TJTS E50 Global Networked Business Models 2008TJTS E50 – Global Networked Business Models 2008 L1:...
Transcript of TJTS E50 Global Networked Business Models 2008TJTS E50 – Global Networked Business Models 2008 L1:...
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Systems
• Reductionism vs. holism• Holism of Aristoteles: "The whole is more than
the sum of its parts".• Origins in Kant: Mechanisms vs. organisms vs.
humans’ autonomous ethical choice– Duality of the freedom of choice between
systems and committing to a controlled system solution
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Systems Thinking(my simplified view)
• Bogdanov – “Tektology: Universal Organization Science”(1912-1917)
• von Bertalanffy – GST (1937)• Churchman (1963)• Ackoff & Emery (1972, purposeful systems)• Checkland – SSM (1981)• Checkland and Scholes (1990)• M.E. Jackson – CST (2000)
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C. West Churchman’s work
• “Churchman many writings are a lifelong struggle against the prevailing methodological and epistemological tendencies in the applied disciplines, and their ever-growing specialization and fragmentation in spite of the common lip service paid to the ideas of interdisciplinarity and comprehensiveness. Their inherent positivism, reductionism, and incrementalism is according to him merely functionalistic and instrumental understanding of rationality that leaves no room for ethical considerations. And perhaps worst, the uncritical stance of most disciplines with respect to these tendencies and their repercussions on the social practice that they claim to improve.” (Ulrich, 1999, c.f. Wikipedia)
• OR, Systems Approach, consulting, conflict resolution in various fields
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Ackoff & Emery (1972)
• Human systems are purposeful systems whose members are also purposeful individuals who intentionally and collectively formulate objectives and are parts of larger purposeful systems. – Participation
• A purposeful, ideal-seeking system/entity: can choose another objective that more closely approximates its ideal.
• Not all purposeful systems/entities seek ideals.
• Machine Age vs. Systems Age – Machine Age = reductionism and simple cause-effect– Systems Age = ‘expansionism’ and producer-product
-systems
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Complex and ‘Soft’ systems
• Complex systems are irreducible• Complex systems possess emergent properties• Complex systems are open systems that self-
organise to reduce entropy
• Soft Systems are in constant interplay with their environment – Perceived real problems– Divergent views about the definition of the
problem– Systemic inquiry to solve those problems
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Seven-stage model of the Soft Systems Methodology (SSM)
(Checkland & Scholes, 1990; Reijonen, 2000)
Problem situation considered problematic
Problem situation expressed
Root definitions of relevant purposeful
activity systems
Conceptual models of the systems (holons)
named in the root definitions
Systems Thinking about Real World
Real World
Action to improve the problem
situation Changes: systemically desirable,
culturally feasible
Comparison of models and real
world
1
2
3 4
5
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Software project planning
Domain of software development
Domain of IS use
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Stakeholders & RootDefinitions (Churchman, 1968;
Checkland, 1985)
• CATWOE grasps the context and process actors– Consumers– Actors– Transformation process– Weltanschauung– Owners– Environment
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SSM is
• A process for a solution, not the solution as such
• Constructivistic• Pragmatic• Intersubjective & participatory
– Process of creating models of interpretations based on different worldviews
– Making models subject to reflection and debate
• Action Research– Researcher is part of the solution (process)
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Reasoning in Systems Theory
• Dynamics• Feed-back• Feed-forward• Association rather than causal explanation• Interaction in higher order
• Abductive reasoning– See also induction, deduction
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Critical Systems Theory (Jackson, 2007)
• Critical and social awareness:– different paradigms of systems thinking– different social contexts
• Boundaries drawn in different ways according to different worldviews
• Pluralism• Creativity, systems based methodology,
implementation.
