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1. Facoltà di EconomiaUniversità degli Studi di ParmaCooperation and Competition Among Firms Ch. 3 Provisional Version (1) 2013-14 1
2. Factors (strategies) facilitating cooperation between individuals and firms
3. Factors and mechanisms of type:endogenousexogenous
4. Endogenous Strategies The initial structure of payoffs is unaffected. The likelihood of cooperation depends on variables that: qualify subjectively the participants; define the attributes of the group; reflect the characteristics or the content of collective action.
5. Exogenous Strategies Preferences and characteristics of the participants are taken as given. The likelihood of cooperation depends on: changes in the structure of payoffs; sanctions mechanisms and incentives entered; involvement of agents outside the group differentiation of agents in decision-making roles
6. Endogenous Strategies
7. The shadow of the future One-shot Prisoner’s dilemma Iterated prisoner’s dilemma (IPD)
8. Prisoner’s dilemma D C C 1, 1 -1, 2 D 0,0 2, -1 8
9. Prisoner’s dilemma Dana D C C 1, 1 -1, 2 Andrea D 0,0 2, -1 9
10. Prisoner’s dilemma Dana D C C 1, 1 -1, 2 Andrea D 0,0 2, -1 D,D=0 C,C=1 10
11. Prisoner’s dilemma Dana D C C 1, 1 -1, 2 Andrea D 0,0 2, -1 D,D=0+0 C,C=1+1 11
12. Prisoner’s dilemma Dana D C C 1, 1 -1, 2 Andrea D 0,0 2, -1 D,D=0+0+0+0 C,C=1+1+1+1 12
13. Prisoner’s dilemma Dana D C C 1, 1 -1, 2 Andrea D 0,0 2, -1 D,D=0+0+0+0+0 C,C=1+1+1+1+1 13
14. Prisoner’s dilemma Dana D C C 1, 1 -1, 2 Andrea D 0,0 2, -1 D,D=0+0+0+0+0+0 C,C=1+1+1+1+1+1 14
15. Prisoner’s dilemma Dana D C C 1, 1 -1, 2 Andrea D 0,0 2, -1 D,D=0+0+0+0+0+0+0…. C,C=1+1+1+1+1+1+1…. 15
16. The shadow of the future One-shotPrisoner’s dilemma Iteratedprisoner’s dilemma (IPD) Indefinite Iteration: The value of cooperationat a given stage in an IPD clearlydepends on the odds of meeting one'sopponent in laterrounds. Asp (likelihood to meetone’sopponent in the followingrounds) approaches0, the IPD becomes a one-shot PD, and the value of defectionincreases. Aspapproaches1the IPD becomes an infinite IPD, and the value of defectiondecreases 16
17. 1.1Self-enforcing agreements Incomplete exchange scheme involving two or more imperfectly informed agents.The parties endorse mutual commitments to the continuation of the exchange even if they do not adopt legally binding contracts.The advantage of exchange is evaluated with regard to the difference between the accumulated payoffs of joint cooperation and the payoffs of defection. (example: Buyer-supplier relationships)
18. Self-enforcing agreements can not be applied to transactions involving relationships that develop in a short term horizon. But they are an appropriate solution when the time horizon of the report is expected long-term (indefinite iterated game). The sanction linked to failure to cooperate is not imposed by a third party but consists of the loss of profits of the entire exchange relationship. Sd=Defection payoff Ss=Cooperation payoff P=Accumulated payoff
19. Evenif T>R
20. Self-enforcing Agreements and Interfirm Cooperation infinite timehorizonof the exchange* existenceof a minimum lengthof the exchange certaintyofpunishment reciprocityof the benefitsofongoingexchange (*) “Chainstoreparadox" (Selten,1978) 22
21. 1.2Strategies of reciprocity
22. In the iterated prisoner's dilemma players constantly face the trade-off between maintaining the credibility of the threat (to punish anytime) and sustaining the costs of retaliation  Which strategies will maximize the aggregate benefit from cooperation?
23. Tit for Tat(Axelrod/Rapoport 1984) Tournament (14+62 entries) Unconditionaldefection (ALL D), Tester , etc. TitforTatis a strategybased on reciprocity. Strategy:1) in the first game the agentwhoselectedTitforTatchoosesto cooperate 2) in subsequentroundshemimics the other player's choice: herespondstocooperationwithcooperation and defectionwithdefection.
