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A Model of Collaborative Entrepreneurship for a More Humanistic Management

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Abstract

Inter-organizational models are both a well-documented phenomena and a well-established domain in management and business ethics. Those models rest on collaborative capabilities. However, mainstream theories and practices aimed at developing these capabilities are based on a narrow set of assumptions and ethical principles about human nature and relationships, which constrain the very development of capabilities sought by them. This article presents an Aristotelic–Thomistic approach to collaborative entrepreneurship within and across communities of firms operating in complementary markets. Adopting a scholarship of integration approach and evaluating the six studies of communities of organizations, we contribute an inter-organizational network model based on the assumptions about human motives and choice offered by Aristotle. We argue that the sustainability of inter-organizational communities depends on how rich is the set of assumptions about human nature upon which they are based. In order to develop and sustain collaborative capabilities in inter-organizational communities, a set of assumptions that takes both self-regarding and others’-regarding preferences as ends is required to avoid any kind of instrumentalization of collaboration, which is an end in itself. Implications for theory and practice are discussed.
H. Rocha & R. Miles – Forthcoming – Journal of Business Ethics
The final publication is available at Springer via:
http://dx.doi.org/ 10.1007/s10551-009-0127-8
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A Model of Collaborative Entrepreneurship for a more humanistic management
Hector O. Rocha
IAE Business School
Raymond Miles
Haas School of Business, Berkeley
ABSTRACT
Inter-organizational models are both a well-documented phenomena and a well-
established domain in management and business ethics. Those models rest on
collaborative capabilities. However, mainstream theories and practices aimed at
developing these capabilities are based on a narrow set of assumptions and ethical
principles about human nature and relationships, which constrain the very development
of capabilities sought by them. This paper presents an Aristotelic-Thomistic approach to
collaborative entrepreneurship within and across communities of firms operating in
complementary markets. Adopting a scholarship of integration approach and the
evaluation of six studies of communities of organizations, we contribute an inter-
organizational network model based on the assumptions about human motives and
choice offered by Aristotle. We argue that the sustainability of inter-organizational
communities depends on how rich is the set of assumptions about human nature upon
which they are based. In order to develop and sustain collaborative capabilities in inter-
organizational communities, a set of assumptions that takes both self-regarding and
other’ regarding preferences as ends is required in order to avoid any kind of
instrumentalization of collaboration, which is an end in itself. Implications for theory
and practice are discussed.
Key Words: collaboration, assumptions, self-interest, economics, inter-organizational
networks, innovation, entrepreneurship, Aristotle, excellence, Latin America, human
nature, human motivation, human rationality, business ethics.
H. Rocha & R. Miles – Forthcoming – Journal of Business Ethics
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What are the assumptions upon which inter-organizational models and their
outcomes are developed and sustained over time? This paper tries to answer this
question integrating philosophical principles, theoretical models, and empirical cases. In
particular, we apply an Aristotelic-Thomistic approach to collaborative entrepreneurship
within and across communities of firms operating in complementary markets, using six
studies of communities of organizations as an empirical setting.
The integration between philosophical principles and organizational models is
not new. From an inductive standpoint, the TWA study (Selznick, 1957) and empirical
research in mid 1970 shows the intuition of philosophical principles such as
organizations as institutions and the role model played by a leader in fostering values
both at the personal and organizational level. These studies have focused on developing
leadership models necessary to facilitate the development of structural and process
design (Miles, 1975) as well as the evolution of alternative strategies, structures, and
processes (Drucker, 1954; Chandler, 1962; Miles and Snow, 2003 [1978]). Also, case
studies carried out in the 1980s and 1990s show the same intuition (Ghoshal and
Bartlett, 1997; Ghoshal and Nohria, 1989; Rocha, 2008). This co-evolution of
organizational forms, organizational outcomes and managerial philosophies in the
management literature has been described in detail elsewhere (Miles and Miles, 1999;
Miles et al. 2008)1. Suffice to say that organizational outcomes were mainly achieved
by internal coordination in the early 20th century, by the meta-capability of delegation
within first divisional and then matrix structures in the latter half of the 20th century, and
by the meta-capability of collaboration, both at the intra-firm (Nahapiet et al. 2005) and
inter-organizational (Miles et al., 2000; 2005; 2008; Rocha, 2006a) levels, in the early
21st century.
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From a deductive standpoint, many business ethics studies show that
organizational models are not ethically neutral (see, for example, Waters and Bird,
1987; 1989; Jansen and Von Glinow, 1985; Schminke, 2001; Melé, 2003; 2005).
However, the integration between ethical principles and organizational models is
difficult to study given that mainstream economic and management theories deal with
implicit assumptions rather than explicit philosophical principles (Miles et al. 2006)2.
For this reason and in order to contribute to the research on the link between the
management and business ethics literature (Jensen and Von Glinow, 1985; Waters and
Bird, 1987; Schminke, 2001; Melé, 1999; Pastoriza et al., 2008; Rosanas, 2008) we use
the term assumptions rather than ethical principles for describing the criteria underlying
the proposed model and their impact on both the process and outcomes of inter-
organizational collaboration. We make explicit these assumptions and show that
assumptions on human beings underlying inter-organizational models and practices are
not ethically neutral.3
In this paper, we use an Aristotelic-Thomistic approach to make explicit the
ethical principles or assumptions underlying an inter-organizational model that foster
collaborative entrepreneurship. The Aristotelic-Thomistic approach sustains that ethics
primarily deals with the true idea of human beings, which refers to the idea of a good
man (Pieper, 1980 [1950]). For Aristotle, the basic human tendency is toward good (NE,
I, 1), and the greatest of all the goods is excellence (NE, I, 5) because it helps to develop
to their full potential what is specifically human. Happiness occurs when the human
being develops his excellences (NE, I, 13; X, 6-7).
The contribution of this approach is twofold. First, it allows both making explicit
and widening the current set of assumptions implicit in inter-organizational models.
Second, it shows that these models are not ethically neutral. In particular, we show how
H. Rocha & R. Miles – Forthcoming – Journal of Business Ethics
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the proposed collaborative entrepreneurship inter-organizational model could have
ambivalent impacts according to the assumptions upon which it is based. The proposed
model shows that richer assumptions on human motives and rationality foster human
flourishing.