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Systemic view on an organisation
Res
&
developm
Modularization
Strategy
Sourcing
Prod
plans
PDM
Production
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Make!= DIY
Persuasion
Delivery
Commitments
Finance
Supplier
Customer
Res
&
Developm
Modularization
Strategy
Sourcing
Prod. planning
PDM
Production
TJTS E50 –Global Networked Business
Models 2008 L2: Typologies of production systems, topologoies of networkedbusiness ecosystems
Jukka Heikkilä[email protected]
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Production typologies
• Make-to-Stock (MTS)• Make-to-Order (MTO)• Assembly-to-Order (ATO)• Engineer-to-Order (ETO)• Hybrid• Effects companies needs for
– Making material acquisitions (Scarcity)– Production schedules– Overall strategic planning for the individual company
as well as for the whole value net• As a result, the typologies influence the composition of a
network
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Make-to-Stock(Kankaanpää, 1999)
• Standard goods produced prior to customer order
• Production amounts based on forecasts– Demand histories
• Finished goods stored in warehouses until actual demand arises
• Goods shipped to retailers or directly sold to end-consumers
• E.g. a factory producing standard goods.
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Make-to-Order(Kankaanpää, 1999)
• Similar to MTS-typology• Produces standard goods based on forecasts
– BUT, when customer order is received the production method changes
• Instead of producing goods for the inventory (warehouse), the produced goods under the MTO-typology are (in a way) “sold” by the time they are produced
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Assembly-to-Order(Kankaanpää, 1999)
• Goods assembled from standard assemblies and semi-finished components based on customer specifications
• Combines the different production typologies • Produces semi-finished standard components
– Based on the forecast– Stored in a warehouse
• Customer order converts the production to the final assembly of the product
• E.g. An automobile assembly plant
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Engineer-to-Order(Kankaanpää, 1999)
• Customer order driven product design• Final product is not fully specified at the
moment an actual customer order is accepted• Order triggers the engineering tasks that define
the final specifications of the product• The customer orders mould the process all the
way until the actual production
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Customer Order DecouplingPoint (CODP) 1/2
• Defines which part of the SC is customer orderdriven– Identifies investments made independently of
customer orders – Beyond CODP no anonymous stock exists
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Production typologies and value chain vs. network
• Combining a value chain with varyingproduction typologies– Forecasts– Processes– Inventories
• Scarcity
– Changes in production• Is it a network or a value chain?
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Interconnected business
• Exchange of information between partners, subcontractors, even competitors– Pooled resources
• Breeding environment– Outsourced services, universities, science parks,
financiers, etc.
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Defining a value net (orvalue creating network)
c.f. Bovet & Martha, 2000
• One size fits all• Arm’s length and sequential
• Rigid, inflexible• Slow, static• Analog
• Customer-aligned• Collaborative and systematic
• Agile, scalable• Fast-flow• Digital
Value netSuppliers
Company
Customers
’Traditional’ supply chain
Demand … Manufacturing… Warehousing… Customer forecasting
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Drivers of networked business(Kumar & Van Dissel, 1996)
• Environmental forces– Globalization– Environmental turbulence
• The support role of IT in reducing transaction costs and transaction risks
• Enabling role of IT in making the collaboration feasible• The motives of the co-operating parties dealing with
issues such as:– Resource pooling– Risk sharing– Utilizing relative advantages– Reducing supply-chain uncertainty– Increasing resource utilization.
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The Game of Business (Nalebuff & Brandenburger, 1996)
Competitors
Suppliers
Complementors
Customers
Company
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The Game of Business (Nalebuff & Brandenburger, 1996)
Competitors
Suppliers
Complementors
Customers
Company
A player is your competitor if customers value your product less when they have the other player’s product than when they have your product alone
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The Game of Business (Nalebuff & Brandenburger, 1996)
Competitors
Suppliers
Complementors
Customers
Company
Traditionally, the other companies in your industry- those companies that make similar products to yours in a manufacturing or engineering sense
Example:Coca cola vs. Pepsi
As people think more in solving their customer’s problems, the industry perspective becomes irrelevant.
