Title: Advances in the analysis of the relationship between Interfirm Cooperation, Localization and Institutional Patterns
1Advances in the analysis of the relationship
between Interfirm Cooperation, Localization and
Institutional Patterns
- by
- Peter Maskell
- Professor, MSc, PhD, Dr.Merc
- Director of DRUID
- Maskell_at_CBS.dk
- www.DRUID.dk
-
- ESNIE, Institute d'Etudes Scientifiques de
Cargèse, Corsica, Wednesday 20 May 2009
2 The basic mainstream distinction between firm
and market
- " ...a firm is a production set summarizing the
possibilities for transforming one bundle of
time-, event- and location-differentiated
commodities into another -
- a market is the coming together of economic
agents (firms and consumers) to exchange
ownership of such commodity bundles." - (Milgrom and Roberts 1988)
3Hybrid organizational configurations by time
horizon and focus
4 Interfirm cooperation / networks
- Vast and badly structured field
- huge number of often unrelated contributions
- array of theories and methods
- modest degree of deductive theorizing where lower
order propositions follow logically from more
general propositions - Grabher Powell (eds) "Networks - Critical
Studies in Economic Institutions" (Elgar 2004)
contains 688 pages with 46 'classic' papers and
thousand references
5Basic assumptions
- Economic system with intelligent, self-interested
individuals
6Self-interest
- 'The beneficence of the play of self-interest
only exists because that play is not free, but is
confined to certain directions by our great
social institutions... - What individual self-interest dictates as a
course of action in any particular case thus
depends on the total set or pattern of
institutions' (Cannan 1896)
7Basic assumptions
- Economic system with intelligent, self-interested
individuals - Property right allocation and enforcement
8Basic assumptions
- Economic system with intelligent, self-interested
individuals - Markets with property right allocation and
enforcement - Rent-seeking organizations with similar and
complementary capabilities. Division of labor
9Pope Innocent IV, 1243
- first used the phrase persona ficta when
assigning rights and obligations to a person by
fiction and only by fiction, thereby including
the idea into Roman law that property rights
could be executed, assets assembled, capital
accumulated and contracts made by purely legal
entities of limited liability and infinitive
lifetime.
10Basic assumptions 4
- Economic system with intelligent, self-interested
individuals - Markets with proporty right allocation and
enforcement - Rent-seeking organizations with similar and
complementary capabilities. Division of labor - Possibilities of mutually beneficial
interaction
11 - In the lone houses and very small villages which
are scattered about in so desert a country as the
Highlands of Scotland, every farmer must be
butcher, baker, and brewer for his own family.
... - (Smith 1776).
12Assumptions
- Economic system with intelligent, self-interested
individuals and rent-seeking organizations - Institutions system, freedom, money,
calculations - Markets with proporty right allocation and
enforcement - Institutions, law, court, police Markets not
sequences of events of exchange (Arrow-Debreu
1954) but institutional settings where events of
exchange take place. - Many firms. Division of labor
- vision! similar,complementary, horizontal and
vertical, - Possibilities of mutually beneficial interaction
- transport, standards, Power, ikea
- ON the shoulders
13Forms of mutually beneficial interaction
- Putting-out systems
- Subcontracting arrangements
- Strategic partnerships,
- Franchising
- Joint ventures
- Decentralized profit centers
- ... etc.
- (Williamson 1991, Hennan 1993)
14Governance
- Oxley (1997) proposition
- higher contractual hazards will lead to more
hierarchical forms of governance
15 Foundations - Networks
- Adam Smith, Alfred Marshall, George Richardson,
- Ronald Coase, Oliver Williamson, Carl Dahlman
- Oliver Hart
- Mark Granovetter, Ronald Burt
- William Baumol
16 Foundations
- Adam Smith, Alfred Marshall, George Richardson,
Brian Loasby - div of labor, capabilities,
- Ronald Coase, Oliver Williamson, Dahlstrom,
- make or buy. cost of using market
- Baumol, Granovetter, Burt
- relations, investments, trust and exit costs ,
value chain,
17Costs of cooperation
- search and information costs,
- bargaining and decision costs,
- policing and enforcement costs
- incentive alignment costs
- (Dahlman 1979, Foss 1999)
18Recent additions...
- Offshore outsourcing
- Crowdsourcing (Lakhani and Jeppesen 2007)
19Learning
- ..salesmen "often knows purchasing agents well.
The same two individuals may have dealt with each
other from five to 25 years. - Each has something to give the other.
- Salesmen have gossip about competitors,
shortages and price increases to give purchasing
agents who treat them well." - Stewart Macaulay(1963)Non-Contractual Relations
in Business A preliminary Study, American
Sociological Review 28(1)55-67
20Repeated games Exit costs and higher order
institutions
- Manufacturing
- Construction/Creatives
21Social Network Theories(Reactions to
Williamson's model of individual opportunism etc.)
- Analyze how positions in networks provide
leverage or access, shaping the accumulation of
resources and knowledge.
22Social Network Theories(Reactions to
Williamson's model of individual opportunism etc.)
- Analyze how positions in networks provide
leverage or access, shaping the accumulation of
resources and knowledge. - Anticedents of networks traced to broad
institutional environment (Sako and Helper 1998).
NSI/RSI
23Social Network Theories(Reactions to
Williamson's model of individual opportunism etc.)
