Governance choice | Papers
Governance choice

Alliance experience and governance flexibility

Prior work has mapped the transaction at the heart of an alliance to the risks of opportunism inherent in that alliance and, ultimately, to how the alliance is structured and governed. We extend this approach by noting that the parties in an alliance do not necessarily perceive the same hazards as predominant and thus may have different preferences for how the alliance is structured. Nevertheless, it is in each party’s best interest to find a structure that protects its interests, while also allowing its partner to protect its interests sufficiently. Drawing from the alliance management capabilities literature, we argue that firms with more alliance experience are better able to protect their interests under any given alliance structure, making the choice of structure less consequential to them. The resulting governance versatility provides a competitive advantage by enabling firms to form advantageous alliances that are less available to inexperienced competitors. Our study of innovative alliances in biopharmaceutical industry lends support to the hypotheses, allowing us to advance the literature on governance choice in alliances, the literature on alliance management, and their intersection.

Lee J, Hoetker G, Qualls W. 2015. “Alliance experience and governance flexibility”. Organization Science 26(5): 1536–1551 View and download

Reconceptualizing plural sourcing

Firms often procure the same input via multiple means, e.g., making and buying. Recent papers exploring such concurrent sourcing modes have yielded rich, but inconsistent, theoretical and empirical insights. We suggest that resolving these inconsistencies and setting the foundation for future work requires reconceptualizing two aspects of concurrent sourcing: what and how. “What” refers to a surprising lack of clarity of what is meant by “same” inputs. We reconceptualize “same” as a spectrum of degrees of similarity and propose how similarity might be measured. “How” refers to the governance modes combined in concurrent sourcing. Extending the literature’s predominant focus on make/buy, we reconceptualize concurrent sourcing as a set of combined governance modes—make/buy, make/ally and buy/ally—distinguished from single modes of governance by certain shared characteristics, but differing from each other in their capabilities and limitations. We demonstrate the potential of our reconceptualization with propositions predicting the use of concurrent sourcing and choice of specific concurrent sourcing modes as a function of similarity, technological volatility and performance ambiguity. Concurrently reconceptualizing “what” and “how” resolves strains between existing studies and strengthens the foundation for future work. Furthermore, enhanced understanding of the trade-offs and synergies among governance modes generates theoretical, empirical and managerial insights relevant to governance choice situations beyond concurrent sourcing itself.

Krzeminska A, Hoetker G, Mellewigt T. 2013. Reconceptualizing plural sourcing. Strategic Management Journal 34: 1614-1627
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Governing inter-organizational relationships: Balancing formal governance mechanisms and trust

Alliances allow firms to “pool imperfectly tradable resources in order to gain greater efficiency in the use of existing resources as well as opportunities to create new re-sources” (Dussauge/Garrette/Mitchell 2000: 207). Not surprisingly, firms often engage in interorganizational relationships as a means of solving complex problems. Indeed, the formation rate of interorganizational relationships has increased dramaticallyin recent years. Accompanying the increasing number of relationships has been adramatic increase in their variety and the means by which they are governed. This special issue aims at exploring firms’ investment decisions related to alliances as well as the design and management of collaborative agreements.To be successful, a relationship must accomplish two goals, namely identifyingthe optimal combination of productive knowledge across parties and mitigating the risks of opportunistic behavior (Mitchell/Dussauge/Garrette 2002; Nickerson/Zenger 2004). The performance of the alliance thus depends critically on the selection of appropriate governing and coordinating mechanisms. Work drawing primarily on transaction cost economics has argued that increases in exchange hazards will lead to the greater use of formal governance mechanisms (Mayer/Argyres 2004; Williamson 1991). At the same time, a parallel literature has put its focus on more relational governance mechanisms based largely on trust and social identification, e.g., establishing teams, frequent direct managerial contact, shared decision making and joint problem solving (Gulati 1998; Uzzi 1997).The appropriate balance of formal and relational governance mechanisms in managing relationships is the topic of considerable ongoing research. This special is-sue contributes to this research stream by exploring a set of innovative ideas on the management of inter-organizational relationships. Each of the four articles collected in this issue puts a special focus on governance mechanisms and factors which may determine the monitoring and coordination of these relationships. They reflect the actual variety of inter-organizational relationships, because this issue includes papers on explorative R&D alliances, asymmetric alliances and relationships between industrial buyers and suppliers. The articles also illustrate the theoretical and methodological variety in this field.

Mellewigt, T., Hoetker, G., Weibel, A., "Governing inter-organizational relationships: Balancing formal governance mechanisms and trust (Guest editor's introduction to the special issue)", Management Revue, Vol. 17, No. 1, January, 2006, pp. 5-9. View and download

Choice and performance of governance mechanisms: Matching alliance governance to asset type

Formal and relational governance mechanisms are used in strategic alliances to coordinate resources and mitigate the risk of opportunistic behavior. While recent work has shown that these approaches are not mutually exclusive, we understand little about when one approach is superior to the other. Using data on the governance choices and subsequent performance of alliances in the German telecommunications industry, we find that the optimal configuration of formal and relational governance mechanisms depends on the assets involved in an alliance, with formal mechanisms best suited to property-based assets and relational governance best suited to knowledge-based assets. Furthermore, a mismatch between governance mechanisms and asset type can harm the performance of the alliance. Our findings contribute to transaction cost economics, the literature on relational governance, and recent work studying their interaction.

Hoetker, G. and T. Mellewigt (2009). "Choice and performance of governance mechanisms: matching alliance governance to asset type." Strategic Management Journal 30(10): 1025-1044. View and download