This paper is structured as follows. First, it presents the philosophical-
theoretical approach for the understanding of the required assumptions on human
rationality and choice of the proposed collaborative entrepreneurship model. We show
how awareness of and behavior in accordance with these two groups of assumptions are
necessary for the sustainability of inter-organizational collaboration. Second, it
describes the six studies, which, together with the first studies on collaborative
entrepreneurship (Miles et al. 2005) are the empirical setting of the paper. Third, it
deepens the original collaborative entrepreneurship inter-organizational model applying
an Aristotelic-Thomistic approach and the insights provided by the new empirical
studies. Fourth, it discusses the findings and shows that changing the assumptions on
human rationality and motivation has an impact on the collaborative entrepreneurship
process and outcomes. Finally, this paper answers the research question and develops
the main conclusions, considering a more comprehensive although not complete view of
human and organizational potential for inter-organizational collaboration.
Collaborative Entrepreneurship Deepening the assumptions on human
rationality and choice
As noted earlier, we argue that the assumptions on which inter-organizational
networks are require a richer view of human nature than that underlying most
management models nowadays. This section aims at deepening these assumptions from
two standpoints: human motives and human rationality. It is known that the way we see
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human nature shapes our managerial assumptions, theories and practice, which makes
relevant the understanding of both the rational and motivational human assumptions of
proposed models and their link to managerial practice (Miles, 1975; Whetten, 1989;
Rocha and Ghoshal, 2006)4.
This section defines these assumptions; then, after describing the cases and the model,
the next two sections illustrate the relationship between those assumptions and the
proposed model, and its impact on practice.
Assumptions about ends – Human Motives
Mainstream approaches to interactions involving a firm are based on the
assumption of self-interest as evidenced by the fact that Game Theory is the dominant
approach in economics and management. This approach assumes that people are driven
by self-interest and, therefore, the main challenge is how to develop cooperative
behavior out of self-interest (Axelrod, 1984). However, this framing of collaborative
realities is unfortunate because it excessively focuses on partial assumptions about
human nature (Rocha, 2006b).
In order to have a more comprehensive motivational framework, we go back to
previous studies on leadership values (Miles, 1975) and human motives and rationality
(Jensen and Von Glinow, 1985; Pérez pez, 1993; Rocha and Ghoshal, 2006; Rosanas,
2008; Argandoña, 2008).
It could be argued that Maslow’s model of a hierarchy of needs, McGregor’s
Theory Y, or Jensen and Meckling’s understanding of human nature (Jensen and
Meckling, 1994) could be enough to provide a richer motivational framework.
However, we argue that a richer understanding of human motives requires going back to
earlier studies for two reasons.
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First, McGregor’s Theory Y rested on managers operating at the high end of
Maslow’s Hierarchy pursuing at least the beginnings of Self-Actualization.
Nevertheless, Theory Y was developed inductively from a psychological perspective
given the challenges of the job design and leadership styles presented at that time. This
approach has not only the natural limitations of not addressing inter-organizational
challenges but also methodological limitations. For example, Theory Y and Maslow´s
hierarchy of needs cannot address the challenge presented by the risks to both
individuals and firms posed by knowledge sharing and the pursuit of equity in inter-
organizational communities. These are some of the shortcomings that arise from the
methodological limitations related to the inductive and psychological approaches that
have been used in building those theories (Pérez López, 1993, p. 51).
As for Maslow’s model, this assumes that individuals are driven by
hierarchically arranged impulses and these impulses are not subject to guidance by
intelligence and will. In other words, individuals lack self-dominion over their needs.
An Aristotelic-Thomistic explanation would recognize that there are human needs, but
individuals are able to guide the impulse that emerge from human needs and establish
which needs are to be satisfied, when, and how. Aristotle admits that a virtuous life
require a modicum of pleasure, but the need for wealth is guided by key virtues such as
prudence, justice and friendship, which form the bases for human relationships.
Different authors (Pérez López, 1993; Jensen and Meckling, 1994; Melé, 1999;
Nahapiet et al. 2005; Rocha and Ghoshal, 2006; Argandoña, 2008; Rosanas, 2008) draw
similar conclusions from alternative angles, which enrich the original model of Maslow.
Second, Jensen and Meckling’s model, which focuses on the fact that people
make trade-offs motivated by wants rather than needs, assumes the possibility of
substitution between different means in order to maximize a given end. When trade-offs
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happen, the substitution will depend on the driver of behavior (the goal to be
maximized): if it is pleasure therefore, individuals are able to substitute morality (Jensen
and Meckling, 1994) for more pleasure or wealth; if honor drives behavior, there would
be substitution of material and safety needs for social needs as in the case of enlightened
self-interest for example, donations to be praised by others even when the donor is in
need - or high-risk sports. Assuming that people always trade these motives off as if
they were commodities (Jensen and Meckling, 1994) leads to the analysis of these
different motives using objective functions, indifference curves, and ratios (Etzioni,
1988, Mansbridge, 1990; Jensen, 2002). However, diverse motives have different
underlying explanations and implications about others interests. For example,
alternative responses to why people buy fair trade products could be: price for value
(pleasure in a broad sense, including having more wealth), compassion for the poor
producers (sentiments), fair trade is the right thing to do (duty), or it promotes human
dignity (excellence). This richer view of human motives leads to the following
conclusion: if excellence drives behavior, therefore there is harmonization of different
ends rather than substitution between different means (Rocha and Ghoshal, 2006).
Taken together, based on different conceptions of human nature, McGregor and
Maslow argue that human development is fulfilled at the higher end of human needs
that are expected to function hierarchically; Jensen and Meckling argue that human
development rests on making substitutions and choices based on wants; Aristotle argues
that human development is to strive for the highest good –i.e. excellence- through the
development of specific human capabilities i.e. intelligence and will.5
Given the previous reasons, in order to understand and prescribe on inter-
organizational networks and the development of collaborative capabilities, we use a
motivational bi-dimensional framework based on the concept of self-love, defined as the
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inclination of human beings to strive for their own good and perfection (Aquinas, 1963;
I, 60, 3)6.
Every motivation has two dimensions: the objective dimension is what we consider
good for ourselves –i.e. pleasure, sentiments, duty, or excellence- while the subjective
dimension refers to whose interest, whatever it might be, is taken into account –self-
interest, others’ interests, self-interest as end and othersinterests only as means, or both
self-interest and othersinterests as ends. Therefore, the unidimensional continuum self-
interest unselfishness is transformed into a bi-dimensional object subject
motivational space. The resulting matrix allows the specification of eight qualitatively
different motives and improves the richness of potential analysis (Figure 1).
