THE RELATIONAL VIEW: COOPERATIVE
STRATEGY AND SOURCES OF
INTERORGANIZATIONAL
COMPETITIVE ADVANTAGE
JEFFREY H. DYER
HARBIR SINGH
Realized by:
- Sonia Infante
- Alice Carboni
- Simona Morganti
SOURCES OF COMPETITIVE ADVANTAGES
Resource based view
Sources of
competitive
advantages
Industry structure view
WHAT IS THE RELATIONAL RENT?
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.
SOURCES OF RELATIONAL RENT

Investment in relational-specific assets;

Substantial knowledge exchange;

Combining of complementary resources;

Lower transaction costs than competitor alliances.
SOURCES OF RELATIONAL RENT

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)
Human
asset
specificity
Site
specificity
Physical
specificity
DEFINITION
ADVANTAGES
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
…THERE ARE OTHER SCHOLARS THAT HAVE ACKOWLEDGED
THE MULTIDIMENTIONAL PROPERTY OF ASSET SPECIFICITY…



MALONE, 1987
JOSKOW, 1988
ERRAMILLI & RAO, 1993
- 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
SUBPROCESSES OF RELATION- SPECIFIC
ASSETS
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
SUPPLIER RELATIONS: JAPANESE
COMPANIES
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
http://www.youtube.com/watch?v=IrjvfihcboY
&feature=youtu.be
SUBPROCESSES OF RELATION- SPECIFIC
ASSETS
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
SOURCES OF RELATIONAL RENT

Investment in relational-specific assets;

Substantial knowledge exchange;

Combining of complementary resources ;

Lower transaction costs than competitor alliances
INTERFIRM KNOWLEDGE-SHARING
ROUTINES
Interorganizational learning is critical to
competitive success…
…but
Organizations often learn by collaborating with
other organizations
KNOWLEDGE-SHARING ROUTINES:
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
SUBSTANTIAL KNOWLEDGE
EXCHANGE
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.

SUBSTANTIAL KNOWLEDGE EXCHANGE
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
A COMPARISON OF TOYOTA'S AND GM'S
PRODUCTION NETWORKS
Toyota:
knowledge transfers
to-and among-suppliers .
(These transfers:
increase partner-specific
absorptive capacity.)
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
… there is significantly
greater knowledge
sharing between
Toyota and
its suppliers than
between
GM and its
suppliers.
SOURCES OF RELATIONAL RENT

Investment in relational- specific assets;

Substantial knowledge exchange;

Combining of complementary resources ;

Lower transaction costs than competitor alliances.
COMPLEMENTARY RESOUCES
ENDOWMENT
“Distinctive resources of alliance partners that
collectively generate greater rents than the sum of
those obtained from the individual endowments of
each partner”.
COCA-COLA & NESTLE ALLIANCE
Nestle’s brand names
and competence in
producing soluble
coffee and tea
Coca-Cola’s powerful
international
distribution and
vending machine
network
COMPLEMENTARY RESOURCES
ENDOWMENT
“ 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”.
SUBPROCESSES OF COMPLEMENTARY
RESOURCES ENDOWMENT
1) Ability to identify potential partners and
value their complementary resources.
 Prior alliance experience;
 Evaluation capability ;
 Acquisition of information.
SUBPROCESSES OF COMPLEMENTARY
RESOURCES ENDOWMENT
2) Ability to develop an organizational
complementary .
 compatible organizational system , processes and
culture
SOURCES OF RELATIONAL RENT

Investment in relational-specific assets;

Substantial knowledge exchange;

Combining of complementary resources;

Lower transaction costs than competitor alliances
EFFECTIVE GOVERNACE
1.Third-party enforcement of
agreements
2.Self-enforcing agreements
informal
formal
SUBPROCESSES OF EFFECTIVE
GOVERNANCE
1) Ability to develop a self-enforcing
mechanism rather than a third-party
enforcement .
Avoid
contracting
costs
Lower costs
of monitoring
No time
limitation
Lower costs
of adaptation
Difficult to
imitate
SUBPROCESSES OF EFFECTIVE
GOVERNANCE
2) Ability to imploy an informal self-enforcing
mechanism rather than a formal selfenforcing .
Lower
marginal
costs
Difficult to
imitate
MECHANISMS THAT PRESERVE
RELATIONAL RENTS
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
<<< there are strong first mover advantages >>>

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
COMPARING DIFFERENT VIEW…

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
…Conclusion…
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
Thanks for
your
attention!!!
BIBLIOGRAPHY/ SITOGRAPHY
-
-
-
-
-
“The relational View: Cooperative strategy and Sources of
Interorganizational Competitive Advantage”, Dyer and Singh,
1998
“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, 1997
http://www.toyotaglobal.com/sustainability/of_initiatives/stakeholders/partners/#sup
plier
www.youtube.com