The issue of vertical firm boundaries continues to attract interest both for economics and management research. The transaction cost economics approach, emphasizing transaction-specific assets and opportunism in order to explain discrete 'make-or-buy' decisions, dominates the literature. Nevertheless, alternative perspectives, developed under the guise of the capabilities, competence or knowledge-based theories of the firm, have gained attention recently. They focus on the evolutionary dynamics of boundaries in the context of the division of labour among firms in an industry and on what is to be divided and co-ordinated -i.e. productive knowledge. The conceptual links between this line of research, which some refer to as neo-Marshallian, and the Industrial Networks approach are explored in this paper. The paper emphasizes both a vision of firms as sets of direct and indirect capabilities, developed and combined in different ways over time, and the connectedness between inter-firm relationships. The discussion is illustrated with the cases of two firms, which are contrasted in terms of the dynamic evolution of their boundaries. The analysis made supports the argument that firms' vertical boundaries reflect their relationships with specific counterparts and the way they address through time the division and integration of knowledge through the configuration of direct and indirect, counterpart specific, capabilities.
IntroductionDespite the growth in transport and communication infrastructure and the possibilities it has opened, there has been a renewed interest in industrial agglomerations or the spatial clustering of firms operating in the same or closely related industries. The vast literature on the subject has emphasised almost obsessively as Hudson (1999) notes, access to and generation of knowledge when firms are spatially close to each other
Purpose -The paper aims to discuss the interaction processes and short-term behaviours and motives in long-term relationships between banks and their corporate clients. Design/methodology/approach -The discussion is based on findings from four Portuguese case studies. Interviews made to major actors on both sides of each relationship were transcribed and analysed to investigate the buyer-seller interaction process, and the interplay between the actors involved. Findings -The paper contributes to knowledge concerning the nature of business banking relationships, provides insights about instability and stress therein, and suggests some factors that can generate or intensify that instability. Short-term irregularities and stress are found to arise in the context of relationships' longer-term continuity and stability.Research limitations/implications -The irregularities found were endogenous to the relationships and originated from one of the actors or from the transaction. No exogenous factors were analysed and further research should be done about them. Some instability was found associated with clients keeping a portfolio of banking relationships, but the management of such portfolios is largely unstudied, begging for more work. It is also suggested that the present study be replicated in other countries and contexts for comparative analyses. Practical implications -The paper provides a framework for corporate managers and bankers alike to better understand the process of banking relationships. It highlights some factors that should be monitored as they impact on buying behaviour and on the interplay between banks and firms. Originality/value -The paper highlights some "stress" factors that can impact on buying behaviour and on the interplay between banks and firms, providing a new insight about the instability of business relationships in the banking business, and suggests some factors that can generate or intensify that instability.
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