INSERT FIGURE 1 ABOUT HERE
The description of each individual motive has been done elsewhere7 and is
beyond the scope of this paper8. It is enough for our purpose to state that many
alternatives to self-interest have been proposed so far. These alternatives include
sentimental love (Smith, 1999), duty (Kant, 1993) and excellence (Aristotle, 1984). (See
Rocha and Ghoshal, 2006 for a review). As mentioned in the Introduction, Aristotle
argues that the basic human tendency is toward good, which can be understood in
different ways: pleasure, wealth, honor, or excellence (NE, I, 4). He argues that the
greatest of all the goods is excellence (NE, I, 5) because it helps to develop to their full
potential what is specifically human: intelligence and will. Happiness occurs when the
human being develops his excellences (NE, I, 13; X, 6-7) (Figure 1, motive 8).
This framework allows us to solve the issue of mutually exclusive motives and
go beyond the prototypical trade-off between self-interest and altruism (Rocha and
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Ghoshal, 2006). This solution adds the qualitative and integrative dimensions of human
motives, going beyond the limits of quantitative and psychological thinking and
opening new horizons to find the assumptions to sustain inter-organizational
relationships.
One could argue that we are using a methodological individualism approach to
reach this conclusion. However, an Aristotelic-Thomistic approach derives the virtue of
friendship, which is key for the understanding of human relationships (Nahapiet et al.
2005), from our relations to ourselves. “Friendship is the image and self-love is the
original; we love our friends as we love ourselves” (Pieper, 1986).
Summing up our understanding of assumptions about ends, we argue that human
nature has the potential to develop different motivations aided by self-scrutiny and
freedom, which allow human beings to step back from, evaluate, and choose among
preferences, including otherspreferences as well as their own (Hirschman, 1985; Sen,
2002). Acknowledging that individuals do make trade-offs (Jensen and Meckling, 1994,
p. 5) aided by a means-end or instrumental rationality logic, we argue that this is not the
most important feature of human nature; seeking good and perfection, evaluating
intrinsically non-substitutable goods is (Rocha and Ghoshal, 2006). This wider lens is
not neutral, given that it has an impact on managerial practice as we will show below.
Assumptions about the relationship between means and ends – Human Rationality
The mainstream assumption about rationality is instrumental or end-means
rationality. Instrumental rationality assumes that goals are given, whatever the goal is
pursued (Etzioni, 1988, p. 135; 151; Jensen, 2002).
However, we have seen that the nature of human motives is marked by the
existence of simultaneous ends. The existence of multiple ends is the result of not only
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having different qualitatively internal motivations i.e. pleasure, sentiments, duty, or
excellence - but also of considering others’ interests, as Figure 1 shows. Intuition and
natural and laboratory experiments (Rocha and Ghoshal, 2006) show that pleasure,
sentiments, duty, and excellence are not exchangeable commodities by their own nature
as is the case with cars, bananas, or cinemas. The existence of qualitatively different
ends means that instrumental or means-end logic has to be complemented with part-
whole logic or a practical rationality approach.
Practical rationality can be traced back to the Aristotelic concept of practical
wisdom (NE, II, 1; VI, 5), which stresses the idea of holism (Solomon, 1992) or part
whole relation. In effect, practical rationality focuses on different ends while
instrumental rationality aims at connecting an action with an external end (NE, VI, 5).
The issue is how different ends are connected and evaluated rather than how to select
the best means to maximise an assumed end. Its reference to ends makes practical
rationality related to the concept of substantive rationality (Weber, 1968), which is
defined as the “degree to which the provisioning of given groups of persons (…) with
goods is shaped by economically oriented social action under some criterion (…) of
ultimate values, regardless of the nature of these ends” (Weber, 1968, p. 85). However,
while practical rationality is concerned with how different ends are interconnected and
evaluated, substantive rationality stresses the idea that behaviour is oriented toward
values, “whether they be ethical, political, utilitarian (…) or whatever” (Weber, 1968, p.
85).
Practical rationality allows a bigger canvas for the analyzing and predicting of
interactions in collaborative communities. For example, cooperative incentive structures
such as an Assurance Game or institutional arrangements such as local regulation of
common property (Kollock, 1998) could fuel human potential to follow an excellence
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driven process, while monetary incentives could foster temporary cooperation that
would disappear if those external incentives were eliminated (Miles et al. 2005; Rocha
and Ghoshal, 2006).
Collaborative Entrepreneurship Empirical Evidence
This section presents the six studies which, together with the original empirical
work on collaborative entrepreneurship, provide the insights for building the model to
be presented in Section 4. We use qualitative research and case analysis (Yin, 1994;
Einsenhardt, 1989) as a method for conceptualizing from the cases analyzed (see
Appendix A). This is a phenomenon-driven methodology, given that real organizations
and people are both the starting point and the cornerstone for understanding emerging
inter-organizational networks (Chandler, 1962; Miles, 1975; Bartlett and Ghoshal,
1989; Rocha 2004; Rocha and Ghoshal, 2006; Gilson, 1935).
Blade.org - An Emerging Community of Firms
The Blade.org community9 was founded by IBM, the principal designer/builder
of the new blade (disc) guided and operated data processor and Intel, the supplier of the
key operating chip devices, aided by a dozen or so “founding” suppliers and potential
downstream operating firms. The founders offered full information on all aspects of the
key design features of the processor to member firms and promised that changes in key
design features would only be made after full disclosure and discussion with member
firms.
The community has quickly (two years) grown to over 100 firms and is now
directed, to a large degree, by members interacting in a set of committees focused on
technology, marketing, customer interactions, etc. Not surprisingly, the firms involved
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have, through their contacts, opened up user applications not imagined in the original
plans and have generated a variety of improvements in the design of processor
peripherals. Perhaps the most interesting development (in addition to the creation of
committees involving customers and venture capital firms) are the number of
collaborative innovations occurring spontaneously among members of the community,
at both the downstream (applications) and upstream (component design) ends of the
process.
