is performed by means of survey data from 126 customer co-creation projects. The data analysis indicates that customer co-creation is most successful for the creation of highly relevant but moderately novel knowledge. Co-creation with customers who are closely related to the innovating firm results in more highly relevant knowledge at a low cost. Yet, co-creation with lead users produces novel and relevant knowledge. These effects are contingent on the richness and reach of the communication channels enabling co-creation. Overall, the findings shed light on opportunities and limitations of customer co-creation for innovation and reconcile determinants originating in relationship marketing and innovation management. At the same time, managers obtain recommendations for selecting customers and communication channels to enhance the success of their customer co-creation initiatives.
Investigating spillovers (potential costs and benefits to a firm that extend beyond an individual transaction), I integrate transaction cost theory and the knowledge-based view of the firm in an effort to better understand the efficient governance of knowledge. Contracts with detailed task descriptions were associated with transactions with the potential to generate new and reusable knowledge. The risk of a firm's technology spilling over to others and the risk of reputation-impairing spillovers were associated with suppliers using their own employees rather than subcontractors. Thus, results suggest that the creation and protection of knowledge are key factors in understanding governance decisions. As more complex and core activities are being outsourced, deciding how to govern relationships with customers and suppliers has become more strategically important. Firm-level capabilities (Ar- gyres, 1996; Demsetz, 1991; Kogut & Zander, 1992) and contracting hazards arising from a transaction (Williamson, 1985) influence how that transaction will be governed, but so can factors related to knowledge and past governance choices (Argyres & Liebeskind, 1999). The purpose of this study was to integrate transaction cost theory and the knowl- edge-based view of the firm to explore how firms govern transactions that involve spillovers, which I
A common characteristic of knowledge-intensive business service (KIBS) firms is that clients routinely play a critical role in co-producing the service solution along with the service provider. This can have a profound effect on both the quality of the service delivered as well as the client's ultimate satisfaction with the knowledge-based service solution. Based on research conducted with an IT consulting firm and work done with other knowledge-intensive business service providers, this article describes clients' key role responsibilities that are essential for effective client co-production in KIBS partnerships. It then presents strategies that service providers can use to manage clients so they perform their roles effectively. By strategically managing client co-production, service providers can improve operational efficiency, develop more optimal solutions, and generate a sustainable competitive advantage.
This study focuses on make-or-buy decisions as a paradigmatic problem for analyzing transaction costs. Hypotheses developed from Williamson's efficient boundaries framework were tested in a multiple-indicator structural equation model. The influence of transaction costs on decisions to make or buy components was assessed indirectly through the effects of supplier market competition and two types of uncertainty, volume and technological. In addition to transaction costs, the decisions were hypothesized to be predicted by both buyer production experience and the comparative production costs between buyer and supplier. The hypotheses were tested on a sample of make-or-buy decisions made in a division of a U.S. automobile company. The results show that comparative production costs are the strongest predictor of make-or-buy decisions and that both volume uncertainty and supplier market competition have small but significant effects. The findings are explained in terms of the complexity of the components and the potential pattern of communication and influence among managers responsible for making the decisions.
Knowledge issues are central to governance choice. Organization structure influences knowledge flows and costs of knowledge creation and exchange inside the firm. Yet the question of how a firm's internal structure affects its governance choice for new activities has received scant empirical attention. We examine the role of internal structure, specifically unit autonomy and lateral coordination, in a firm's governance decision for new, knowledge-intensive activities. The findings show that internal structure is a ‘shift parameter’ that affects governance choice by moderating the relationship between task complexity and degree of integration. The empirical setting is the U.S. banking industry and its adoption of Internet banking. Copyright © 2013 John Wiley & Sons, Ltd.
As outsourcing evolves into a competitive necessity, managers must increasingly contend with the decision about which software development projects to outsource. Although a variety of theories have been invoked to study the initial outsourcing decision, much of this work has relied in isolation on one theoretical perspective. Therefore, the relative importance ascribed by managers to the factors from these theories is poorly understood. The majority of this work also masks interesting insights into outsourcing decisions by focusing on the information technology (IT) function rather than individual projects as the unit of analysis, where many of these decisions occur. In contrast, prior research at the project level has focused on predicting development performance in the postoutsourcing-decision phases of projects.