- Analyze how positions in networks provide
leverage or access, shaping the accumulation of
resources and knowledge. - Anticedents of networks traced to broad
institutional environment (Sako and Helper 1998).
NSI/RSI - Executive networks to gather information, deter
competition and collude in setting prices or
policies
24Social Network Theories(Reactions to
Williamson's model of individual opportunism etc.)
- Analyze how positions in networks provide
leverage or access, shaping the accumulation of
resources and knowledge. - Anticedents of networks traced to broad
institutional environment (Sako and Helper 1998).
NSI/RSI - Executive networks to gather information, deter
competition and collude in setting prices or
policies - Prescriptive on how to reduce uncertaincy
25 26 Localization - Clusters
- New institutional economics
- New economic geography
27 Localization - Clusters
- If there is such an entity as localization/spatia
l clustering/agglomeration theory today, it
consists of a mix of ideas originating more than
a century ago (Marshall 1890, Weber 1909), - further developed in the post-war period within
the regional science tradition (Alonso 1964) and - given new input since the early 1990s though the
engagement by economists (notably Krugman 1991)
business strategists (notably Porter 1990) and
economic geographers (see Malmberg and Maskell
2002 for overview).
28Inter-firm Interaction
29Geographical proximity effects?
- there is no compelling reason to assume that
..local ties are stronger than ties at a
distance. - Relational proximity can exist between actors
located in different parts of the world. Modern
technological and institutional developments
facilitate both the transfer of information and
the travelling of people across space. Amin and
Cohendet (2004) .
30Clusters definition and types
- Real-life existing phenomenon
- - across time and space
- Non-random geographical agglomerations of firms
with similar or closely complementary
capabilities - (see Ellison and Glaeser 1994)
31Cluster publications 1953-2004Number of
articles, published in scholarly journals within
the social sciences with the term 'cluster or
its synonyms in the title or in the abstract or
among the keywords.(Maskell Kebir 2006)
32Cluster theory Three fundamental issues
- 1) Existence the economic and social benefits
that may accrue to firms when clustering or
collocating - 2) Extension the diseconomies encountered when
clustering exceeds certain geographical and
sectoral thresholds. The solitary firm - 3) Exhaustion the possible erosion of economies
and onset of diseconomies over the lifecycle of
the cluster
33 Institutionalizing clusters
- Decisions to invest in particular regions
generated increasing returns as a wider number of
participants followed them and developed local
norms that guided interaction. - Identities are learned and interests forged
through interaction, producing feedback dynamics
that increased interdependence and consensus
among the varied participants.
34Lock-in The historically evolved institutional
repertoire
- An interesting aspect of institutions in general
is that they tend to work by limiting or even
preventing the exploration of excluded
possibilities - Excluding possibilities carries unknown
opportunity costs. - The sophistication of institutions may prevent
the performance of disparate activities deemed
attractive at later stages. - (Arrow 1962, Loasby 2000).
35Variety amongst similar firms
- Best practices accumulate to isomorphic pressures
that gradually reduce existing variety in
routines. - Lack of variety combined with spatial myopia
leads to an insular mind-set
36Recent developments External Linkages - Local
interaction as an interpretive framework
37Recent developments Myopic actors, cognitive
quirk
- Clustering arguable represent a possibility to
circumscribe some of the potential problems
stemming from corporate myopia. - Actors lucky enough to find world-class solutions
and global best practices in their backyard gain
advantages over those who do not.
38Recent developments 3Spillovers versus genealogy
and evolution
- Entrepreneurship, first mover advantage, market
selection -
39Recent developments 3Spillovers versus genealogy
and evolution
- Entrepreneurship, first mover advantage, market
selection - Steep learning curve, organizational superiority,
institutions and infrastructure -
40Recent developments 3Spillovers versus genealogy
and evolution
- Entrepreneurship, first mover advantage, market
selection - Steep learning curve, organizational superiority,
institutions and infrastructure - Attracting talented wannabes and related
entrepreneurs
41Recent developments 3Spillovers versus genealogy
and evolution
- Entrepreneurship, first mover advantage, market
selection - Steep learning curve, organizational superiority,
institutions and infrastructure - Attracting talented wannabes and related
entrepreneurs - Spin-offs from initial incumbents come endowed
with inherited and previously tried-out superior
routines. -
42Recent developments 3Spillovers versus genealogy
and evolution
- Entrepreneurship, first mover advantage, market
selection - Steep learning curve, organizational superiority,
institutions and infrastructure - Attracting talented wannabes and related
entrepreneurs - Spin-offs from initial incumbents come endowed
with inherited and previously tried-out superior
routines. - Intensified local rivalry among newcomers and
spin-offs help create stable clusters with firms
that dominate an industry for generations -
sometimes globally - (Klepper 2002, Dahl et al. 2003, 2005, Thompson
and Klepper 2005, Buenstorf and Klepper 2005),
43 44Institutional dynamics
- Institutions are viewed as a solution to
collective action problems, which enable
participants to realize gains from coordination
or collocation.
45Implicit assumptions (and usually incorrect)
- Functionalistic
- Successful
- Fair
46Institutional dynamics 2
- "How do linkages that become routine in a
statistical sense cascade into normative
understandings in the prescriptive sense, such
that participants in a dense network recognize
these categorical patterns and start to sustain
and reinforce them?" - (Powell et al. 2009)
-
47Institutional dynamics
- How does which elements combine to make
distinctive repertoires possible only at
particular points in time and space?