THREE DIMENSIONS OF INTERFIRM COOPERATION

There have been attempts to explain interfirm cooperation from different theoretical points of view. Due to such heterogeneity, research has been very scattered and unholistic. Usually researchers have taken only one theory as their point of departure, and they have approached a research problem in a very focused way. This study is an exception, because it strives for holism by combining different theories (cf. Culpan, 1993; Pettersen, 1993: Paasche, Pettersen & Solem, 1993; Roos & Oijord, 1992; Cook & Emerson, 1984). The purpose of combining different theories is to set up a holistic framework for the study and find the essential aspects of interfirm cooperation which we have to focus on if we want to analyze the development process of interfirm cooperation in a holistic way. In this connection we can also talk about theoretical triangulation (see Denzin, 1978, pp. 295). The main theories combined in the present study are transaction cost analysis, resource dependence theory, social network theory by Johannisson, the network theory of the Uppsala school of thought, and strategic management theory. The reason why these very theories have been chosen is that they have been the most often cited theories in the field of interfirm cooperation but none of these theories alone is perfectly suitable for studying SME cooperation and the different nets described in the present study. Thus, by combining the theories it is possible to supplement the weaknesses of different theories.

Transaction cost theory is related to different structures/governance modes (see e.g. Williamson, 1985; Johanson & Mattsson, 1987). Transaction cost theory gives an answer to why there are so many kinds of organizations. The reason for heterogeneity is that transactions differ so greatly and efficiency is realized only if governance structures are tailored to the specific needs of each type of transaction (see Williamson, 1981). A contract is a substitute for trust in this theory, because according to transaction cost theory the lesser the trust, the more formal structures are required for interfirm cooperation. Lack of trust derives from the opportunistic behaviour of firms and from imperfect information. Also power and control are very closely linked to this theory. The Uppsala school of thought represents a network theory which is quite close to transaction cost theory because it also refers to different structures of interfirm cooperation by stating that there exist bonds between firms, the strength of which can vary. Weakly bonded nets are more volatile while strongly bonded nets are more long-term in character (Easton, 1994; Johanson & Mattsson, 1987). Moreover, the Uppsala tradition scrutinizes different nets from the point of view of their resources. Due to different levels of resources, actors have different power positions in nets. Resource dependence theory (Pfeffer & Salancik, 1978) is not too different from the two above-mentioned theories because power, control, uncertainty and trust play an important role in this theory too. In resource dependence theory, however, personal relationships and friendship also appear in the picture while in transaction cost theory the relationships only involve firms, and in network theory firms also take precedence over people. More emphasis on personal relationships is given by Johannisson's social network theory (e.g. 1987) where trust, friendship, commitment and shared values and beliefs are key elements concerning entrepreneurial networking. The history of relationships occupies a key position in Johannisson's frame of reference. Further, strategic management literature focuses on profit maximizing and different levels of objectives and advantages and required inputs and resources (cf. Ansoff, Declerck & Hayes, 1976). The Porterian value chain (1985) refers to the complementarity of resources.