Syndicom Communities
The Syndicom collaborative community10 began around the desire of a group of
spine surgeons to confer with a larger group of colleagues concerning patient treatment
and the design of spinal corrective devices. To this end, Syndicom has helped design
and support communities of surgeons across three continents, totalling literally
hundreds of participants, consulting on patient care across a secure internet system. In
addition, Syndicom has helped surgeons create a series of entrepreneurial clusters
sharing ideas to develop, patent (with the help of attorneys sharing equity) and produce
(with the help of equity sharing manufacturers of innovative new orthopedic devices).
Further, they have used the community design process to help create and manage FDA
trials of new devices. Finally, Syndicom is currently being sought by medical supply
firms to help them engage in collaborative innovation processes both within their
boundaries and at their margins (with customers and suppliers). The evolution of
Syndicom is more diffuse and less predictable than that of Blade, but its members have
clearly begun to share a deep understanding of the values and behaviors supporting
effective collaborative processes and to use this understanding to guide their effort
(Miles et al, 2006).
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European Firm Communities
The Finnish, Danish, and North Italian examples are in the main demonstrations
that firms in those areas may have substantial ability to engage quickly and extensively
in trust based collaborative activities. In Finland, one can argue that it may well be that
both the heavy reliance on community solidarity through wars and recessions and the
heavy investments made in enhanced welfare and security, provide a value and belief
base that promotes collaborative behaviors (Castells and Himanen; 2002; Miles et al.
2005) The Northern Italian collaborative textile communities (e.g. the famous example
of the Prato textile community composed of many small “weavers without looms”
brought together in fluid alliances by entrepreneurs and ship design and furnishing
communities on the east and west coasts of Northern Italian) are perhaps classic
historical and geographic cultural communities. There are also emergent clusters of
knowledge and innovation sharing firms emerging in Denmark and Norway (Rocha,
2004)11 and the Miles et al team is working with scholars in Finland, Denmark,
Norway, and Switzerland to explore these using the methodology described in
Appendix A.
Argentinean Food Bank Network
The Red Argentina de Bancos de Alimentos (Argentinean Food Bank Network)
was founded in 2003 by the 12 Food Banks that were then working in Argentina. Its
mission is to promote human development through nutrition training and food
assistance both to the downstream network members and the final user: people with
nutritional handicap and hunger.
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The main objectives of the network are the creation, development and support of
local Food Banks through training, exchanges of good practices in logistic and quality
assurance, communication, fundraising and collaboration between the parts of the
network.
The network represents the Food Banks both at the national and international
levels. In 2006, the Red became a founding member of the Global FoodBanking
Network bringing them together with the national Food Banks Networks of Canada,
United States and Mexico.12
The functioning of the network has contributed to linking Multinational
Corporations operating in Argentina such as Kraft, Nestle, Unilever, Pepsico, and Arcor
with local firms, non-governmental organizations and public agencies dedicated to
nutrition. In 2007, the contribution of the network in terms of distributed food and
people reached grew 12% on average, compared to 2006. To date it has distributed
5,000 tons of food and reached 130,000 people.
The main challenge the network faces is in developing a sustainable sense of
membership and a solid economic base. This challenge together with the creation of
awareness of the hunger situation and the promotion of the joint work and alliances
between all the sectors in Argentina are typical of the emerging collaborative inter-
organizational network, which has to harmonize the centrality of values and core
competencies with strong relationships among independent organizations.
LATAM South Cone Ovine Network
The LATAM Ovine Network, named Ovis XXI, began in 2003 based on an
innovation provided by the Australian company, Multi Purpose Merinos (MRM®),
which has developed a cross-breed of sheep that produces ultra soft and long wool fiber
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using advanced genetics and breeding techniques from Australia. Strict quality
protocols are used, and will be certified in the near future. The fiber is offered as yarns,
fabric and garments that feel like cashmere. Ovis XXI is currently present in Argentina,
Chile and Uruguay. This network currently involves over 800 thousand sheep, 15
multiplying studs, 11 consulting services companies, 36 accredited professionals, 90
sheep breeders, independent technical and management consultants, and both NGOs and
government agencies.
From the very beginning, Ovis XXI was based on an intrinsic network mindset,
which means that value creation cannot be created without the commitment, trust,
sharing of knowledge, and equitable rewards between the central node and the
independent firms belonging to the network. These are the core assumptions upon
which the services of the central node and the contribution of the whole network are
based.
Ovis XXI has contributed to communities of breeders across three countries;
facilitating the development of their technical, innovative and managerial capabilities
and their connections to providers and markets. This has been done by the provision of
services such as on site training, diffusion of knowledge and innovation practices, the
co-creation of new products and markets, and quality assurance mechanisms. In
addition, almost all of the new business has been developed with the participation in
both capital and decision making of the participating firms, which create the conditions
for commitment and trust among them.
However, these same contributions put pressure on finance, which in turn,
diverts the managerial time of the central node. As in the case of Syndicom, the
evolution of Ovis XXI is more diffuse and less predictable than that of Blade. Financial
constraints due to rapid growth across the network are putting pressure on the values
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and behaviors which have been present from the very beginning. The challenge is to
achieve sustainable production by growing the number of lambs produced, and
improving both the quality of the stock and the price for each animal, innovating not
only on the product side but also through the vision, process and network structure. In
particular, the main challenge of the central node and the whole network is to create and
maintain commitment to the shared definitions about mission, vision, and strategic
intent, focusing on the contributions of each independent member to the whole network,
and harmonizing consolidation with controlled growth.
Latino American Geographical Concentrated Networks or Clusters
The possible linkage of measures of social and economic equality and
collaborative innovation has led us recently to review and extend our efforts to
understand development success and failures in emerging economies, particularly in
Latin America.
Economic geographers, economists, sociologists, researchers in business and
management, and policymakers have witnessed an increased interest in the study of
clusters or geographical concentrations of interdependent firms, governmental agencies,
and non-governmental organizations in related industries during the 1990s (Rocha,
2004). One of the several reasons explaining this interest in clusters is their assumed
impact on firm performance, regional economic development, and national
competitiveness (Porter, 1998).
However, LACs’ specificities in terms of public policies, industrial organization,
and development suggest additional arguments underlying cluster outcomes in LACs as
compared to other countries. Research on clusters in LACs has begun to consider some
of these specificities (Schmitz and Nadvi, 1999; Altenburg and Mayer-Stamer, 1999;
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Pietrobelli and Rabellotti, 2004), which are not captured in general frameworks because
of either data constraints Solvell et al, 2003, p. 33; Porter and Van der Linde, 2002) or
the lack of specific knowledge on those countries. For example, the development-
related issues of poverty and inequality that characterize LACs (Morley, 2001) are not
included in the general frameworks on cluster outcomes (Porter, 1990; Solvell et al,
2003).
