Cooperative Strategy: Economic, Business, and Organizational Issues. . - Other Reviews - book review

Administrative Science Quarterly, March, 2002 by Gautham Ahuja

David Faulkner and Mark de Rond, eds. New York: Oxford University Press, 2000. 397 pp. $74.00.

This edited volume brings together original contributions from several leading scholars of interorganizational cooperation. The chapters are an eclectic mix of conceptual and empirical pieces that examine interorganizational cooperation from several different perspectives (e.g., transaction costs, game theory) and different research approaches (survey methods, archival research, case studies). The book is also broad, in that it examines various facets of cooperation and both content and process issues. It is divided into five parts. Part 1 presents an overview of interorganizational cooperation, part 2 examines the rationale for cooperation, part 3 focuses on the process elements of cooperation, part 4 deals with the human aspects of cooperation, and part 5 presents some potential future directions for research.

The first chapter is an overview by Faulkner and de Rond of the major perspectives that have been used to explain collaboration between business firms, as well as those that have informed our understanding of the process of cooperation. The authors examine the rationale for cooperation through both economic and organizational theories. The economic perspectives include market power theory, transaction cost theory, the resource-based view, agency theory, game theory, and real options theory. The organizational theory arguments for cooperation include resource dependence theory, organizational learning, social network theory, the ecosystems view, and structurationist perspectives. The breadth of coverage and the inclusion of perspectives that are not as commonly used (such as real options theory, the ecosystems view, and structurationist perspectives) make this chapter a must-read for both introductory and advanced readers in the area. The second chapter presents an empirical study of interorganizational cooper ation. Glaister, Husan, and Buckley use data on international joint ventures between U.K. firms and their Triad and non-Triad partners to assess patterns of cooperative activity in the developed world over the 1990-1996 period. Because research on joint ventures has often focused on samples of U.S. firms, this chapter on U.K. firms is useful in providing a relatively novel empirical context and in drawing attention to the possibility of future comparative research. Indeed, some comparison in this chapter of how the patterns of joint venture formation in the United Kingdom differed from or were similar to those observed in other geographic areas would have been useful in increasing our confidence or raising questions about the generalizability of existing findings, but the authors leave this task for subsequent research.

Part 2 presents five different perspectives on why firms collaborate, sometimes even with their direct competitors. In chapter 3, Rugman and D'Cruz present a synopsis of their theory of the flagship firm, relating the problem of cooperation to the general theory of foreign direct investment. They propose that joint ventures and collaborative relationships are a form of de-internalization and can be understood best as part of a bigger collaborative business system in which a flagship firm develops and provides leadership to a business network consisting of its key suppliers, customers, and competitors and the non-business and government infrastructure. Their five-collaborative-relationships model, as a contrast to Porter's Five Forces model focusing on competitive behavior, presents an interesting perspective on collaboration and merits attention. It also presents some insights into both why vertical integration may be preferred by firms in certain circumstances and when it might fail. In the next two chapters , Madhok (chap. 4) and Tallman (chap. 5) present two very interesting and insightful, but distinct, integrations of resource-based and transaction-costs perspectives in the context of collaboration. Madhok's treatment of opportunism as a variable whose level is, to some extent, determined by managers, rather than being a structural constraint, raises an interesting set of possibilities that he subsequently analyzes. Most notably, he suggests that recognizing both transactional (i.e., the cost side) and value (i.e., the rent-earning side) efficiency aspects of interfirm exchange is critical to successful collaboration. Tallman delves into the problem of why collaborative ventures (or shared organization ventures, as he calls them) fail so frequently. An in-depth analysis of the governance costs of hybrid organizational arrangements forms the centerpiece of his model explaining the formation, governance, and instability of joint ventures.

In the last two chapters in part 2, Nti and Kumar (chap. 6) and Loveridge (chap. 7) add further variety (and insight) by presenting analyses of collaboration based on game theory and network traditions, respectively. Nti and Kumar develop a formal model to identify the implications of differences in learning rates between firms entering a joint venture. The propositions that result from this model have implications for several aspects of the cooperation process, including partner selection, design of sharing rules, and the management of learning in strategic alliances. Loveridge's analysis focuses on the firm as a node in a complex series of interorganizational networks characterized by three distinct sets of flows (Gupta and Govindarajan, 1991): capital flows, knowledge flows, and product flows, each with a distinct logic of action. Although these last two chapters are extremely different in their modes of argument, each makes important contributions to our understanding of the phenomenon and thereby undersc ores the importance and benefits of an eclectic approach.