Why firms make unilateral investments specific to other firms: the case of OEM suppliers

Kang, Min Ping; Mahoney, Joseph T.; Tan, Danchi

doi:10.1002/smj.730

Cited by 227 publications

(231 citation statements)

References 90 publications

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“…A tight linkage between the parent and venture can facilitate the flow of knowledge from the venture to the parent (Mowery, Oxley, & Silverman, 1996). The interorganizational learning literature highlights the importance of resource commitment to learning, as resource commitment can help align the incentives of the parties (Santoro & McGill, 2005) and can help with partner commitment (Kang, Mahoney, & Tan, 2009). Within the context of technologically dynamic industries, JVs offer a unique combination of access to knowledge stocks and the splitting of risk in the face of environmental uncertainty.…”

Section: Discussionmentioning

confidence: 99%

The Influence of Exploration on External Corporate Venturing Activity

Titus¹,

House

Covin

2014

Journal of Management

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We utilize the exploration/exploitation framework to examine how a firm’s engagement in exploration influences its portfolio of external corporate venturing (ECV) activities. Three forms of equity-based ECV are considered: corporate venture capital investments, joint ventures, and acquisitions. The organizational learning literature is used to investigate how a firm’s engagement in exploration influences its usage of acquisitions relative to its overall portfolio of ECV activities. The investing firm’s industry technological dynamism is posited as a moderator of the relationship between exploration and the relative usage of acquisitions. Utilizing a sample of 1,326 firm-year observations between 1996 and 2008, we find that exploration is positively related to the relative usage of acquisitions, though this relationship is moderated by the investing firm’s industry technological dynamism.

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Section: Discussionmentioning

confidence: 99%

The Influence of Exploration on External Corporate Venturing Activity

Titus¹,

House

Covin

2014

Journal of Management

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“…Such relationship specific investments support the sales of components to the buyer, they create value in the relationship with the specific buyer, and hence they are necessary for a buyer-supplier relationship to contribute to competitive advantage Kang et al, 2009).…”

Section: External Supplier's Transaction Specific Assetsmentioning

confidence: 99%

“…Some of the safeguards mentioned in transaction cost theory are reciprocal investments by the buyer to create a hostage situation where both parties may lose if their relationship is terminated (Williamson, 1985). However, empirical studies show that suppliers often make such relationship specific investments unilaterally (Ebers and Semrau, 2015;Kang et al, 2009).…”

Section: External Supplier's Transaction Specific Assetsmentioning

confidence: 99%

Concurrent sourcing and supplier opportunism

Mols

2017

IJPM

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Abstract:The term 'concurrent sourcing' refers to the practice of a firm to simultaneously make and buy the same components. This paper presents an agency model for explaining how and when concurrent sourcing reduces the likelihood of external supplier opportunism. In the proposed model, the external supplier's expected costs of opportunism are determined as a product of four factors. These four factors are: buyer's likelihood of discovering supplier opportunism, buyer's internalised quantity as reaction to supplier opportunism, asset specificity of external supplier's investments, and multiplier effects. Each of these factors are explained and discussed in the paper. The paper also offers a number of theoretical and managerial implications.

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“…More recent research informed by transaction cost economics has drawn attention to the fact that transaction characteristics are also endogenously determined and can be the result of firms' choices (e.g., Bensaou & Anderson, 1999;Jia, 2013;Kang et al, 2009;Oxley & Sampson, 2004). For instance, firms may manipulate the characteristics of a transaction that they enter by carefully selecting the activities or assets involved in the transaction (Bensaou & Anderson, 1999;Oxley & Sampson, 2004).…”

Section: Introductionmentioning

confidence: 99%

Choosing Between Safeguards: Scope and Governance Decisions in R&D Alliances

Lioukas

Reuer

2018

Journal of Management

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Research on transaction cost economics has emphasized the choice of an appropriate governance structure as an important mechanism in alleviating exchange hazards in interfirm transactions, yet firms may also manipulate the characteristics of a transaction so as to make it less hazardous in the first place by carefully selecting the activities or assets involved in the transaction. In this paper, we explore this theoretical issue in transaction cost economics by examining how firms design R&D alliances to mitigate appropriation hazards in these interfirm transactions. In particular, we investigate when firms will prefer to limit the scope of functional activities involved in an R&D alliance, thus addressing appropriation hazards directly by manipulating the alliance's characteristics, versus when they will opt for an equity-based governance structure in order to mitigate appropriation hazards ex post. We argue that firms are more likely to limit the scope of alliance activities rather than choose an equity-based governance structure when there are multiple partners in an alliance and when the partners are from different nations, because monitoring and other control mechanisms become more cumbersome and problematic in these circumstances. In contrast, firms that are direct competitors are more likely to choose an equitybased governance structure in order to mitigate exchange hazards such as knowledge misappropriation through carefully monitored knowledge sharing. Empirical analysis of data on R&D alliances in a variety of industries provides support for our arguments regarding alliances involving multiple partners and alliances between competitors. We discuss the implications of our study for research on transaction cost economics.

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Why firms make unilateral investments specific to other firms: the case of OEM suppliers

Cited by 227 publications

References 90 publications

The Influence of Exploration on External Corporate Venturing Activity

The Influence of Exploration on External Corporate Venturing Activity

Concurrent sourcing and supplier opportunism

Choosing Between Safeguards: Scope and Governance Decisions in R&D Alliances

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