Given this research need, a meta-study of 19 empirical studies including a total
of 146 clusters in LATAM concludes that clusters contribute to both development and
growth at the firm and regional levels, but that they are also a potential source of socio-
economic divides (Rocha, 2004; 2006b). In particular, clusters show positive impacts on
economic development indicators such as innovative capacity, employment, product
upgrading, and employment training and growth indicators such as production and
exports, but no impact on functional and inter-sectoral upgrading or even negative
impact on economic and social divides.
In summary, LACs’ specificities such as poverty and income inequality and the
emergent nature of clusters in LACs are potential sources of more inequalities in terms
of both incomes and capabilities if alternative governance mechanisms and ways of
rooting firms in the local economy are not taken into account (Rocha, 2004; 2006a).
These new insights and their comparison with the European network models ask for
more research on the necessary assumptions underlying proposed network models,
given that different contributions are expected in different contexts.
Collaborative Entrepreneurship An Inter-organizational model for a more
humanistic management
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Innovation in markets occurs when product or service ideas are developed
and / or adapted to new or expanded market uses (Schumpeter, 1934; Miles et al,
2007; Rocha and Birkinshaw, 2007). The innovation potential of individual firms
may be limited not only by a firm’s systems and processes that reduce the
motivation or ability of their members to engage in knowledge sharing innovation
producing activities but also by the limits, real or imagined, imposed by their own
market strategies. That is, firms focused on one or more closely related markets
tend to limit their own innovation efforts in order to both lessen the costs of
development and sustain the returns from their existing line. Thus, as documented
in the R&D experiences of even such innovative firms as Xerox and IBM, the focus
on existing products and markets is one key barrier the innovation process faces.
It is the constraints imposed on knowledge utilization by managerial and
market barriers that is driving community building practices within and across
firms. Therefore, we expect an organizational form focused on the design and
operation of a community of firms addressing complementary markets will be
created to enhance the potential for the fuller utilization of the entrepreneurial
capability of all of its members.
Miles et al developed a detailed scheme to describe the inter-organizational
business model required for enhancing collaborative and entrepreneurial
capabilities. They called this model OpWin and argued that it exemplifies the
species of collaborative inter-organizational networks demanded by the global
economy (Miles et al. 2005; Figure 2)
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This model is a collaborative venture across firms that had already
experienced the benefits of both planned and unplanned collaborative innovation
activities growing out of supply chain interactions. OpWin is a dynamic network of
member firms and temporary affiliates, in which each is a profitable independent
entity and their resources are often shared in business ventures with other firms,
usually but not always within the network (Miles et al. 2006).
Both the evidence used for building the original model and that presented in
Section 3 of this paper demonstrate the emergence of key elements of the model
proposed by Miles et al. In effect, many aspects of the OpWin design and their
underlying values and assumptions flowed from the researchers analysis of
currently operating inter-organizational communities such as the Taiwanese based
electronics firm Acer and its community of suppliers and distributors, as well as the
R&D focused Australian community of firms TCG. It also drew upon the
experience of inter-organizational collaborative processes and achievements in an
industrial-municipal alliance in Denmark and a variety of organizational
communities concentrated geographically (Rocha, 2004) as well as the evolution of
collaborative engineering processes in the US Civil Construction industry (Miles et
al. 2005).
For example, the authors modeled aspects of Opwin’s key operating guidance
mechanisms on a set of written behavioral protocols at TCG and some features of
Opwin’s value sharing indoctrination of new members on the printed philosophy and
expected practices offered by Acer CEO Stan Shih. Similarly, the careful
documentation of successful collaborative efforts at OpWin reflected in part similar
practices recording the outcomes of successful collaborative innovations in the city of
Kulundberg, Denmark. Finally, the training in collaborative processes required of all
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new members reflected the pre-project workshops utilized in “partnering” practices
common in the US civil construction industry (cf Miles et al. 2005).
Of course shared values and inter-firm learning opportunities in geographically
clustered Industrial Districts have been recognized as far back as Marshall’s 19th
century insights (Rocha, 2004) and as extensively as Saxenian’s examinations of
technology clusters in California and across the US (Saxenian, 1994). What is different
in the OpWin case is the purposeful design of an inter-organizational collaborative
community and its sustaining and innovation generating processes and mechanisms, in
addition to not having geographical proximity as one of its key features.
Key Features
The founders analyzed the values and processes that had been involved in their
successful collaborative efforts and set out to purposely expand these processes by
enhancing their own ability to share knowledge and engage in collaborative ventures
and by inviting other firms who addressed complementary markets and with whom they
had developed trusting relationships into their community. As the OpWin Community
honed its design and expanded its size, it specified several structural and process
characteristics that its leaders believed were essential:
1. Creation and adoption by all members of a commitment to trustworthy behavior and
the pursuit of equitable treatment among all members in all interactions.
2. The design of effective processes, including behavioral protocols, to enhance the
likelihood of positive actions and joint gains from the engagement of community
members in knowledge exchange and collaborative entrepreneurial projects.
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3. The creation of an efficient community-owned mechanism to enhance the likelihood
of member ideas finding value-generating market utilization a secure “idea bank”
describing current development projects and those anticipated.
4. The investment in, as a community owned asset, the creation of a set of central
services to assist in the design and operation of collaborative inter-organizational
ventures, the location and induction and training of new members, the design and
maintenance of inter-organizational governance mechanisms to assure adherence to
collaborative values and to grow and expand the community and to seek external
venture opportunities for entrepreneurial initiatives not being pursued by community
members.
Clearly the values and design features of the OpWin community are not those advocated
in the current theory of the firm and/or the prescriptions for the operation of either
individually owned or corporate form single firms or for clearly defined, legally
structured partnerships and joint ventures among firms. To facilitate innovation and
market exploration, OpWin promotes a process that encourages collaborative
entrepreneurial interaction first and the allocation of returns second the exact reversal
of the process generally prescribed to control opportunistic behavior. Without
question, the time and effort investments expected to be made by OpWin members to
guarantee the maintenance of trust and the common pursuit of equitable treatment can
be viewed as both extensive and expensive. So too, however, are the time and effort
investments required in traditionally-designed and managed firms in order to feel
assured that the possibilities for opportunistic behavior have been removed. Thus, the
design and operation of collaborative firm communities rests clearly on different
assumptions concerning how organization managers and members are or can be
motivated to behave.
