Introduction

• Amorphous forms of collaboration:

  • Strategic alliances, strategic partnerships, consortia, embedded relationships, JIT II

  • Don’t have much legal structure

  • Growing segment of the world economy

  • Considered a prime vehicle for growth

  • New economy didn’t give birth to these hybrid forms

    • It allowed them to be used

    • ‘the ability to attract partners and manage alliances… is the new core competency of the networked age’ (Schifrin 2001)

  • Rational capital = the organizational capability of firms to interact with suppliers in a partnership arrangement (Lorenzoni and Lipparini 1999)

  • The new economy has allowed competitive advantage to be created from these collaborations

• Management has generally kept up with the new styles of organization, but accounting generally hasn’t

  • Hard to ‘measure financial performance from the outside’

  • Hopwood and Bromwich argue that there is a case also for new management accounting

• Intuition says new management accounting modes accompany the emergence of hybrid organizational forms

• Highly failure rate of these hybrid firms

  • High level of organizational trust required (Lewis 1999, Ring and Van de Ven 1992)

• The multi-level nature of alliance networks leads to demands for management accounting and performance management

The New Economy and the Extended Enterprise: Evidence on Strategic Alliances and Joint Ventures, 1985-2000

• US census data shows that between 1992 and 1997, strategic alliances out grew establishment of new firms

• May be even higher due to the non-legal framework of more hybrid alliances

• Has affected different industries more substantially

  • Services industry collaborations are growing

    • Propensity for services firms to employ collaboration strategies during the 1990s

  • Manufacturing industry collaborations are declining

• Cross-border partnerships are increasing

  • Free trade and deregulation has allowed this

• Traditionally, collaboration was a means of transferring knowledge

  • More recently, collaboration is being used to develop new technologies

    • i.e. collaboration between competitors

      • E.g. Microsoft and Nokia (2011)

• Shift towards networks of collaborators rather than between two partners

  • E.g. Microsoft Windows Phone alliances between Microsoft, Acer, Nokia, Samsung et al.

• (Porter 1980) argued for joint ventures as a means of entering international markets

  • Local expertise and political influence can help bridge cultural divides

  • Some governments prohibit foreign entry without a local partner

• Empirical evidence suggests several important features of collaborations that have emerged in the new economy:

  • The magnitude of collaborative activity has increased

  • The mechanisms of collaboration have changed

  • The participants in collaborations have changed

  • The motivation for collaboration has changed

  • The substance of collaborative activity has changed

Markets, Hybrids, and Hierarchies: Theories of firm boundaries and alliance formation

• Governance structure, rather than a production function defines a firm (Williamson 1985)

• Why do firms rely on both arm’s length transactions and vertical integration to obtain/produce inputs?

Transaction cost theory

• Transaction cost theory states that firms choose a organizational structure that minimizes the sum of production and transaction costs (Coase 1937)

  • Transaction costs include negotiation costs and enforcement and resolution of disputes

  • May turn to markets when there are high sunk costs involved in production (Klein 1988)

• Firm boundaries reflect strategic choices about the use of scarce, inimitable resources to achieve a sustainable competitive advantage (Prahalad and Hamel 1989, 1990)

• Anderson and Sedatole suggest that hybrid forms are a transitional step towards hierarchies

  • ‘Transitional devices rather than stable entities’ (Porter 1990)

  • Some conclude otherwise based on the longevity and huge growth in hybrid collaborations (Williamson 1985, 1991; Menard 1995)

• Firms are more likely to form equity alliances when appropriation hazards are high (Oxley 1997, 1999)

  • So-called institutional factors

• Firms choose vertical integration over alliances when exogenous shocks are likely (Williamson 1991)

Resource-based view

• Source of sustainable competitive advantage (Doz and Hamel 1998)

• Followers of this view include Gulati and Singh (1998), Lorenzoni and Lipparini (1999), Menard (1995), Williamson (1991)

Comparison of the 2 theories

• Evidence supports both (Kale et al. 2000; Tsang 2000)

• Evidence of conflict between the two theories

  • Transaction cost theory says that uncertainty induces firms to become more vertically integrated

    • But Lorenzoni and Lipparini (1999) find...

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