Relational exchange arrangements supported by trust are commonly viewed as substitutes for complex contracts in interorganizational exchanges. Many argue that formal contracts actually undermine trust and thereby encourage the opportunistic behavior they are designed to discourage. In this paper, we develop and test an alternative perspective: that formal contracts and relational governance function as complements. Using data from a sample of information service exchanges, we find empirical support for this proposition of complementarity. Managers appear to couple their increasingly customized contracts with high levels of relational governance (and vice versa). Moreover, this interdependence underlies their ability to generate improvements in exchange performance. Our results concerning the determinants of these governance choices show their distinct origins, which further augments their complementarity in practice. Copyright © 2002 John Wiley & Sons, Ltd.

Do formal contracts and relational governance function as substitutes or complements

This paper analyzes the recent progress in the understanding of a class of organizations known as hybrid forms. The growing literature on these forms, standing between markets and hierarchies, raises important questions about their nature and role in a market economy. Adopting a transaction-cost perspective, the paper first confronts the conceptual problem posed by this apparently heterogeneous set of arrangements. It then proceeds to explore the attributes characterizing their mode of coordination. The last section examines the complex forms of "government" adopted by these arrangements and proposes a model for encapsulating these properties. The conclusion emphasizes several remaining issues.

/pdf/the-economics-of-hybrid-organizations-37dxhuaq07.pdf

The Economics of Hybrid Organizations

Transaction cost economics (TCE) is one of the leading perspectives in management and organizational studies, yet debate continues regarding its empirical support. In this paper, we take stock of the large body of extant research and provide a systematic assessment of empirical evidence. In all, 308 statistical tests from 63 articles, selected according to a set of clear criteria, were examined across various dimensions. We assess not only the level of empirical support for the theory, but also the degree of paradigm consensus present in the empirical literature. Our analysis shows that results are mixed: while we found support in some areas (e.g., with regard to asset specificity), we also found considerable disagreement on how to operationalize some of TCE's central constructs and propositions, and relatively low levels of empirical support in other core areas (e.g., surrounding uncertainty and performance). We conclude that a more thorough empirical grounding of the theory's foundation is crucial to its future development, and offer several strategies for doing this. Copyright © 2003 John Wiley & Sons, Ltd.

A systematic assessment of the empirical support for transaction cost economics

Knowledge, Networks, and Knowledge Networks A Review and Research Agenda

Since the publication of Williamson's Markets and Hierarchies, many empirical articles have investigated the tenets of transaction cost theory. Using meta-analytic techniques, we quantitatively syn...

https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=6191&context=lkcsb_research

Make, Buy, or Ally: A Transaction Cost Theory Meta-Analysis

Two economic theories that have had an immense impact on modern strategic management research are Porter's strategic positioning framework (SPF) and Williamson's transaction cost economics (TCE). While both theories have contributed to our understanding of strategic management and to the choice of strategy and structure, each theory offers managerial prescriptions that are incomplete at best. We contend that if followed in isolation, each theory can lead to inferior performance. This paper, which studies the international courier and small package (IC & SP) services in Japan, improves upon prescriptions from both theories by linking Porter's and Williamson's approaches. Our main proposition is contained in three relationships that predict a fit among three strategic choices: market position, resource profile, and organizational structure. We test our predictions with a three-stage, reduced-form, endogenous self-selection model. While our empirical methodology is complicated and relies on a multilevel analysis, the methodology is necessary both for analyzing a constellation of activities in the vertical chain and for assessing strategy, structure, and performance when data can be drawn from only a limited number of firms. Our results suggest that a firm's market position, resource profile, and organizational choice are related in ways predicted by a positioning-economizing perspective, To be sure, our study is ambitious and suffers from a number of limitations; nevertheless, it provides one of the first attempts to theoretically and empirically link Porter's SPF and Williamson's TCE.

