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 6: Duality and Dialectic Tensions

Paul W.L. Vlaar

Subjects: business and management, organisational behaviour, strategic management


* From a dialectical perspective, then, specific theories are not in any simple sense to be set aside. Rather they are to be superseded in a more encompassing framework. (Benson, 1977: 17) INTRODUCTION The mainstream literature on contracts, rules and procedures presumes that formalization is directed at coordination and control, and that its influence on performance is contingent upon firm, transaction and contextual characteristics. In response to recent calls for inquiries into dialectics in interorganizational relationships, and in an effort to provide managerial choice with a more prominent position in research on interorganizational governance, a complementary perspective is being developed here. I propose a framework in which formalization is presented as a duality, involving tradeoffs between its functions and dysfunctions, and eventuating in dialectic tensions with which managers have to cope. In line with this, I argue that researchers should be preoccupied not only with assessing the ‘rightness’ of governance solutions, but also with the trade-offs and tensions associated with them. The framework is illustrated by a case study of an alliance between a major European financial services firm and one of the world’s leading retailers. The alliance managers in this particular relationship attempted to reduce or capitalize on the tensions associated with formalization by (1) adopting a semi-structure, in which outcomes were formalized, but behaviour was not; (2) justifying formalization through referring to factors that were beyond their control, and (3) alternating their emphasis on different requirements by each of the partner firms. The...

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