Trust (Confidence) Relationships, according to the view of Strategic Management

A Delphi Study on the Role of Trust and Strategic Management

Structuring Cooperative Relationships between Organizations

The brisk development of advances in competitive environment technology , firm strategies and other pressures are encouraging a lot of firms to look for enduring cooperative relationships with other firms These collaborations are considered prompt methods to keep pace especially when the firm is seeking exclusive and original resources However , why are firms engaging in such frequent , contract-based transactions of distinctive assets with the same company when received theory (Coase , 1937 Williamson , 1975 , 1985 ) foresees that

they should be using hierarchical measures ? Powell (1987 ) proposes that these firms are working toward a varied set of business objectives that demands teamwork since they concern reciprocal dependencies . The contract-based governance forms used in pursuing these varied business objectives include strategic alliances (James , 1985 , partnerships (Perlmutter Heenan , 1986 , coalitions (Porter Fuller , 1986 , franchises (Friedlander Gurney , 1981 , research associations (Ouchi Kremen-Bolton , 1988 , and different types of network organizations (Eccles Crane , 1987 Jarillo , 1988 Lincoln , 1990 Powell , 1990

Comparative investigation of the methods available to manage these types of business relationships has been carried out by scholars working within a field of institutional economics now acknowledged as transaction cost economics (TCE (Williamson , 1975 , 1985 . In brief , TCE analysis of governance structure substitutes looks at the following underlying question : when does a manager working towards the types of business objectives stated above utilize the market , rely on her own company , or employ a mixed-mode relationship

Researchers of TCE work on a hypothesis that in resolving this issue managers will be stimulated solely by efficiency matters specifically they will choose the least expensive of these alternatives , considering the collective effects of transaction and production costs (Williamson 1985 ,

. 61 . Other incentives , like equitable outcomes , are not emphasized in these investigations . TCE study assumes that economic players are opportunistic as well . The consequences of trusting behavior in devising governance mechanisms are by and large disregarded

Williamson (1991 ,

. 269 ) highlights that transaction cost economics has been disparaged for it involves polar forms (markets and hierarchies while ignoring intermediate or hybrid forms

The predisposition to underline markets and hierarchies in the expression of the governance question leads to a considerable void in our comprehension of alternatives , while being mindful of alternative modes of governance . This is principally the case in our perception of other forms for the governance of repeated transactions of highly idiosyncratic assets under situations of indecision , and small numbers negotiating , such as transnational joint ventures , extractive resources exploration , or biotechnology research . TCE academics maintain that these types of transactions are best managed by hierarchy for it solves a lot of the problems linked with opportunistic behavior by the contributors . On the other hand , Stinchcombe (1990 ) offers a convincing counter-argument : contracts can be built to imitate hierarchies when judged to be necessary

Stinchcombe 's line of reasoning shows that this exchange happens through a network of contracts (1990 ,

. 236 , but on the other hand as Doz and Pralahad (1991 : 148 ) observe...