/pdf/market-position-resource-profile-and-governance-linking-1sai8gbiqc.pdf

Market position, resource profile, and governance: linking Porter and Williamson in the context of international courier and small package services in Japan

Prior research suggests that equity joint ventures (JVs) are particularly effective vehicles for accessing complex technology. Different schools of thought have emphasized different reasons why joint ventures might support greater knowledge transfer than “bare” license agreements: incentive alignment, organizational embeddedness, and enhanced administrative controls. We probe and refine these theoretical perspectives, drawing out implications of the different theories for the extent and speed of alliance-related knowledge transfer, as well as for knowledge “leakage” in areas not directly related to alliance activities. Using a proprietary data set derived from regulatory filings with the Japanese government we test these implications in our empirical analysis of U.S.-Japan agreements. The picture that emerges from the analysis is one of particularly intense but contained knowledge transfer in equity joint ventures, relative to bare license agreements: knowledge transfers directly related to the alliance activity are enhanced in the JV, and the speed of integration into the Japanese firm's subsequent innovations also increases. In marked contrast, leakage of unrelated technology is significantly reduced. These findings suggest that administrative structures that reduce technology leakage are a key feature of the equity joint venture, a result that is inconsistent with a “pure” knowledge-based perspective on alliances.

Alliance Structure and the Scope of Knowledge Transfer: Evidence from U.S.-Japan Agreements

Despite many empirical studies having been carried out on examiner patent citations, few have scrutinized the obstacles to prior art searching when adding patent citations during patent prosecution at patent offices. This analysis takes advantage of the longitudinal gap between an International Search Report (ISR) as required by the Patent Cooperation Treaty (PCT) and subsequent national examination procedures. We investigate whether several kinds of distance actually affect the probability that prior art is detected at the time of an ISR; this occurs much earlier than in national phase examinations. Based on triadic PCT applications between 2002 and 2005 for the trilateral patent offices (the European Patent Office, the US Patent and Trademark Office, and the Japan Patent Office) and their family-level citations made by the trilateral offices, we find evidence that geographical distance negatively affects the probability of capture of prior patents in an ISR. In addition, the technological complexity of an application negatively affects the probability of capture, whereas the volume of forward citations of prior art affects it positively. These results demonstrate the presence of obstacles to searching at patent offices, and suggest ways to design work sharing by patent offices, such that the duplication of search costs arises only when patent office search horizons overlap.

/pdf/obstacles-to-prior-art-searching-by-the-trilateral-patent-3kn5po5y6u.pdf

Obstacles to prior art searching by the trilateral patent offices: empirical evidence from International Search Reports

Despite large numbers of empirical studies being conducted on examiner patent citations, few have scrutinized the cognitive limitations of officials at patent offices in searching for prior art to add patent citations during patent prosecution. This research takes advantage of the longitudinal gap between international search reports (ISRs) required by the Patent Cooperation Treaty (PCT) and subsequent examination procedures in national phases. It inspects whether several kinds of distances actually affect the probability that a piece of prior art is caught at the time of ISRs, which is much earlier than national phase examinations. Based on triadic PCT applications for all of the triadic patent offices (European Patent Office (EPO), United States Patent and Trademark Office (USPTO), and Japan Patent Office (JPO)) between 2002 and 2005 and their citations made by the triadic offices, evidence shows that geographical distances negatively affect the probability of prior patents being caught in ISRs, while a lag of prior art positively affects the probability. Also, the technological complexity of an application negatively affects the probability, whereas the size of forward citations of prior art affects it positively. These results show the existence of cognitive restrictions borne by officials at the patent offices, and suggest issues for designing work sharing by patent offices, in that the duplication of search costs exists only where search horizons of patent offices overlap each other.

Cognitive Distances in Prior Art Search by the Triadic Patent Offices: Empirical evidence from international search reports

Previous studies' finding of the lower R&D investment of family firms raises the question of how such firms can survive in research-intensive environments. Our analysis of Japanese pharmaceutical f...

Contact Hitters or Power Hitters? R&D of Family Firms in the Japanese Pharmaceutical Industry

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