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The Game of Business (Nalebuff & Brandenburger, 1996)
Competitors
Suppliers
Complementors
Customers
Company
Intel and Air France may end up as competitors as videoconferencing takes off and becomes a substitute for business trips
Paper producers and computer industry can end up as competitors as both offer tools for graphical and textual presentation
What else might my customers buy that would make my product less valuable to them?
How else might customers get their needs satisfied?
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The Game of Business (Nalebuff & Brandenburger, 1996)
Competitors
Suppliers
Complementors
Customers
CompanyA player is your complementor if customers value your product more when they have the other player’s product than when they have your product alone
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The Game of Business (Nalebuff & Brandenburger, 1996)
Competitors
Suppliers
Complementors
Customers
Company
Product & spare parts, maintenance
What else might my customers buy that would make my product more valuable to them?
Hot dogs & mustard
Computing power & sophisticated software
Digital cameras & SoftwarePrintersSpecialty papers
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The Game of Business:Co-opetition (Nalebuff & Brandenburger, 1996)
Competitors
Suppliers
Complementors
Customers
Company
Players often occupy more than one role
-> try to co-operate and compete at the same time (Co-opetition)
Clothing shops are gathered together in a mall
Museums -Compete for paintings etc.-Compete for customers-Co-operate in weekend passes etc.
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The Game of Business:Co-opetition (Nalebuff & Brandenburger, 1996)
Competitors
Suppliers
Complementors
Customers
Company
With whom should With whom should we cowe co--operate operate with?with?
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Tree
• Each link connects exactly to one other linkActor D
Actor CActor F
Actor GActor B
Actor E
Actor A
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Definition of business network
• The network of – connected and interdependent
organisations – mutually and cooperatively working
together – To control, manage, and improve – the flow of materials and information
from suppliers to end-users. (Christopher, 1998)
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Why interest in Networks?
• Individual organisations are already trimmed to be ‘lean-and-mean’,
• Already efficient Supply Chains• improvements easier to achieve in network
relations– Instead of efficiency also agility, adaptiveness
and alignment of goals needed
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What is Smart business network?(Vervest, Preiss, van Heck & Pau, 2005):
• A network of participating businesses – With compatible
goals,– Interacting in novel
ways,– Perceived by each
participant as increasing its own value,
– Sustainable over time as a network.
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Smart Business Network?
Dynamic, chancing pool of local/case-dependentsubcontractors
Subcontractors, static
Network of partners, static
Customer
Dynamic network: Companies ready to be pulled together for a given run and then disassembled to become part of another temporary alignment (Miles & Snow, 1992, pp. 66–67).
Static network: tight relationships with a limited set of actors that also serve organizations outside the network.Business partners carefully selected and tied with contracts
TJTS E50 –Global Networked Business
Models 2008 L3: When firms, when markets? Economics of organizing
Jukka Heikkilä[email protected]
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Division of labour
– Adam Smith (1776)• pin factory is a famous example showing
how division of labour increases output volume.