The objective of this study is to examine the relative importance that IT managers ascribe to various factors from three complementary theories—transaction cost economics, agency theory, and knowledge-based theory—as they simultaneously consider them in their project outsourcing decisions. A secondary objective is to assess the cross-cultural robustness (United States versus Japan in this study) of such models in predicting project-level IT outsourcing decisions. We develop and test a multitheoretic model using data on 1,008 project-level decisions collected from 33 Japanese and 55 U.S. managers. Overall, our results provide novel insights into the relative importance that managers ascribe to the factors from these three theories, their complementarities and occasional contradictions, and offer new insights into the differences among U.S. and Japanese IT managers. Implications for theory and practice are also discussed.
This study examines why firms choose different governance structures across their alliances. We focus on the coordination costs in alliances that arise from interdependence of tasks across organizational boundaries and the related complexity of ongoing activities to be completed jointly or individually. We use a typology of alliance governance structures that differentiates structures by the magnitude of hierarchical controls to test hypotheses predicting alternative contractual choices. We use empirical data on alliance announcements in three worldwide industries over a 20-year period to assess which factors explain the choice of alliance types. The findings suggest that the magnitude of hierarchical controls in contractual relationships such as alliances is influenced by the anticipated coordination costs and by expected appropriation concerns.(. )
Looks at new communications technologies, such as videoconferencing systems, which have enabled the creation of “virtual organizations” and “virtual teams”. Investigates the hypotheses that both “social presence” and “media richness” associated with a communication medium used to support geographically-dispersed software development teams, will have a significant impact on team productivity, perceived interaction quality, and group process satisfaction. Results supported the predicted superiority of the face-to-face setting over the videoconferencing setting with regard to team productivity. They also indicated that a communication medium characterized as high in both “media richness” and “social presence” can engender a greater sense of interaction quality. There were no significant differences between the face-to-face and videoconferencing settings for group process satisfaction.
Various researchers have suggested that an important explanatory factor for the growth in strategic alliances is that alliances provide a platform for organizational learning, giving firms access to the knowledge of their partners. The notion that alliances are a vehicle for learning is the basis for an important and cross-disciplinary stream of research. This chapter examines theoretical and empirical research in the alliance learning area. We have two central objectives. The first is to integrate a large body of research by examining the key research questions addressed. The second objective is to critically examine the existing research as the basis for establishing a research agenda. Although the alliance learning area has generated a substantial amount of research interest and spawned wide-ranging types of inquiry, many important and substantive managerial issues remain underexplored.
This paper seeks to identify the sources of wide and persistent variations in learning performance in the semiconductor manufacturing industry. In the resource-based view of the firm, human capital is frequently assumed to contribute to competitive advantage due to its inimitability based on its intangible, firm-specific, and socially complex nature. Consistent with this view, we find that investments in firm-specific human capital have a significant impact on learning and firm performance. More specifically, human capital selection (education requirements and screening), development through training, and deployment significantly improve learning by doing, which in turn improves performance. However, we find that acquiring human capital with prior industry experience from external sources significantly reduces learning performance. We also find that firms with high turnover significantly underperform their rivals, revealing the time-compression diseconomies that protect firm-specific human capital from imitation. These results provide new empirical evidence of the inimitability of human capital. Copyright © 2004 John Wiley & Sons, Ltd.
This article examines interorganizational strategies from a transactional value, rather than transaction cost, perspective. It argues that the transaction cost perspective has at least two major limitations when used to analyse interorganizational strategies: (1) a single-party, cost minimization emphasis that neglects the interdependence between exchange partners in the pursuit of joint value, and (2) an over-emphasis on the structural features of interorganizational exchange that neglects important process issues. We propose instead a transactional value framework for analysing interorganizational strategies that addresses (1) joint value maximization, and (2) the processes by which exchange partners create and claim value. We discusses the implications of the present approach for the study of interorganizational strategies and for the transaction cost perspective itself.