24. Bible Judges: verse 15:11, (Samson and Philistines) “As they did unto me, so have I done unto them”.
25. Tit for tat https://www.youtube.com/watch?v=QYg8khfc9Fs
26. Main features of Tit for Tat TitforTatis a strategythatis: nice (itisnever the first todefect) retaliatory (toavoid the riskofexploitation) forward-looking (notcutting off the interaction) forgiving (itiswillingto cooperate evenwiththosewhohavedefectedagainstit )
27. Repeatedprisoner’s dilemma Simulator http://www.gametheory.net/Mike/applets/PDilemma/ http://ccl.northwestern.edu/netlogo/models/PDN-PersonIterated (Tit for Tat+Defectors)
28. 1.3“Benefit of the doubt”
29. In TitforTateachactorisableto monitor the actionof the partner (perfect information) Frequently, in the real world, players are notabletoassessaccuratelywhether the choiceof the other party stemsfromanintentionaldecision or itisthe resultof chance, forcemajeure or variablesbeyond the controlof the partner. Bendor, Kramer and Stuot (1991) abandon the assumptionthat the playershaveperfectknowledgeof the choicesmadeby the counterparts and introduce “noisysettings” “Benefit of the doubt”
30. Implications Highlyreactivestrategiestendtoprovidevery low cooperative outcomes; TitforTatin anuncertainenvironmentisdominatedbyotherstrategies; (Asymmetryof the effectsof the errorterm)
31. Strategies of ‘generosity’ In uncertainenvironments, the dominantstrategies are characterizedby "generosity" (see NICE). NICE, foristance, doesnot reciprocate withmutualdefection, butcontinuesto cooperatebyallowing the recoveryof cooperative counterpart. Onlybelow a definedlevelof ex ante cooperation, NICE begintoprogressively reduce their cooperative attitude. In uncertaincontexts ‘benefit ofdoubt’ in the long rungenerates more favorableresultsthan immediate reactivity
32. % C.C 100 90 n. rounds
33. % C.C 5 5 100 90 n. rounds
34. % C.C 5 5 5 100 90 n. rounds
35. % C.C 5 5 5 100 90 n. rounds
36. % C.C 5 5 5 100 90 n. rounds
37. % C.C 5 5 5 100 90 n. rounds
38. % C.C 5 5 5 100 90 n. rounds
39. Mathew 5:38-44 38 "Here's another old saying that deserves a second look: 'Eye for eye, tooth for tooth.' 39 Is that going to get us anywhere? Here's what I propose: 'Don't hit back at all.' If someone strikes you, stand there and take it. 40 If someone drags you into court and sues for the shirt off your back, giftwrap your best coat and make a present of it. 41 And if someone takes unfair advantage of you, use the occasion to practice the servant life. 42 No more tit-for-tat stuff. Live generously. 43 "You're familiar with the old written law, 'Love your friend,' and its unwritten companion, 'Hate your enemy.' 44 I'm challenging that. I'm telling you to love your enemies.
40. Limits Exploitation risks Incomplete Cooperation
41. 2Heterogeneity 43
42. 2Heterogeneity Relevant dimensions: Differences in resource endowment; Heterogeneity in preferences 44
43. Heterogeneity Heterogeneitypromotescollectiveaction (Olson); Heterogeneityinhibitscollectiveaction (Ostrom); The conceptofcritical mass (Maxwell) 45
44. Heterogeneity Olson Cooper Heterog
45. Heterogeneity Olson Cooper Ostrom Heterog
46. Heterogeneity Cooper Maxwell Heterog
47. Heterogeneity Olson Cooper Maxwell Ostrom Heterog
48. Heterogeneity Intermediate levelsofheterogeneitypromotecooperation; Very high and very low levelsofheterogeneitydiscouragecooperation; Heterogeneity in endowments and homogeneity in preferences facilitate cooperation. 50
49. 3Fairness 51
50. Ultimatum game Division of a fixed sum of money S between a Proposer and a Responder. Proposer offers x. If Responder rejects x both earn zero. If x is accepted the Proposer earns S – x and the Responder earns x. 52
51. Ultimatum game Agent A and B cannot communicate Agent A:Receives € 100 and Decides how many € to give to Agent B: (write the ammount of € and pass the card to Agent B) € ... ... ... ... ..=X Agent BAgent B can:a) accept and in this case Agent B receives X and Agent A receives €100-Xb) refuse and in this case both get € = 0 Accepts □ Refuses □ 53
52. Predictions with rational andself-regarding players Offer x=ε; where ε is the smallest money unit. Any x>0 is accepted. 54
53. Experimental regularities Most offers are between 0.3S and 0.5S. x <0.2S is rejected half the time. Competition among Proposers has a strong x-increasing effect. Competition among Responders strongly decreases x. 55
54. 56
55. Interpretation Role of fairness (and economic altruism) Fairness as a behavioral guide Inequality aversion 57
56. Dictator game Like the ultimatum game but the Responder cannot reject what the “Proposer” dictates (S-x, x). 58
57. Predictions with rational andself-regarding players No sharing, i.e., x = 0 59
58. Experimental regularities On average “Proposers” allocate x=0.2S. Strong differences across experiments and across individuals 60
59. 61
60. Third party punishment game Agent A and Agent B play a dictator game. Player A receivesanendowmentof 100 tokensofwhichhe can transfer anyamountto Player B. Player B has no endowment and no choicetomake. Player C hasanendowmentof 50 tokens and observes the transfer of Player A. Afterthis player C can assignpunishmentpointsto Player A. Foreachpunishmentpointassignedto Player A Player C hascostsof 1 token and Player A hascostsof 3 tokens. 62
