This paper offers a theoretical explanation for why interfirm collaborations form yet fail, and further suggests how firms might manage them for a more positive outcome. Based on a perspective of value, we explain how a more inclusive and integrative perspective, one which combines elements from transaction costs and resource-based theory, provides more robust insight into collaboration formation, management, and instability. In doing so, we differentiate rent-yielding firm-specific assets at the core of the resource-based view from the transaction-specific assets at the core of transaction cost theory. The paper makes a crucial distinction between the potential value attainable through collaborations and its actual realization. The crux of our argument is that firms enter into collaborative relationships because these are expected to yield superior value relative to alternate organizational forms in certain situations, offering potentially synergistic combinations of complementary resources and capabilities, yet such relationships are frequently prone to failure because the partner firms tend not to recognize ex ante the nature and extent of transaction-specific investment that is required in the collaborative relationship to attain these synergies. In our argument, critically, the relationship between organizations is seen not simply as a governance structure of a hybrid nature but, more importantly, as a productive resource for value creation and realization. In this light, transaction-specific investment in what we term relational specificity becomes imperative. In the search for value, we explain why the transaction costs incurred in the exchange of resources are not independent of the nature of resources to be transacted and, similarly, why the returns realized from these resources are not independent of the relationship- and transaction-specific expenditures incurred in effectively combining them and maintaining the combination. The interdependence between the two, mediated by the quality of the relationship, has direct implications for the earning of rents through collaborations. These relationship-specific expenditures can be of an internally generated nature, endogenous to the alliance form itself, and need not exceed alternative forms, while the associated benefits have the capacity to potentially exceed the alternatives. This translates into potentially superior value. The paper contributes in three key related ways: (a) the explicit recognition of the relationship as a value-bearing asset embedded in a larger and endogenous institutional context, namely a system of resource relationships—both intraorganizational and inter-organizational—among partner firms and the collaboration, (b) the recognition of the evolving relationship between production and exchange which, at the level of the collaboration, is directly dependent on the nature, evolution, and dynamics of the relationship among the parties to the transaction, and (c) the provision of a nontrust explanation for why firms might knowingly forego opportunities to take advantage of their partners. Drawing from this, the paper occasions (a) a shift in focus from the form to the process of governance, which has direct implications for value creation and realization and (b) a shift in the primary identity of transaction-specific and relationship-specific expenditures from cost to investment in future value.

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This paper examines the relationship of performance with product and international diversification on Japanese multinational firms from 1977 to 1993. We show the relationships between diversification and performance change over time through the use of multiple time periods and accounting for keiretsu membership. Results show that while diversity strategies vary between keiretsu and non‐keiretsu firms, performance is not much different. Across time periods, performance varies considerably, but strategies are less variable. Product diversity has weak effects on firm performance only in one time period, while international diversification has negative profitability and positive growth consequences in in some periods. These results suggest first that diversification strategies and their effects on performance vary across time periods and generally produce some unexpected findings. We do not find strong interactive diversity effects. Copyright © 2000 John Wiley & Sons, Ltd.

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The authors examine the meaning of control in international joint ventures (IJVs) and the relationships of potential means of control in such organizations to the performance satisfaction of the foreign partner. They propose a conceptual model that provides both a traditional ownership-focused internalization perspective on those issues and an integrated approach combining a broader transaction cost interpretation of control with a resource input-based bargaining power model. A set of simultaneous structural equations with endogenous explanatory variables provides multiple possible paths from various resource and power inputs through different means of control to perceived performance satisfaction. In such a model, intermediate variables act both as dependent and independent variables; thus the complex theoretical interactions of the variables are modeled more comprehensively and realistically than in single-equation models. To test the model and compare the theoretical relationships, the authors used data from a survey of managers in Norwegian multinational firms having at least one IJV. For structural equation modeling with latent variables, they used the LISREL VII program that simultaneously fits the measured variables to the latent variables and provides a maximum likelihood solution for the structural equation system. The results clearly reject the traditional internalization approach to IJV governance that relies strictly on ownership share to delineate degree of control. However, relative resource input has a strong relationship to relative bargaining of the parent companies, which then drives equity share, control over specific activities, and perceptions of overall control of the IJV. That result supports a bargaining-power-based model of IJV control. The relatedness of the strategic resources of the parent and the joint venture also drives specific control, implying that although transaction risk is important to governance, governance is provided by specific control rather than ownership level. Perceptions of performance are strongly and positively related to overall control. Those results suggest that specialized control provides both protection and exploitation of key resource inputs and is gained through increased bargaining power. Higher levels of specific control result in a perception of overall control and thereby satisfaction with perceived levels of IJV performance among foreign parent company managers. Interestingly, traditional exogenous determinants of IJV control and performance such as government mandates, cultural similarity, and international experience levels fail to provide significant effects. Rather, the focus is on endogenous aspects of the parent-IJV relationship, suggesting that the key to parent firm satisfaction with an IJV is control over operations that use key strategic inputs from the parent.

Previous research has suggested that firms need to balance exploitation and exploration. Acquisitions can be used as a way to explore (i.e., develop new areas of technological expertise) or exploit (i.e., reinforce existing technological capabilities). This article examines acquisitions in the semiconductor industry to answer the following question: Under what conditions do acquisitions facilitate exploitation and/or exploratory activity by the acquirer firm? The authors posit that an acquirer firm's ability to develop such exploratory innovation is a function of three key factors: opportunity available to the acquirer firm for exploration, ability of the acquirer firm to effectively assimilate and establish innovations in new technologies, and extent of control of target firm postacquisition. The results demonstrate strong support for the hypotheses indicating the benefits of target technological uniqueness and for the moderating effects of commonality between acquirer and target firms in geographic bases for exploration. However, the findings contradict expectations about the effects of mergers and suggest that merger enables the acquirer to engage in effective exploration. For exploitation, the authors find negative effects of target technological uniqueness and positive effects of commonality of geographic bases.