Lecture 4a - Business Network Strategies

Question 1

What are the 6 theoretical paradigms from economic to behavioral? (Barringer & Harrison, 2000)

Answer 1

• Transaction cost theory: minimize cost
• Resource dependency: exchange with environment to obtain (VRIN) resources to remain competitive and enhance performance
• Strategic choice: to increase competitiveness and market power
• Stakeholder theory: interdependent web of stakeholders, aiming to fulfull objectives
• Learning theory: Acquire and assimilate it and apply it in a business setting (absorptive capacity)
• Institutional theory: appear ligitimate and conform to prevailing social norms and environmental pressure

Question 2

What are the 4 types of hypotheses of transaction cost theories?

Answer 2

• Electronic market hypothesis: IT reduces market coordination costs, therefore IT leads to more use of markets
• Electronic hierarchy hypothesis: IT enables privileged access to market data formed by small groups of vertically arranged companies that develop close relationships
• Move to the middle hypothesis: Firms move to more outsourcing (electronic markets) as well as on a reduced set of stable partnerships (electronic hierarchies)
• Threatened intermediary hypothesis: IT will lead to the decline of traditional intermediaries because of IT-enabled data exchange

Question 3

What are the 6 types of coupling, ranging from tightly to loosely?

Answer 3

1. Joint venture: Two firms in a network work together based on a contract
2. Network: Less formal, group of firms working together
3. Consortium: Even less legal support
4. Alliance
5. Trade Association
6. Interlocking Directorate

Question 4

What are the advantages and disadvantages of interorganizational relationships?

Answer 4

Advantages:

• Gain access to a resource (RDT)
• Economies of scale (TCT)
• Risk and cost sharing
• Gain access to a foreign market
• Product/ service development
• Learning
• Speed to market
• Flexibility
• Collective lobbying
• Neutralizing or blocking competitors

Disadvantages:

• Loss of proprietary information
• Management complexities
• Financial and organizational risks
• Risk of becoming dependent on a partner
• Partial loss of decision autonomy (do we follow the policies of the network, or our own?)
• Clash of partner cultures
• Loss of organizational flexibility

Question 5

How do capabilities enhance business performance? (Andriole, 2010)

Answer 5

• Collaboration: globalization of business; coordinate discussions; reach more people; audit communication (N=4)
• Rapid Application Development: modify and develop faster; support applications easier; improve requirements modeling (N=3)
• CRM (Salesforce): mine customer data; reach more customers; ask feedback; communicate effectively (N=4)
• Innovation: syndicate innovation; improve success rates; more innovation activities; produce effectively (N=4)
• Training: support training; modify training content; asynchronous learning; codify and distribute content (N=4)
• Knowledge Management: sharing knowledge; retrieve knowledge; organize knowledge; leverage knowledge (N=4)