AN INQUIRY INTO THE NATURE AND CAUSES OF THEWEALTH OF NATIONS;BY ADAM SMITH,
available e.g. fromhttp://www.adamsmith.org/smith/won-intro.htm
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Coordination
“Every organized human activity gives rise to two fundamental and opposing requirements:
1. the division of labor into various tasks to be performed and
2. the coordination of these tasks to accomplish the activity”
(Mintzberg, 1983)
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Three types of dependencies(Thompson, 1967)
• Pooled dependency– Minimal direct contact among participants
• Requires the least amount of coordination
• Sequential dependency– More direct contact among participants as working in a ’chain’
• Requires coordination
• Reciprocal dependency– Much direct contact among participants through interaction
• Requires coordination
• Complexity grows in each type of dependency
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Pooled dependency(c.f. Kumar & Van Dissel, 1996)
• Participants share and use common resources– E.g. common transportation, mainframe
• Socio-technical risks:– Misuse of common pool (core-competencies,
knowledge robbery)– Only some participants add information to
common pool, others as ‘takers’– Infiltration of pool with incorrect information
(intentionally or unintentionally)
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Sequential dependency(c.f. Kumar & Van Dissel, 1996)
• Participants work in series– Output of one firm as input of another firm
• Socio-technical risks:– ‘Breaking the chain’
• Participants failure affects at least the adjacent, possibly all subsequent downstream units
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Reciprocal dependency(c.f. Kumar & Van Dissel, 1996)
• Participants feed tasks and activities back and forth among themselves– Participants receive input from and provide
output to others, often interactively• Socio-technical risks:
– Failure of one participant can have ill-effect both upstream and downstream
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Coordination: Organisation as an information processing entity
(Galbraith J., 1977)
– Uncertainty is the difference between informationrequired and information at hand (for a task)
– Management is to provide coordinationmechanisms to handle uncertainty
• Basic mechanisms: Rules, guidelines, procedures, goals, etc.
• Growing complexity and exceptions overwhelm basicmechanisms: information must be prepared for decisionmaking
– Firms are information processing units. With the help of IT, hierarchies will be able to processinformation timely and precisely (reducinguncertainty)
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Reduce the need forInformation processing
Hierarchy of authorityRules and ProceduresPlanning and goal setting
Creation oflateral relations
Investment ininformationsystems
Creation ofself-containedtasks
Creation of slack resources
Environmentalmanagement
Increase capacity toProcess information
Reduce the need forInformation processing
Hierarchy of authorityRules and ProceduresPlanning and goal setting
Creation oflateral relations
Investment ininformationsystems
Creation ofself-containedtasks
Creation of slack resources
Environmentalmanagement
Increase capacity toProcess information
Galbraith points out the organization must adopt at least one of the strategies when faced with greater uncertainty. If it does not consciously choose one of the five, then the first, reduced performance will happen automatically
((Galbraith J., 1977)Galbraith J., 1977)
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”Invisible hand”
– Adam Smith (1776)
• Free market, while appearing chaotic and unrestrained, is actually guided to produce the right amount and variety of goods by a so-called "invisible hand".
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Organisations versus Markets?
• Why are there firms? • Transaction costs
Nobel Laureate Ronald Coase: The Nature of the FirmEconomica, New Series, Vol. 4, No. 16 (Nov., 1937), pp. 386-405
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Why Firms, Not Markets Only?
• The main differences between market and internal organization: (Williamson, p. 90)
– Markets promote high-powered incentives and restrain bureaucratic distortions more effectively than internal organization
– Markets can aggregate demands to advantage, thereby to realize economies of scale and scope
– Internal organization has access to distinctive governance instruments
♦ Firms exist, because in some situations they can economise on transaction costs better than markets!
