Distinguishing costs of cooperation and control in alliances

Abstract

Firms simultaneously face the need to cooperate with and control an alliance partner. To complement the transaction cost perspective's emphasis on the need to control and limit opportunistic behavior, we examine the sources and impact of the cooperation costs incurred in order to work with a partner. We propose that these costs increase with greater joint task complexity and interpartner diversity, and perceptions of equitable behavior affect the perceptions of these costs. Hypotheses derived from the framework are tested in a sample of 231 contractual alliances between architects and general contractors in the Hong Kong construction industry. We find that both cooperation costs and transaction costs affect the level of time and effort a manager expends on an alliance, supporting our fundamental proposition that the costs of cooperation and control are conceptually and empirically distinct. We argue that cooperation costs should be incorporated into studies that compare the choice of alternative partners and alliance structures, as well as among the broader categories of market, hierarchy, and hybrid governance forms. Copyright © 2005 John Wiley & Sons, Ltd.

The Two Facets of Collaboration: Cooperation and Coordination in Strategic Alliances

“…More recent research has begun to consider how such formal structures as dedicated joint-venture organizations and detailed contracts can address not only cooperation issues but also coordination issues (Gulati et al, 2005;Puranam & Vanneste, 2009;Vlaar et al, 2006;White & Lui, 2005). As we noted in our description of the structural school of thought on inter-organizational coordination, joint-venture structures can facilitate coordination by providing robust authority structures and enforcement mechanisms, dedicated staff, and opportunities to devise structures and procedures that fit the purpose of the alliance (Gulati & Singh, 1998).…”

“…Such compatibility in a particular joint effort may be difficult to determine with certainty ex ante, but familiarity among partners provides information about each other's cultural and structural makeup (Li & Rowley, 2002) and equips them to anticipate and bridge remaining incompatibilities . Further, partner proximity in the technology, industry, or geographical space can serve as proxies of compatibility: it increases the odds of partners having similar technological standards, organizational structures, knowledge bases, and a shared language, all of which reduce equivocality about coordination requirements and the risk of incompatibilities (Stuart, 1998;White, 2005;White & Lui, 2005).…”

“…The preceding discussion assumes that actors choose formal and informal governance arrangements primarily to alleviate cooperation concerns. But as they draw up alliance contracts, organizations may also seek solutions to anticipated coordination challenges (Gulati et al, 2005;Vlaar et al, 2006;White & Lui, 2005) or apply lessons of previously encountered coordination challenges (Litwak & Hylton, 1962). Such a coordination perspective on alliance-design decisions-specifically, partners' choices of contractual structure and specific contractual clauses-is receiving increasing attention.…”

Bad Apples, Bad Barrels, and the Structure of Marketing Channel Relationships: Analyses of the Propensity for Opportunism and Opportunistic Behaviors

“…These difficulties are significantly relieved by looking at the issue of governance comparatively, so the costs of one mode of governance are always examined in relation to alternative feasible modes." In hybrid governance form, White and Lui (2005) show empirical evidence for increased transaction costs of both cooperation and control as both task complexity and interpartner diversity increase. In market governance form, Anderson and Dekker (2005) similarly provide support for increased transaction costs, including extensive contracts, when the relationship characteristics are associated with hazards.…”

Network Capitalism and the Role of Strategy, Contracts and Performance Expectations for Asia-Pacific Innovation Partnerships

“…Gulati & Singh, 1998;Oxley, 1997); risks; partnership task-scope and transaction-level characteristics (e.g. Oxley, 1999;Oxley & Sampson, 2004); technological intensity (Osborn & Baughn, 1990); strategic motivation (Nielsen, 2003); division of labour (Reuer, Zollo, & Singh, 2002); task complexity and inter-partner diversity (White & Lui, 2005); trust among partners (e.g. Gulati, 1995a;Krishnan, Martin, & Noorderhaven, 2006;Lui & Ngo, 2004;Nooteboom, Berger, & Noorderhaven, 1997;Zaheer, McEvily, & Perrone, 1998); and inter-organizational structures (e.g.…”