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Assumptions
The proponents of the OpWin model recognized the fact that it was based on the
necessary assumptions that people could learn to be trusted in the pursuit of equitable
inter-organizational collaborative entrepreneurship. In particular, the main assumptions
underlying the OpWin model are the following (Miles et al. 2005):
- expectation that membership carries a positive economic value sustained by the
opportunity to participate in innovations across multiple markets driven by
knowledge shared within and across firms
- mutual identification of interests
- attention to the intrinsic value of relationships
- information sharing
- long-term commitment
- the continuous pursuit of equitable rewards
- taking pleasure in acknowledging others’ ideas
- voluntary collaborative behavior by independently-owned and governed firms.
The understanding of these assumptions, in turn, was based on extensive
research illustrating the leadership models and their underlying assumptions that have
emerged to facilitate the development and operation of each new structural and process
design (See e.g., Miles, 1975) as well as the evolution of alternative strategy, structure,
and process models (See e.g., Miles and Snow, 1978).
Discussion
The main motivation of this paper is to identify the assumptions on human
beings that are required for the sustainability of the proposed collaborative
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entrepreneurship model, which we believe, includes many dimensions of the inter-
organizational network phenomenon.
We argue that both self-love and practical rationality approaches are necessary
lenses for the deepening of our understanding of collaborative entrepreneurship.
Otherwise, the description, explanation and prescription would be partial and even
harmful for the new community of organizations. In fact, good habits such as mutual
identification of interests, attention to the intrinsic value of relationships, information
sharing, long-term commitment, equitable rewards, and taking pleasure in
acknowledging others ideas that were found in the multiple inter-organizational
networks could be interpreted in two opposing ways, which could affect both the degree
of ethical ambivalence (Jensen and Von Glinow, 1985) among the participating
organizations or, more generally, the sustainability of the processes and outcomes of the
collaborative effort. We illustrate and discuss this argument using four examples.
First, empirical evidence shows that people’s concern for fairness or equitable
treatment, a key assumption of the proposed model, is reduced when monetary pay-offs
dominate behavior (Rabin, 1993). This finding could be interpreted in, at least, two
ways: first, all rational people have their price and are willing to trade-off everything
(self-interest and instrumental rationality dominates behavior; Jensen and Meckling,
1994). Therefore, no concern for fairness would be expected if the pay-off is high
enough. Alternatively, people’s concern for fairness is crowded-out by external
incentives, but no price, however high, could completely extinguish the concern for
fairness of at least some people (other motives such as duty and excellence mingled
with practical rationality dominate behavior; (Kollock, 1998; Frey and Jegen, 2001). In
this case, a result opposite to the previous alternative may be expected when an
incentive structure targeting fairness is put in place.
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Second, the Syndicom case described in the previous section is best explained
when a self-love rather than a self-interest approach is used for its understanding. In the
early clusters each consisting of 10 to 15 spine surgeons that Syndicom helped surgeon
leaders put together in the hope that they would become on-line consultants to one
another in diagnosing patient problems and prescribing treatment alternative costs and
benefits. The technology allowed real-time sharing of patient X-rays (with patient
confidentiality protected) and it provided the potential of a dozen or so skilled
consultants for each non-routine case. However, it had to overcome the surgeon’s
concerns about displaying their own inadequacies (perhaps by asking for help on a case
that others would see as having an obvious diagnosis and solution or by offering
diagnostic and/or treatment suggestions that others might judge to be naïve) as well as
their concerns about such consultations taking time away from their highly lucrative
practice demands. For each cluster one or two leaders (with the urging of Syndicom
process guidance) posted early cases and responded with quick critiques. Those getting
the help provided quick appreciative feedback. As the more reluctant collaborators
watched (and read the analyses provided by Syndicom) others began to both post cases
and responses. As more and more postings occurred, with each receiving more and
more responses and appreciative comments, the clusters began to flourish with all
participants becoming increasingly appreciative of the impact collaboration was having
on their diagnostic and treatment expertise. This case shows two things. First, it is
possible to pursue mutual economic and innovative benefits and, at the same time,
attempt to practice enduring habits or excellences such as giving credit to others,
trusting and leading by example. Second, the learning dimension of excellences is
evident given that their development needs a repetition of good human acts, especially
when difficulties in building a collaborative community arise. This enduring learning
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dimension is absent in more reductive views of human nature such as that of
enlightened self-interest (Rocha and Ghoshal, 2006), in this particular case a game-
theory approach, given that the prescription is to defect when semi-permanent
difficulties –defined in terms of pay-offs- arise.
Third, in the Blade.org experience, an increasing number of firms have engaged
in the collaborative design of new processor applications (downstream) or in the
creation of improved or enhanced designs of parts and components (upstream value
creation). The effort by IBM and Intel to behave in a trustworthy manner with all the
network participants created an environment of trust that encouraged respect for one
another and built a commitment to joint returns while, at the same time, developing the
excellence of equitable treatment and trustworthy behavior. This explanation highlights
the inclusive and harmonization dimension of excellences, which, as in the previous
case, is not taken into account when a self-interest approach is used for the
understanding and prescription of collaborative behavior.
Fourth and finally, many of the examples provided in the previous section and
other related examples such as the software and microelectronic industry in Costa Rica
(Oxfam, 2002) and some multinational corporations in the consumer goods industry in
India and Latin America (Prahalad and Hammond, 2002) could be interpreted as cases
in which organizations could be motivated by both enlightened self-interest or
excellence (Rocha, 2007).