Interorganizational relationships (IORs) encompass a broad array of collaborative exchanges, including strategic alliances, joint ventures, buyer-supplier agreements, licensing, co-branding, franchising, cross-sector partnerships, networks, trade associations, and consortia. Scholarly work in this area typically focuses on particular forms, which has made it difficult to build a holistic understanding of why organizations engage in these relationships. This paper summarizes the IOR literature by conducting a meta-review, a review of the reviews that have covered various IOR forms and theories. Through this approach, we highlight similarities and differences among forms and acknowledge perspectives grounded in organizational economics and organization theory. In line with March’s (1991) seminal framework, we identify two pure forms of interorganizational relationships, co-exploration and co-exploitation. Explicating these pure forms enables us to integrate different theories and reconcile the empirical reality that IORs, like firms, combine exploration and exploitation. We conclude by suggesting directions for future work, highlighting areas rich in potential.
In this study, we extend the analysis of adaptation in theories of economic organization beyond traditional considerations of incentive conflict (hold-up). We conceptualize adaptation as coordinated and cooperative response to change, and define the adaptive capacity of a vertical relationship as the ability to generate coordinated and cooperative responses across procurer and supplier to changes in procurement conditions. We draw on the concepts of differentiation and integration to dimensionalize the adaptive capacity of different modes of procurement. Using data on all component classes procured internally and externally by Ford and Chrysler, we show that different procurement modes differ in terms of their adaptive capacity and performance. We also show that performance differences across modes of procurement arise as a function of the match between adaptive capacity and adaptation requirements associated with the exchange, and not only the match between governance form and transaction hazards. Copyright © 2005 John Wiley & Sons, Ltd.
Two economic theories that have had an immense impact on modern strategic management research are Porter's strategic positioning framework (SPF) and Williamson's transaction cost economics (TCE). While both theories have contributed to our understanding of strategic management and to the choice of strategy and structure, each theory offers managerial prescriptions that are incomplete at best. We contend that if followed in isolation, each theory can lead to inferior performance. This paper, which studies the international courier and small package (IC&SP) services in Japan, improves upon prescriptions from both theories by linking Porter's and Williamson's approaches. Our main proposition is contained in three relationships that predict a fit among three strategic choices: market position, resource profile, and organizational structure. We test our predictions with a three-stage, reduced-form, endogenous self-selection model. While our empirical methodology is complicated and relies on a multilevel analysis, the methodology is necessary both for analyzing a constellation of activities in the vertical chain and for assessing strategy, structure, and performance when data can be drawn from only a limited number of firms. Our results suggest that a firm's market position, resource profile, and organizational choice are related in ways predicted by a positioning-economizing perspective. To be sure, our study is ambitious and suffers from a number of limitations; nevertheless, it provides one of the first attempts to theoretically and empirically link Porter's SPF and Williamson's TCE. Copyright © 2001 John Wiley & Sons, Ltd.
This paper proposes that transaction costs and capabilities are fundamentally intertwined in the determination of vertical scope, and identifies the key mechanisms of their co-evolution. Specifically, we argue that capability differences are a necessary condition for vertical specialization; and that transaction cost reductions only lead to specialization when capabilities along the value chain are heterogeneous. Furthermore, we argue that there are four evolutionary mechanisms that shape vertical scope over time. First, the selection process, itself driven by capability differences, dynamically shapes vertical scope; second, transaction costs are endogenously changed by firms that try to reshape the transactional environment to increase their profit and market share; third, changes in vertical scope affect the nature of the capability development process, i.e., the way in which firms improve their operations over time; and finally, the changes in the capability development process reshape the capability pool in the industry, changing the roster of qualified participants. These dynamics of capability and transaction cost co-evolution are illustrated through two contrasting examples: the mortgage banking industry in the United States, which shows the shift from integrated to disintegrated production; and the Swiss watch-manufacturing industry, which went from disintegration to integration. Copyright © 2005 John Wiley & Sons, Ltd.
Transaction cost economics, neoclassical economics, and the firm capabilities literatures propose theories of the firm that typically depict firm boundaries determined by a dichotomous choice: the make or buy decision. However, none of these theories presents a satisfying explanation as to why firms would concurrently source, i.e., simultaneously make and buy the same good. This study combines these organizational economics theories and compares when firms make, buy, and concurrently source through surveying small manufacturing firms. Support was shown for aspects of all three theories, with evidence indicating that concurrent sourcing is a distinctly different choice, rather existing along a make/buy continuum. Copyright © 2007 John Wiley & Sons, Ltd.