Based on the above-mentioned theories, three different dimensions that have to be taken into consideration when analyzing interfirm cooperation can be found: the strategic, the network management and the socio-psychological dimensions (see also Murto-Koivisto & Vesalainen, 1995; Vesalainen & Murto-Koivisto, 1994; cf. Pettersen, 1993; Paasche et al., 1992, Roos & Oijord, 1992, Cook & Emerson, 1984). In the present study the strategic dimension refers to such variables as the intensity of cooperative efforts and the internal division of work. The network management dimension emphasizes the formality of the net and decision-making style, i.e. the use of power inside a net, while the socio-psychological dimension refers to the commitment and trust of cooperative partners. The intensity of cooperative efforts indicates the level of objectives set for the cooperation and the intensity of cooperation, i.e., how closely the cooperative partners are linked to each other. The objectives in the hierarchical order in regard to intensity from bottom to top can be knowledge transferring, cost division, using common resources, reaching critical mass, e.g., higher capacity or complete product package and developing new common businesses (see Murto-Koivisto, Routamaa & Vesalainen, 1996). This division is based on Ansoff's et al. (1976) and Vesalainen's (1995) classifications concerning different types of organizational behaviour and the use of resources. The internal division of work refers to how overlapping or complementary the partners' resources in a net are (see e.g. Skjerstad, 1994; Roos & Oijord, 1992). Formality of cooperation can vary from informal personal relations to different agreements (oral and written) and corporative arrangements (cf. Bucklin & Sengupta, 1993; Ring & Van de Ven, 1992; Hall, Clark, Giordano, Johnson & Roekel, 1977), and the decision-making style in a net may be either hierarchical, democratic or consensus-based (for more details, see Murto-Koivisto & Vesalainen, 1994; cf. Lincoln, Gerlach & Takalashi, 1992; Parkhe, 1991; Killing, 1988; Lorenzoni & Ornati; 1988). Commitment can be evaluated in terms of investments made for cooperation which can be both money and time (see e.g. Anderson & Weitz, 1992). The level of investments also reveals the level of trust to a great extent, because the general assumption is that trust precedes commitment (see e.g., Huemer, 1994; Morgan & Hunt, 1994).

The development process of interfirm cooperation

Many authors have approached the development process of interfirm cooperation by classifying different development phases (see e.g., Benassi, 1995; Hovi, 1995; Pettersen, 1993; Bronder & Pritzi, 1992; Lorange & Roos, 1992; Butler & Hansen, 1991; Devlin & Bleackley, 1988). Usually authors have identified three, four or five different external phases that are characterized by certain recognizable elements. As a synthesis based on earlier classifications, four different phases are presented which in the assumed chronological order are: formation, configuration, implementation and dissolution.

Regardless of the fact that the different development models have been considered process models they are quite undynamic in nature because they do not take into account the variability of time-spans and the possibility that some net may also develop backwards, i.e., return to earlier phases and start a development process again. Moreover, those models do not reveal the internal processes or adaptation processes that have to be gone through inside a net before a net can proceed to the next development phase (cf. Ring & Van de Ven, 1994). The adaptations made by partners have an ability to strengthen and deepen cooperation, but in spite of that these internal adaptation processes have been neglected in earlier studies. (cf. Niederkofler, 1991; Dubini & Aldrich, 1991; Parkhe, 1991). Most of the earlier development models are not life-cycles of interfirm cooperation either, because they usually end with the implementation or management phases (cf. Kogut, 1987). These models seem to ignore that nets are mostly only temporal, although they may function for several years (cf. Ring & Van de Ven, 1994; Niederkofler, 1991). They have forgotten that nets are not meant to be life-long because continuous changes require adaptations and a net that is built for a certain purpose is not necessarily able to adapt to new requirements. Instead new actors, resources and activities are required to fulfill new tasks. Naturally, the more intensive the exchange process among firms are the stronger will be the will to make adaptations (Johanson & Mattsson, 1987; see also Parkhe, 1991; Lorange & Roos, 1987).

In the empirical part the development process of interfirm cooperation will mainly be dealt with through those three dimensions and variables of them that were earlier presented. The different development phases will be used to describe the approximate points of time of the process. The assumption is that there is a connection between the main variables (cf. Pettersen, 1993), which can be seen in the research setting in Figure 1. The purpose of the arrows in the figure is to point to the unclarified problem, i.e., how different dimensions will be located in relation to each other in the development process and particularly in the implementation phase. Most clearly related to the research setting of the present study are, however, Pettersen's (1993) and Ring and Van de Ven's (1994) studies because both of them took also into account the aspect of process. Ring and Van de Ven clarified the balance between informal and formal processes thus concentrating on the socio-psychological and network management dimensions of the present study while Pettersen (1993) in his doctoral dissertation assumed that there are certain given characteristics in (a) the enterprises, (b) the relationships, (c) the network, and (d) processes tied to the development that are essential aspects to be taken into consideration in connection with interfirm cooperation.

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