Week 7: IORs

Question 1

What is IOR?

Answer 1

Co-operation between two or multiple independent organisations.

Question 2

Why do firms collaborate?

Answer 2

• Globalisation
• Rapid technological transformation
• Technical complexity products

Question 3

Theories of collaboration:

Answer 3

• Resource-based view
• Transaction cost Economic
• Social Network Theory

Question 4

What is Resource- based view?

Answer 4

To merge resources and attempt to activate the optimal configuration of their pooled resources.

Question 5

What is transaction cost economics?

Answer 5

IORs formed to minimize the combination of production and transaction costs of boundary spanning activities of firms

Question 6

What is the social network theory?

Answer 6

Social networks of previous alliances are an important reference point for deciding future alliance formation.

Question 7

What are the benefits of IOR?

Answer 7

• Access to foreign market
• Risk and cost sharing
• Flexibility
• Economies of scale
• Neutralising/ blocking competitiors

Question 8

IOR Disadvantages:

Answer 8

• Cultural clash
• Risk of being dependent on a partner
• Partial loss of decision autonomy
• Management and organisational risk

Question 9

What are the 2 risks in IOR?

Answer 9

• Performanace risk- general risk of unsatisfactory business performance
• Relation risk- the risk of partner not cooperating in goodwill

Question 10

What are the problems in IOR?

Answer 10

• Co-operation problem: Partner firms may seek to attain their own specific goals at the expense of the IOR’s collective objectives
• Co-ordination issues: Issues in spliiting tasks/ struggle to co-ordinate tasks.
• Appropriation concerns: One party may take advantage of another.

Question 11

What are the formal IOCMs to help deal with cooperation, coordination and appropriation problems?

Answer 11

1) Output/ results control
2) Behavioural/ action control

Question 12

What are the informal IOMCs to help deal with cooperation, coordination and appropriation problems?

Answer 12

1) Social, personnel and cultural controls
2) Trust?

Question 13

What are the different types of trust?

Answer 13

• Contract-based trust
• Competence trust
• Goodwill trust

Question 14

What is open-book accounting?

Answer 14

the systematic disclosure & discussion of cost data between supplier & buyer

Question 15

What are the potential problems in open-book accounting?

Answer 15

1) Policy not to share data with any customer
2) Poor cost accounting system
3) Fear of opportunistic behaviour by customer