Contracts and Trust in Alliances

Contracts and Trust in Alliances

Discovering, Creating and Appropriating Value

Paul W.L. Vlaar

Paul Vlaar contends that strategic alliances and other forms of cooperation, such as buyer–supplier relationships, joint ventures and offshoring initiatives, increasingly stand at the basis of competitive advantage. Although contracts and trust play a crucial role in such relationships, prior studies on both governance solutions are generally confined to single theories, paradigms and viewpoints. Drawing on an in-depth case study, survey data and conceptual developments, the author advances a more integrative framework. He probes issues such as: • the tension between the need and the ability to contract • trust and contracts as co-evolving and self-reinforcing phenomena • contractual functions other than coordination and control • dialectical tensions stemming from contract application • standardization of contracting practices. By exploring these topics, the book offers novel perspectives on the role of trust in interorganizational relationships, shifting our attention and creation to the discovery of value by collaborating partners.

Chapter 2: Mainstream Literature: Coordination and Control

Paul W.L. Vlaar

Subjects: business and management, organisational behaviour, strategic management

Extract

While different theoretical perspectives or paradigms may be irreconcilable in their own philosophical terms, when applied to the study of organizational phenomena they are not necessarily incommensurable. (Child, 1997: 44) INTRODUCTION In this chapter, I describe two perspectives on formal interorganizational governance that have dominated the literature for the last three decades. I label those relatively generic views on interorganizational governance the ‘control’ and ‘coordination’ perspectives. The first approach to interorganizational governance is rooted in transaction cost theory and agency theory. The second approach draws its arguments from the behavioural theory of the firm and research on dynamic capabilities. Jointly, both perspectives function as a basis or platform for discussing each of the research themes, which build on and complement the coordination and control perspectives depicted here. MAJOR THEORETICAL PERSPECTIVES ON FORMAL INTERORGANIZATIONAL GOVERNANCE The most common and influential theoretical perspectives describing the role of formal interorganizational governance can be grouped into two broad categories: (1) the ones focusing on formal governance as a mechanism for control, and (2) the ones viewing formal governance as a means of coordination. Although these theoretical perspectives may be irreconcilable in their own philosophical terms, I concur with Child (1997: 44) that ‘when applied to the study of organizational phenomena [different perspectives] are not necessarily incommensurable’. In fact, each of them highlights different aspects of the phenomenon, and both are argued to be deeply intertwined. Emphasizing both the coordination and control perspective connotes with Makadok’s (2003: 1043) statement that ‘future...

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