In fact, following neoclassical economic thinking, it could be argued that
multinational corporations (MNCs) motivated by self-interest might see developing
countries solely as a source of cheap labor and would therefore outsource production
and minimize the costs of the working environment in order to maximize profits in the
short-term. Therefore, the local concentration of activities would be guided towards
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profit maximization rather than towards both wealth creation and local development
(e.g. harmonization of two ends rather than maximization of one of them). This
motivation–behavior–outcome relationship based on self-interest can be seen in the blue
jeans industry in Torreon, Mexico (Bair and Gereffi, 2001) and the sportswear industry
in countries such as Indonesia, Vietnam, and the Philippines (Oxfam, 2002; 2003). In
contrast, MNCs that are moved by excellence are more likely to see developing
countries as entities that include different stakeholders who contribute to the value-
creation process and whose legitimate interests are intrinsic to the very nature of
businesses. Their practices would tend to develop the local base, creating links with
local suppliers and training local employees, and their outcomes would tend to balance
the benefit received by different stakeholders. This relationship between motivation,
behavior and outcomes based on excellence could be inferred from the software and
microelectronic industry in Costa Rica (Oxfam, 2002) and in some MNCs in the
consumer goods industry in India and Latin America (Prahalad and Hammond, 2002).
Generalizing the previous cases and arguments, we argue that attention to the
intrinsic value of relationships, trust, equitable treatment and rewards, and long-term
commitment towards collaboration for a synergic creation of value are based on two
meta-assumptions: a heterogeneous motivational structure that goes beyond, but
encompasses, self-interest, and practical or part-whole rationality, which goes beyond,
but encompasses instrumental or end-means rationality.
From a motivational standpoint, we consider as example the assumption of
paying attention to the intrinsic value of relationships. This assumption is more probable
when either duty or excellence is taken into account as the main human motive (Figure
1, cells 6 and 7). The reason is that these motives consider the other party as an end
rather than a means as the criterion for judging the goodness of an act. Contrary to
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mainstream economic approaches based on self-interest, a self-love view shows that
both duty and excellence are the only non-egoistic motives because they involve the
possibility of counter-preferential choice - i.e. choices that go against the individual’s
own welfare and sentiments (Sen, 1990 [1978])13. This means that committed behavior
cannot be credited to enlightened self-interest, because commitment excludes treating
others as means (Rocha and Ghoshal, 2006).
From a rationality standpoint, we consider as example the assumption of
equitable treatment. The existence of multiple ends is the result of not only having
qualitatively different internal motivations i.e. pleasure, sentiments, duty, or excellence
- but also considering others’ interests, as Figure 1 shows. Intuition and the natural and
laboratory experiments described elsewhere (Rocha and Ghoshal, 2006) show that
pleasure, sentiments, duty, and excellence are not exchangeable commodities. The
existence of qualitatively different ends implies that instrumental or means-end logic
has to be replaced with part-whole logic or practical rationality approach. This approach
is a necessary assumption for promoting sustainable equitable treatment, which goes
beyond the pay-off received by each party and reaches the very motives that drive that
pay-off.
This section has made explicit the assumptions on human motives and rationality
underlying the inter-organizational collaborative model presented in the previous
section. It has also shown the differential impact of the assumptions on human motives
and rationality underlying the model. Figure 3 shows the expanded model. The
following section concludes and proposes lines for future research.
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Conclusions and contributions for further research
This paper is an attempt to go a step forward towards the sustainability of
collaborative inter-organizational networks.
For this purpose, it integrates previous and new research and tries to answer the
following research question: What are the assumptions upon which inter-organizational
models and their outcomes are developed and sustained over time?
The main argument of this paper is that the sustainability of inter-organizational
communities depends on how rich is the set of assumptions about human nature upon
which they are based. In order to develop and sustain collaborative capabilities in inter-
organizational communities, a set of assumptions that takes both self-regarding and
others’-regarding preferences as ends is required in order to avoid any kind of
instrumentalization of collaboration, which is an end in itself.
The following conclusions are the bases upon which this argument was built.
First, innovation and, more generally, development processes within and across
communities of organizations operating in complementary markets require collaboration
as the key meta-capability for the sustainability of those communities and their
outcomes.
Second, collaboration is more than a meta-capability. It is also an attitude that
rests on and shapes strong values such as trust, equitable treatment, commitment to
shared goals, and focus on the intrinsic value of inter-organizational relationships.
Third, the collaborative capability and attitude implicit in the new inter-
organizational network ultimately rest on a particular set of assumptions about human
nature. The current view, either implicit or explicit in mainstream management theories,
is that people are motivated by self-interest guided by instrumental rationality logic.
Difficulties and co-creation of value are two of the common factors at work in the
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process of development of inter-organizational networks. A reductive view of human
nature such as enlightened self-interest and its associated frameworks are not conducive
to the sustainability of these networks when difficulties arise, because their prescription
is to defect when semi-permanent difficulties defined in terms of pay-offs- appear.
Therefore, the assumptions of enlightened self-interest and instrumental rationality are
not enough for the development and sustainability of inter-organizational networks; a
richer view of human nature is required.
Fourth and finally, both self-love and practical rationality approaches are richer
lenses for the description, explanation and prescription of the proposed inter-
organizational form and of the sustainability of its impact. Good habits such as mutual
identification of interests, attention to the intrinsic value of relationships, information
sharing, long-term commitment, equitable rewards, and taking pleasure in
acknowledging othersideas that were found by Miles et al. (2005), are different
manifestations of excellences. Given that excellences take both self-regarding and
others’-regarding preferences as ends, the proposed approach gives credit to human
nature for developing excellence-based collaboration, for which learning and time
become crucial dimensions. Therefore, this paper provides a richer set of assumptions
than those provided by mainstream management theories in order to sustain
collaboration within and across communities of firms.
Based on the previous conclusions, this paper contributes to theory and practice.
From the conceptual and theoretical standpoints, this paper has enriched the
collaborative inter-organizational network suggested in previous works, proposing a set
of conceptual assumptions about human motives and choice offered by Aristotle. This
set of assumptions creates a more flexible framework, which helps to explain
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phenomena, interpret the work of others and to guide future research (Miles and Snow,
2003 [1978]) and practice.
From the practical standpoint, this paper provides additional evidence in order to
increase the external validity of the proposed inter-organizational network model and a
more sustainable basis for business and public policy. In addition to the original cases
from software, integrated systems, and biotechnology industries (Miles et al. 2005), the
paper provides cases from other industries (for example, Medical and Ovine industries)
and organizations belonging to the private and public sectors (for example, Syndicom
and the Food Bank Network). Additionally, the paper contributes cases from developing
economies (LATAM Ovine Sector, LATAM clusters, and Food Bank Network). This
integration is important because developing economies face different problems and
challenges and therefore this reality has allowed some qualifications to the original
model. A phenomenon-driven model based on both a richer set of assumptions and
more diversified cases are important contributions for more efficient, effective and
sustainable business and public policymaking.
