Academic journal article International Journal of Management

Interorganizational Collaboration, Social Embeddedness, and Value Creation: A Theoretical Analysis

Academic journal article International Journal of Management

Interorganizational Collaboration, Social Embeddedness, and Value Creation: A Theoretical Analysis

Article excerpt

This paper explains interorganizational collaboration and its success at value creation (of time-to-market and cost benefits) by adopting the concepts of network, transaction cost economics (TCE) and the resources-based view (RBV). The TCE and RBV theories together portray the modes of exchanging strategic resources, which are characterized by information asymmetry, resources inimitability, and resources immobility. Also, the importance of the role of relational embeddedness in moderating information problems, the role of structural embeddedness in offering informal safeguarding mechanisms to lessen coordination difficulty, and the role of positional embeddedness in strengthening the benefits of the other kinds of embeddedness are elucidated in terms of network theory to explain that strategic resources exchange, despite transaction difficulties, can be conducted. This paper also proposes that interorganizational embeddedness in interfirm collaborations of resources exchange and combination has a supplemental role for facilitating value creation when transaction cost theories and the resources-based view are applied in the exchange process and modes.

Introduction

Scholars having a resources-based view of the firm see the firm as the primary unit of analysis to create value-generating activities. They argue that the firm exists because it can more efficiently coordinate the collective learning process and build competitive advantage that resides in the organizational routine and capability than the market can (Foss, 1996c: 18). The notion of the firm as a bundle of resources provides an alternative explanation to the concepts of transition cost (TC) that sees the firm as a bundle of transactions or contracts (Barney, 1986; Dierickx and Cool, 1989). However, they both overlook an important fact - that resources exchange is often linked to the social context in which the firm is embedded. Therefore, proponents of the RBV should broaden their view to include the idea that the value of innovation generated from resources and capabilities could be owned and controlled by a coalition of firms rather than a single firm to achieve time-to-market and cost benefits. The idea of firms exchanging valuecreating resources and capabilities is suggested by some organization theorists (Gulati, 1999; McEvily and Zaheer, 1999). They indicate that firms who span firm boundaries to combine resources may create distinctive value.

Thus, my research questions included: (1) why do firms choose to collaborate, rather than go it alone, to pursue value from fast and cost-saving innovations through strategic resources exchange and combination? (2) What are the main difficulties in exchanging and combining interfirm strategic resources? (3) What mechanisms does interorganizational embeddedness offer to mitigate problems in creating value?

This study offers a more synthesized theoretical explanation of TCE, the network and the RBV to answer why an interfirm organization performs better than a single entity when exchanging/combining resources that facilitate value creation while reducing transaction costs. The argument presented here is derived from these three major theoretical perspectives and explains how network embeddedness affects economic cooperation activities. Both the transaction cost economics (Williamson, 1985; Hennart, 1988, 1991) and resources-based view argument (Barney, 1986; Dierickx and Cool, 1989) were used as bases for furthering the understanding of the mechanism of network embeddedness in interfirm exchanges.

Why firms choose to collaborate - to facilitate value creation from strategic innovative resources exchange and combination

Value creation and resources exchange/combination

Moran and Ghoshal (1996) argued that new sources of value are generated through novel deployment of resources, especially through new ways of exchanging and combining resources. Combination is a process of systematizing concepts into a knowledge system, where the knowledge conversion consists of combining different bodies of explicit and implicit knowledge (Polanyi, 1967; Nonaka and Takeuchi, 1967). …

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