Pragmatic Collaborations: Advancing Knowledge While Controlling Opportunism.

Industrial and Corporate Change (Impact Factor: 1.37). 02/2000; 9(3):443-87.
Source: RePEc


This paper starts from the observation that firms are increasingly engaging in collaborations with their suppliers, even as they are reducing the extent to which they are vertically integrated with those suppliers. This fact seems incompatible with traditional theories of the firm, which argue that integration is necessary to avoid the potential for hold-ups created when non-contractible investments are made. Our view is that pragmatist mechanisms such as benchmarking, simultaneous engineering and "root cause" error detection and correction make possible "learning by monitoring"--a relationship in which firms and their collaborators continuously improve their joint products and processes without the need for a clear division of property rights. We argue that pragmatic collaborations based on "learning by monitoring" both advance knowledge and control opportunism and thus align interests between the collaborators. Copyright 2000 by Oxford University Press.

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    • "As was indicated above, Ménard's (1996) study of governance structures in the French poultry industry empirically confirms this notion. Helper et al. (2000) in their study of supplier relations in the automobile industry also discover governance structures that seem incompatible with the traditional transaction cost theory typology. The transaction cost economic explanation of governance structures has been challenged on the grounds that it paints an undersocialized view of economic action that disallows any impact of social relations and the wider social structure (Granovetter, 1985). "
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    • "A resource-based view of the firm can be used to demonstrate how innovation depends on the development and accumulation of specialised internal capabilities. To stimulate the development of internal capabilities the firm needs organisational integration: a set of relations that creates incentives for employees who participate in hierarchical and functional divisions of labour to apply their skills and efforts to the innovation process (Helper et al., 2000). To absorb knowledge from the external environment, firms need organisational integration in which employees function as interfaces with the environment. "

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