We hope that this paper triggers even more collaborative research among
colleagues and collaborative policymaking among researchers and practitioners. This
has been our own experience, which have been focused on the quality of a four-year
process of dialogue, trusting that our contribution to having more humane collaboration
theories and practices will be bigger than our own individual works.
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APENDIX A
The phenomenon-driven nature of this study makes conceptualizing the
emerging inter-organizational community a challenge (Rocha, 2004 and Rocha and
Sternberg, 2005 for the case of inter-organizational communities geographically
concentrated). These communities are complex phenomena and given their emerging
nature there is no readily available secondary data to use as proxies.
Therefore, we have relied on the validity criterion used in qualitative research
(Yin, 1994). Validity is defined as the extent to which the operational definition
captures the concept under study, and two of the main strategies are extensive reviews
of the literature on the concept (Miles et al. 2005; Rocha, 2004) and in deep interviews
and / or participation in the cases.
As for this latter strategy, we have used case research, using two steps. First, the
gathering of secondary data through desk research in order to have a preliminary picture
of the organizations and the sectors in which they operate, and to complement and
triangulate the information gathered in the second stage. Second, we have had
interviews and face to face interaction with at least 15 members of each community,
including different levels of membership and different management groups. Therefore,
our method was both collaborative and participative. We engaged in dialogues and
discussions with managers as co-researchers given their first-hand knowledge of the
reality we were trying to identify and analyze.
Acknowledgments
Earlier versions of this paper were presented at the 15th International Symposium on
Ethics, Business, and Society at the IESE Business School, University of Navarra,
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Barcelona, Spain, on May 16-17, 2008 and at the Workshop on Humanizing the Firm
and the Management Profession, IESE Business School, June 30 – July 2, 2008. We
would like to thank the participants of these conferences for a number of comments and
suggestions that were helpful in preparing the final draft. We also are grateful to Grant
Miles, Charles Snow and two anonymous reviewers for their very useful comments.
The first author is very grateful to Dolores Mariezcurrena for her assistance, and to
Vanina Ubino, Pablo Borrelli, Richard Fenton, Marco De Santis and their colleagues for
their time during the process of researching the LATAM cases. The usual disclaimers
apply.
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Figure 2
Collaborative Entrepreneurship Model
Members
Member Firms
Affiliate Firms
Network Services
Services provided to member firms by the Central
Services Office:
Continuing Education
Identification of new members
Venturing
Mantain Innovation Catalogue
Project Management Software
Leadership and Management
Advisory Council
Leaders Council
Facilitators
Innovation Teams
Source: Miles, Snow and Miles (2005)
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Figure 3
Collaborative Entrepreneurship Expanded Model
Members
Member Firms
Affiliate Firms
Network Services -General
Continuing Education
Identification of opportunities and new members
Mantain Innovation Catalogue
Project Management Software
Communication
Network Leadership and Strategic Planning
Institutional Processes
Developing common values
Leadership and Management
Advisory Council
Leaders Council
Facilitators
Innovation Teams
Network Services -Specific
-Logistic
-Trazability and quality assurance
-Formation of alliances
-Sharing specific experiences and practices
-Other specific services from different sectors /
Inter-organizational communities / countries
(distribution of food, fundraising, etc.)
-Innovation is driven by sharing knowledge across markets and firms
-mutual identification of interests
-attention to the intrinsic value of relationships
-information sharing
-long-term commitment
-equitable rewards
-taking pleasure in acknowledging othersideas
-Independent ownership and governance of each firm
Supporting Assumptions -Specific
-Heterogeneous and interrelated motives
(including self-interest but beyond it)
-Practical rationality (part-whole)
Supporting Assumptions Human Nature
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Figure 1
Assumptions about human Motives
Object
what is
good ?
Subject whose interests?
View
Only self Only others’ Self as end
and others
only as means
Both self and
others as ends
Pleasure 1 Narrow
self-interest N/A
2 Instrumental
or
Enlightened
self-interest
N/A Self-interest
as only
motive
(cells 1, 2,
and 4) Self-interest
as opposed to
unselfishness
(all cells
except cell 8)
Self-love as
the basic
human motive
integrating
self-interest
and
unselfishness
(all cells)
Sentiments N/A 3 Unselfishness
(sentiment-
driven altruism)
4 Instrumental
or
Enlightened
self-interest
5 Sentimental
love
Basic
human
impulse
=
Good in
general
(self-love)
Duty N/A 6 Unselfishness
(Duty-driven
altruism) N/A 7 Duty
Excellence
N/A
N/A
N/A
8 Excellence
Source: Rocha and Ghoshal (2006)
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1 For an extensive historical, conceptual and empirical review of geographical concentrated inter-organizational relationships, nowadays known as clusters, see Rocha (2004).
2 By mainstream economic and management theories we refer to those theories analyzed in Ghoshal and Moran (1996), Nahapiet and Ghoshal (1998), Ghoshal (2005) and
Rocha and Ghoshal (2006)
3 We thank an anonymous reviewer for this useful observation.
4 This section heavily relies on the synergies between three previous works: Miles and Miles (1999); Miles et al. (2005); and Rocha and Ghoshal ( 2006).
5 For more examples on the relationship between motives, behavior and impact on practice following three different sets of assumptions, cf. Rocha and Ghoshal (2006).
6 Self-love is a natural tendency shared by all human beings. Self-love has to be distinguished from selfishness, which is a special kind of self-love, and narcissism, which is a
psychological pathology.
7 Cf. Rocha and Ghoshal, 2006
8 For a detailed explanation of and prescription from each motive, see Rocha and Ghoshal (2006).
9 See www.Blade.org.
10 See www.Syndicom.com.
11 The Northern Italian cases are examples of the Cultural-Institutional School of clusters and the Nordic innovation cases are examples of the Innovation approach to clusters.
For a detailed review of cluster theories, concepts, processes and practices, see Rocha (2004a).
12 See http://www.globalfoodbanking.org/who_we_are/mission.shtml.
13 Note that in the case of unselfishness, the personal interests that are negatively affected are welfare in the case of sentiment-driven altruism (cell 3), and welfare and
sentiments in the case of duty-driven altruism (cell 6). Sentiments in the former case and duty in the latter case are the interests that drive human behavior, and therefore they
are not negatively affected.
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