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Transaction Costs (Williamson, 1985; original idea in Nature of the Firm, Coase, 1937)
• Transaction costs are “costs of running the economic system” (Arrow, 1969)
• “such costs are distinguished from production costs…Transaction costs are equivalent of friction in physical systems” (Williamson, p.19)– Ex ante contracting– Ex post contract enforcement
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Market vs. Hierarchical Coordination I/II
Hierarchical coordination
InternalAgency
Monitoring costsBonding costsResidual loss
InformationInformation processing costs- communication- documentationOpportunity costs due to poorinformation
(Gurbaxani & Whang, 1991)
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Market vs. Hierarchical Coordination II/II
Market coordination
ExternalCoordination Costs,i.e., TransactionCosts
OperationalSearch costsTransportation costsInventory holding costsCommunications costs
Contractual Costs of writing contractsCosts of enforcing contracts
(Gurbaxani & Whang, 1991)
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Behavioral Assumptions & attributes of contracting process
(Williamson, 1985)
Boundedrationality
Opportunism Assetspecifity
Impliedcontractingprocess
0 + + Planning
+ 0 + Promise
+ + 0 Competition
+ + + Governance
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Transaction Cost Economics (Williamson, 1985)
• Concentrates on contractual aspects of business transactions– Uncertainty– Asset Specificity (‘investment
characteristics’)1. Site specificity2. Physical asset specificity3. Human asset specificity4. Dedicated assets (a discrete investment in
generalized production capacity that would not otherwise be made)
– Frequency & Duration
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Markets vs. Hierarchies• ∆G = ß(k)-M(k),
– i.e. cost difference between Bureaucracy and Market governance of the transaction depending on the asset specificity = k
• Assume ß(0) > M(0),ß(0) - M(0) = ß0 >0
• M’ > ß’ i.e. decreasing curve• Market more preferred
– when k is low, – because of incentive and
bureaucratic disabilities of internal organization
• Internal org more preferred– when k is high, – because market has no
effective governance mechanism to allow adaptive, sequential adjustments to disturbances
Buy Make
€
k
ß0 ∆G
kG
(Williamson, 1985)
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Markets vs. Hierarchies• ∆C is production costs
difference between producing to one’s own requirements and buying the same item in the market
• Assume ∆C is positive throughout but will be a decreasing function of k– The production cost
penalty of using internal organization is high for standardized items, hence ∆C is large when k is low
– As good and services become close to unique, aggregation economies can no longer be realized in the market
€
k
∆G
kG
∆C
∆C
(Williamson, 1985)
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Markets vs. Hierarchies• Aim is to optimize sum
of governance and production costs∆C + ∆G
Market has advantages in both C and G where k << k*Internal org has advantages where k >> k*
Markets realize little aggregate economy benefitsWhen k is high, markets hazardous
Only small differences for intermediate degrees of k
Mixed governance are apt rise
€
k
∆G∆C
∆C + ∆G
k*
Buy MakeMixed governance
(Williamson, 1985)
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Efficient Governance Structures
Investment CharacteristicsNon-specific Mixed Idiosyncratic
Fre
Occasional
(e.g. std.equipment)
Marketgovernance
(e.g. custom equipment) (e.g. construction)
Trilateral governance(neoclassical contracting)
quency
Recurrent
(classicalcontracting)
(e.g. raw material)
Bilateralgovernance
(relational
(e.g. custom material)
Unifiedgovernance
contracting)(e.g. site specific transfer ofintermediate product acrosssuccessive stages)
(Williamson, 1985)
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Move to the Market (Malone et al., 1987)
• Transaction costs, plus an additionaldimension:– Complexity of product description– ’Complexity’ in general (various sources)
• Task• Environment• Interrelatedness/Dependency/Connectedness
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General argument favoring shift towardMarkets (Malone et al., 1987)
• Coordination unit costs reduced by IT– if nothing else is changed– markets are more favourable than before.
”the result of reducing coordination costs without changinganything else should be an increase in the proportion of economic activity coordinated by markets” p. 489
2nd argument favoring shift towardMarkets (Malone et al., 1987)
Market
HierarchyC
ompl
exity
of p
rodu
ctde
scrip
tion
rela
tive
to th
e ca
pabi
litie
sof
the
tech
nolo
gy
High
Low
Asset specificityrelative to the capabilities of the technology
Low High
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”Move to the Middle”(Clemons, Reddi & Row, 1993)
• Earlier, presence of unwanted opportunism leadto vertical integration of companies
• From vertical integration towards cooperation– With utilization of IT
• Lower-relationship specificity• Better monitoring capabilities • Reduction in the costs of IT
• Enables companies to benefit from production economies of large specialized suppliers– The conclusion does not match with Malone et
al., (1987)– Why?
