JEFFREY H. DYER HARBIR SINGH Realized by: - Sonia Infante - Alice Carboni - Simona Morganti

Sources of competitive advantages Resource based viewIndustry structure view

Supernatural profit jointly generated in an exchange relationship that cannot be generated by either firm in isolation and can only be created through the joint idiosyncratic contribution of the specific alliance partners.

 Investment in relational-specific assets;  Substantial knowledge exchange;  Combining of complementary resources;  Lower transaction costs than competitor alliances.

 Investment in relational-specific assets;  Substantial knowledge exchange;  Combining of complementary resources;  Lower transaction costs than competitor alliances.

Specialization of assets is a “necessary condition for rent” Three kind assets specificity: (Williamson, 1985)

DEFINITIONADVANTAGES SITE SPECIFICITY Successive production stages are located close to one another - Reduce inventory and transport costs; - Lower costs of coordinating activities PHYSICAL ASSET SPECIFICITY Transaction specific capital investments (i.e. customized machinery, tools..) - Allow product differentiation; - May improve quality HUMAN ASSET SPECIFICITY Transaction specific know how accumulated by transactors through long standing relationships - Reduce communication errors; - Increase speed to market

 MALONE, 1987  JOSKOW, 1988  ERRAMILLI & RAO, Site specificity - Physical asset specificity - Human asset specificity - Time specificity - Site specificity - Physical asset specificity - Human asset specificity - Dedicated specificity - Professional skills - Specialized know- how - Customization

1)The length (in years) of the governance arrangement designed to safeguard against opportunism influences the ability of alliance partners to invest in relation specific assets

Japanese automobile producers are successful at building close cooperative ties with suppliers It generated surplus profits and competitive advantages for collaborating firms HOWEVER: REMEMBER!..: there is an opportunity cost associated with maintaining long term, continuous relationships with suppliers

…infact in 1995 Nissan and Toyota supported large teams of more than 60 internal consultants to provide assistance to suppliers TOYOTA CASE -It has built strong and close relationships with its suppliers based on the need for mutual support and a harmonious society -It helped quickly restore normality to production systems after the Great East Japan Earth quake &feature=youtu.be

2)Ability to substitute special- purpose assets for general purpose assets is influenced by the total volume and breadth of transaction between the alliance partners

 Investment in relational-specific assets;  Substantial knowledge exchange;  Combining of complementary resources ;  Lower transaction costs than competitor alliances

Interorganizational learning is critical to competitive success… …but Organizations often learn by collaborating with other organizations

Is the second potential source of interorganizational competitive advantage  Firm’s alliance partners: source of new ideas and information that result in performance-enhancing technology and innovations.

 Alliance partners rents by developing superior interfirm knowledge-sharing routines. Def: “regular pattern of interfirm interactions that permits the transfer, recombination, or creation of specialized knowledge. (Grant, 1996) interfirm processes: are useful to facilitate knowledge exchanges between alliance partners

2. The greater the alliance partners' investment is in interfirm knowledge-sharing routines, the greater the potential will be for relational rents. Many scholars divide knowledge into two types:  information and  know-how

 Information: easily codifiable knowledge that can be transmitted  Know-how : involves knowledge that is tacit, complex, difficult to codify and difficult to imitate and transfer ---However, compared to information, know-how is more likely to result in advantages that are sustainable.

2 (a). The greater the partner- specific absorptive capacity is, The greater the potential will be to generate relational rents through knowledge sharing. 2 (b). The greater the alignment of incentives by alliance partners is to encourage transparency and reciprocity and to discourage free riding, The greater the potential will be to generate relational rents through knowledge sharing

Toyota: knowledge transfers to-and among-suppliers. (These transfers: increase partner-specific absorptive capacity.)

… there is significantly greater knowledge sharing between Toyota and its suppliers than between GM and its suppliers. GM: and its suppliers have a history of keeping innovations proprietary. GM has not cultivated a stable network of supplier companies and consequently, suppliers rationally refuse to engage in costly knowledge-sharing activities

 Investment in relational- specific assets;  Substantial knowledge exchange;  Combining of complementary resources ;  Lower transaction costs than competitor alliances.

“Distinctive resources of alliance partners that collectively generate greater rents than the sum of those obtained from the individual endowments of each partner ”.

Nestle’s brand names and competence in producing soluble coffee and tea Coca-Cola’s powerful international distribution and vending machine network

“ The greater the proposition is of synergy- sensitive resources owned by alliance partners that, when combined, increase the degree to which the resources are valuable, rare and difficult to imitate, the grater the potential will be to generate relational rents”. COMPLEMENTARY RESOURCES ENDOWMENT

1) Ability to identify potential partners and value their complementary resources.  Prior alliance experience;  Evaluation capability ;  Acquisition of information.

2) Ability to develop an organizational complementary.  compatible organizational system, processes and culture

 Investment in relational-specific assets;  Substantial knowledge exchange;  Combining of complementary resources;  Lower transaction costs than competitor alliances

1.Third-party enforcement of agreements informal formal

1)Ability to develop a self-enforcing mechanism rather than a third-party enforcement. Avoid contracting costs Lower costs of monitoring Lower costs of adaptation No time limitation Difficult to imitate

2)Ability to imploy an informal self-enforcing mechanism rather than a formal self- enforcing. Lower marginal costs Difficult to imitate

generated by alliance partners:  -Interorganizational asset interconnectedness  -Partner scarcity  -Resource indivisibility  -Institutional environment

 Interorganizational Asset Interconnectedness alliance partners may need to make "bundles" of related relation specific investments in order to realize the full potential of those investments in an alliance relationship.  Partner Scarcity The creation of relational rents is often contingent on a firm's ability to find a partner with: ---complementary strategic resources ---a relational capability >>

 Resource Indivisibility Partners may combine resources or jointly develop capabilities in such a way that the resulting resources are both: idiosyncratic and indivisible  Institutional Environment An institutional environment that encourages or fosters trust among trading partners may facilitate the creation of relational rents (North, 1990)

 IN SUMMARY… the relational rents generated by alliance partners are preserved because competing firms:  cannot imitate practices or investments  cannot find a partner with the requisite complementary strategic resources or relational capability  cannot access the capabilities of a potential partner because these capabilities are indivisible  cannot replicate a socially complex institutional environment

 RBV VIEW: focuses on individual firms generate supernatural returns based upon resources, assets and capabilities that are housed within firm VS RELATIONAL VIEW: a firm in isolation, irrespective of its capabilities or resources cannot enjoy these rents  RBV VIEW: an individual firm should attempt to protect valuable proprietary know- how VS RELATIONAL VIEW: share valuable know- how with alliance partners  INDUSTRY STRUCTURE VIEW: firms should increase number of suppliers VS RELATIONAL VIEW: firms can increase profits by increasing their dependence on a small number of suppliers

Relationships between firms are an increasingly important unit of analysis for explaining supernatural profit results The relational view offers a useful theoretical lens through wich researches can examine and explore value- creating linkages between organizations …Conclusion…

Thanks for your attention!!!

- “The relational View: Cooperative strategy and Sources of Interorganizational Competitive Advantage”, Dyer and Singh, “Remade in America, translating & transforming japanese management systems”, edited by Jeffrey K. Liker, W. Mark Fruin & Pave S. Adler - “The determinants of inter-firm trust in supplier- automaker relationships in te U.S., Japan, Korea”, Jeffrey H. Dyer, global.com/sustainability/of_initiatives/stakeholders/partners/#sup plier global.com/sustainability/of_initiatives/stakeholders/partners/#sup plier -