Theoretical perspectives
24 important questions on Theoretical perspectives
What do network resources do?
Explain Element 1 of TCE: Transactions andtransactioncosts
- Transaction = transferral of property right (≠ logistics!)
- Transaction costs = The costs incurred by the determination, transfer, and enforcement of property rights, i.e. during the initiation and execution stages of transactions.
-Initiation costs (e.g. search & information) (ex-ante)
-Negotiation & contractingcosts (ex ante)
-Control costs (e.g. monitoring & evaluation) (ex-post TC)
-Enforcementcosts (ex-post TC)
--> Goal: Minimizing transaction costs! (byselectingthe ideal form oforganization)
Explain Element 2 of TCE: Organizational forms
- Two basic and dichotomous forms of organizing economic activities: markets and hierarchies (i.e., firms)
- Tasks that involve uncertainty, high transaction-specific investments and that occur frequently are more likely to take place within hierarchically organized firms
- Exchanges that are straightforward, non-repetitive, and do not require transaction-specific investments will take place in markets
- As a response to blurring of organizational boundaries: alliances were considered as a “hybrid” form (Williamson 1991).
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What are the transactionalcostadvantagesofstrategicalliances (vis-à-vis markets)?
›Decreased search costs
›Decreased initiation and control costs with regard to contract negotiations and monitoring contractual compliance
›Superior flow of information (e.g. transfer of tacit knowledge)
›Transfer and exchange of sensitive information because of improved control possibilities over its actual utilization
›Quasi-internalization of transaction-specific investments
What are transactionalcostadvantagesofstrategicalliances (vis-à-vis hierarchies)?
›Targeted and specific cooperation
›Easier reversibility options of decision to cooperate
›Organizational rigidity easier to overcome through adaption to environmental changes
What is the value of TCE for explaining ISA (pro's and cons)
•Explains why certain types of transactions should be organized in certain organizational arrangements
•But:
•Under-theorizes production costs and returns
•Exaggerates market failure, neglects problems of hierarchies
•Exaggerates decision-making rationality and opportunism
•Neglects how cooperation evolve and role of informal governance -->Also, TCE is not very instructive for understanding the management of ISA
How does TCE go together with institutional theory?
›Traditional TCE has taken theinstitutional environment as a given
›However, ‘weakinstitutional regimes’maycreateappropriability hazards in ISA as intellectual property cannotbesufficientlyprotected.
›As a result, transaction costsforspecification of contracts, monitoring partner’sbehaviorandenforcementarise.
What is the critique on TCE that Gulati voices? Gulati (1995)
interactions between partners that may alter their calculus when they are choosing contracts in alliances
When would firm enter an alliance from a TCE perspective? Gulati (1995)
- Transaction cost theorists argue that anticipated transaction costs determine the type of contract used in an alliance.
- The contract used for an alliance will be closer to either the market or the hierarchy extreme, depending on the magnitude of the transaction costs: the greater the transaction costs, the more hierarchical the contract.
- A firm would enter an alliance when the transaction costs associated with an exchange are intermediate and not high enough to justify vertical integration.
What are the main factors that cause transaction costs in strategic alliances? Gulati (1995)
- Possibility of opportunistic behavior
- Making alliance specific investments
- Uncertainty associated with the partnership
- Initiation costs – search & information
- Negotiation and contracting
- Transaction costs, which typically arise out of concerns about opportunistic behavior on the part of one or more of a set of partners, include the costs of negotiating and writing contingent contracts, monitoring contractual performance, enforcing contractual promises, and addressing breaches of contractual promises
- The possibility of opportunistic behavior by a partner generates the most salient transaction costs in the alliance context.
What is meant by a “mutual hostage” situation and how does it alleviate transaction costs? Gulati (1995)
- An equity alliance creates hostage situation by requiring ex ante commitments by the partners
- Mutual hostage: shared equity helps align the interests of all the partner; concern for their investment reduces the possibility of their behaving opportunistically over the course of the alliance
What does Gulati use as a proxy for trust in his study? Is this a good measurement? Gulati (1995)
What is the critique on the original TCE and what was developed as a reaction to this critique? Oxley (1999)
Please name and explain the different types of transaction costs.
Ex-post: Control costs (e.g. monitoring & evaluation), Enforcement costs (arises when parties don’t behave according to the rules)
What is the role of asset specificity from the perspective of the Relational View? How does this view differ from Transaction Cost Economy?
What does Lavie consider the biggest limitation of the RBV? How does he seek to overcome it? Lavie (2006)
·He assumes a weaker condition of resource accessibility, which establishes the right to utilize and employ resources to enjoy the associated benefits
Where does the ‘propriety assumption’ of the RBV originate from and why might it be outdated? Lavie (2006)
·It is outdated because it prevents an accurate evaluation of a firm’s CA. A firms CA simply does not only originate from internal resources. CA also based on the of resource endowment of the alliance partner
What is the difference between resource ownership and accessibility and how does it matter for theories on competitive advantages? Lavie (2006)
·Accessibility:the right to utilize and employ resources or enjoy their associated benefits. It is the service that resources provide, not the resources themselves that generate value for the firm. (relational perspective)
What are the two theories that the Relational View draws on? Lavie (2006)
· TCE: An effective alliance governance structure and the evolution of inter-firm routines that facilitate the sharing of knowledge and information within the boundaries of the alliance also plays a role in generation relational rents.
Why is the imperfect mobility condition also relevant for interconnected firms? Lavie (2006)
What are internal rents and how do they differ from relational rents Lavie (2006)
·Relational rents: It is not only about the intra-firm resource complementarities but also about the inter-firm resource complementarities. A firm is able to leverage the value of its own resources by accessing complementary resources of an alliance partner.
What is relative absorptive capacity and why does it matter? Lavie (2006)
What is the difference between the scale and scope resources in an alliance? Lavie (2006)
·Relative scope: the degree of the overlap of the resources. Pooling alliances: More or less the same resources. Or they are different. Why is it important? If there are the same resources not much learning is left.
·Appropriability hazard more likely when the overlap between the scope/scale is small
What is inbound spillover rent and how does it differ from relational rents? Lavie (2006)
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