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”Move to the Middle”(Clemons et al., 1993; Coase, 1937)
• Companies degree of outsourcing dependsupon the total cost– Total cost = sum of the production cost and the
transaction cost for producing a givencomponent
• The structure of the firm evolves to select the governance structure and degree of outsourcing that minimizes the total cost?
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”Move to the Middle” (Clemons et al., 1993; Williamson, 1985)
• Transaction cost economies– Finding suppliers from the markets is expensive
(think of the opportunity costsopportunity costs of)• Cost of finding a reliable supplier• Contracting• Monitoring and enforcing the contract• Coordinating with the supplier
• Redefinition of Transaction costs decomposedTC = coordination cost + operations risk +
opportunism risk
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Opportunity cost
• Trade-offs of the decisions you make • The costs of opportunity forgone, excluded
– Only the second best, xor third best, xor the fourth best…
– Important in finding hidden costs• i.e. unnoticed opportunity costs
• Also known as economic cost – It is not only money, but can be anything (e.g.
time)
• Don’t include sunk costs in calculi! – Why?
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The Changing Characteristics of IT
• More detailed description of IT:– Decreasing average unit cost of IT
• increasing economies of scale• informational economies of scale
– Increasing information availability and processing capacity
– Increasing standardization and interconnection
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”Move to the Middle”(Clemons et al., 1993)
• Connection of IT with transaction costs?– IT reduces coordination costs
• Reduces the unit cost of communicating and reacting to information
• OR creates excess information (e-mail)?
– IT lowers operations risk• Increased information availability and processing capacity
enable improved monitoring and incentives
– IT reduces opportunism risk• Hence, “Move to the Middle”-hypothesis:
– A greater degree of outsourcing will take place…– But the firm will rely on fewer suppliers than before…
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IT and the Governance Structure of Outsourcing
• IT is inexpensive and scale-intensive, provides an effective monitoring capability, and is less relationship-specific→ outsourcing
• Fewer Suppliers– Organizational costs of establishing human relationships
and business processes are more significant than IT costs
– Incentives to suppliers– Increased costs and reduced benefits of search
• suppliers are evaluated on lead time, flexibility, reliability, innovation and value-added services.
• Long-Term Suppliers– Time to recoup the investment– Learning curve effects– Incentives
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About technological determinism:
• "Technology is fully determinative of economic organization only if (1) there is a single technology that is decisively
superior to all others and (2) that technology implies a unique organization form.
Rarely, I submit, is there only a single feasible technology, and even more rarely is the choice among alternative organization forms determined by technology.", (Williamson, 1985, p. 87).
• The options for organizing increase; and there is a polarization on the market (check e.g., Gurbaxani & Whang, 1998)
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More nuances needed• Later views on Williamson (among others)
– Criticism• on the dichotomy of market vs. hierarchy• on the dyadic, uncomplicated relationship view on
transaction, whereas in real life complex relationships– ’Firm A, … is a joint subsidiary of firms B and C,
has technical agreements with D and E, subcontracts work to F, is in marketing association with G – and so on. So complex and ramified arethese arrangements, indeed, that the skills of a genealogist rather than an economist might oftenseem appropriate for their disentaglement.” Macneil (1985, p. 496, c.f. Powell (1990) p. 329)
– Credible commitments in relation with size, focus, specialization
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Etiology of Networks (Powell, 1990)
• Powell gave (qualitative) grounds to a number of new concepts and definitions on– ”Non-market, non-hierarchical modes of exchange
represent a particular form of collective action”(Powell, 1990, p. 322):– Co-op as a long run effective arrangement– Networks create incentives for learning and the
dissemination for learning– Open-ended quality of networks beneficial when
resources are variable and the environment uncertain– Especially feasible means of utilizing and enhancing
intangible assets– Tacit knowledge– Technological innovation
– Side-effects– Rationale: Know-how, trust, demand for speed
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Key Features Market Hierarchy Network
Normative Basis Contracts-Property Rights
EmploymentRelationship
ComplementaryStenghts
Means of Communication
Prices Routines Relational
Methods of Conflict Resolution
Haggling-resort to courts for enforcement
Administrative fiat-Supervision
Norm of reciprocity-Reputationalconcerns
Degree of Flexibility
High Low Medium
CommitmentAmong the Parties
Low Medium to High Medium to High
Tone or Climate Precision and/orSuspicion
Formal, bureaucratic Open-ended, mutualbenefits
Actor Preferencesor Choices
Independent Dependent Interdependent
Mixing of Forms Repeat transactions(Geertz, 1978)
Contracts as hierarchicaldocuments(Stinchcombe, 1985)
Informalorganization(Dalton, 1957)
Market-like features: profit centers, transfer pricing(Eccles, 1985)
Status Hierarchies
Multiple Partners
Formal rules
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Side-effects
• Each node/contact point can be a source of conflict– Power (remember Clemons et al.!)
• Dependency & particularism– Networks restrict access (of outsiders)
• Recurring transactions between members• Particular, compatible technologies
-> Increased dependency on the activities and decisions of the others– (remember, Kumar & van Dissel)
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Rationale and antecedents for network forms (Powell, 1990)
• Know-how– Distinctive competencies: Intellectual capital
(=knowledge) or craft based skills in culture, science, design, programming)
• More need for metaknowledge and know-how• Fungible knowledge applicable to wide range of
activities– Object of exchange and organization
• Under what circumstances collaboration and sharedresponsibility?
– On-going, complementary activities -> sharingcritical information -> development of trust -> emergence of common values ,
– Resources & tangibles (equipment, services, patents) on the market/between organisations
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Rationale and antecedents for network forms (Powell, 1990)
• The demand for speed– Fast access to information, flexibility,
responsiveness• Passing information up and down within an
organisation? Acquiring information from the market? Or generating new interpretations i.e., filtered and interpreted through the reliablenetwork nodes?
– ’Thicker’ information than from the market, ’Freer’ information than within a hierarchy
– Risk & expense sharing
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Rationale and antecedents for network forms (Powell, 1990)
• Trust– Co-operation and solidarity, or a sense of generalized
reciprocity (vastavuoroisuus)• In this kind of long-term relationships there is little need to
formalize exchange relationships• Reputation as indications of reliability• Peer monitoring and acceptance/punishment• Quality preferred over quantity
– Northern Italy, Southern Germany, Scandinavia, Far East• Common (homogeneous) background
– Ethnic, geographic, ideological, professional• Institutional contexts
– Legal, political, economic– Skilled labor, security, salaries, external mechanisms for
job-training, relative equity, relaxed anti-trust standards, r&d policy, linkages between universities and industry…
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Research evidence (Holland & Lockett, 1997)
Technologicaldevelopment
Economicforces
Market Complexity
Coordinationstrategy
Assetspecificity
IOS
A firm’sdecisions
Networkstructure
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Research Evidence (Holland & Lockett, 1997)
CASE 1: Personal CommunicationsComponent suppliers
CASE 2: Fashion Stores –Fabric Suppliers
CASE 3: European Computers –IT suppliers
CASE 4: Global Money - Banks
CASE 5: Worldwide FuturesHigh
Marketcomponent %
Low
Low HighHierarchycomponent %
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Research Evidence (Holland & Lockett, 1997)
• Mixed mode hybrid structure – consisting of both markets and hierarchies– also in network form
• Case organizations in steady-state (vs. inherently transient) – conclusion is:– The hybrid structure is relatively stable– The degree will vary, the hybrid structure has
always the market element of competitionensuring change
• Economic forces• Technological development
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Unresolved issues (Powell, 1990)
• Why cross-national variation?• How to explain the diversity of formation of
networks in industries?• Sustainability and rebuild of networks?• Can we find behavioural differences between
forms of organizing?• Simultaneous competition & collaboration?• Performance?• Complexity?• Information processing?• Future orientation?