61. Predictions with rational andself-regarding players Since punishment is costly a self-interested player C will never punish. 63
62. Experimental regularities In the aboveexperimentsPlayers A wereneverpunishediftheytransferred 50 or more tokensto Player B. Roughly 60 percentofPlayers C punished A. The less A transferred, the strongerwas the punishment 64
63. 4Trust 65
64. Trust can be defined as : 1)Reliability/Ability/Competence and/or 2) Fairness/Loyalty/Good Faith/Goodwill Trust (1) 66
65. Trust can be defined as the expectation that other agents will adopt cooperative behavior even when they are not subject to control or direct monitoring. Trust (2) 67
66. Implications If trust is perfect, there is no room for opportunism, and then there will be no social dilemmas. 68
67. Trust as a precondition for cooperation (General)Trust can be seen, not as a factor of cooperation, but as a precondition allowing cooperation projects to be identified and carried out. It is relevant in terms of: a) no ex-ante aversiontowardscooperation b) injection of extra economic value to cooperation as such, with the consequence of canceling the benefits of defection 69
68. Trust as an outcome of cooperation Individual, not general, trust is the output of positive experiences of cooperation and allows for the extension towards further initiatives
69. Trust game In a trust game an Investor receives an amount of money S from the Experimenter, and then can send between zero and S to the Trustee. The Experimenter then triples the amount sent, which we term y, so that the Trustee has 3y. The Trustee is then free to return something (z) between zero and 3y to the Investor. The payoff of the Investor is S – y + z and the payoff of the Trustee is 3y – z. 71
70. Predictions with rational andself-regarding players Trustee repays nothing: z = 0. Investor invests nothing: y = 0. 72
71. Experimental regularities On average y = 0.5S and trustees repay slightly less than 0.5S. Z is increasing in y. Roughly one third of the trustees reciprocated by sending back more than was originally sent. 73
72. 5Social capital 74
73. Social Capital Def. 1: Social capital is the set of personal relationships (formal or not) that an individual has (Burt); Def. 2: Social capital is the endowment of social relations and rules of conduct present in a given community (Putnam) 75
74. Social capital(def.2) Social capital is the output of experiences of civic engagement, participation in associative organizations (cultural, recreational, sports, etc..) and the adherence to the norms that regulate the community life. 76
75. Social capital Def. 2(Extended interpretation) Social Capital facilitates collective action and cooperative practices through: the strengthening of social cohesion (reduction of conflicts, decreasing uncertainty, etc); the increase of information exchange; the strengthening of group identity. 77
76. Social capital Def. 2(Restrictive interpretation) Social capital facilitatescollectiveaction and practical cooperative through the followingmechanism: The networksofcivic engagement providerelationalgoods (contacts, information, reputation). Theseassets can bepreservedonlyifindividualsmaintain positive relations inside the community theybelongto. The fear that in the case of defection the sanction could be ostracism (exclusion from the system of internal relationships), reduces the individual and collective incentives towards opportunism and facilitates cooperation 78
77. Social capital and institutional action Hp. 1 Capital (Civicness) → Selection of the political representation → Control of the work of public administrators → Institutional efficiency → Increased endowment of public goods → Social and economic growth → Extension of the social capital 79
78. Social capital and institutional action Hp. 2 Proactive Institutions → Institutional activism → Increase the endowment of public goods; → Economic and social growth → Growth of civicness → Increase in Social Capital → Selection of the political representation → Control of the work of public administrators 80
79. Social capital and institutional action Implications: Circularity of processes; Role of history (Hp 1: Social capital is inherited from the past); Institutional action (the formation of social capital is affected by institutional initiative) 81
80. 6Group Identity 82
81. Individual and group identity Identity - self-image - can beseenas a componentofindividual utility and isanexplanationforagents’ behaviour in aneconomiccontext(Akerlof and Kranton 2000). 83
82. Individualidentitydevelops in social contexts; Group identityreinforces the senseof self and everyactionthatapproximates the individualto the idealcharacteristicsof the groupincreasesitspersonnel utility; Theseactions can behighlycostly and mayapparentlyconflictwithindividualrationality. Individual and group identity 84
83. Listofritesofpassage (partial) NA (native Indians), SA, Africa: women at menses secluded and taught by elder the art of womanhood. Boys undergo trials to affirm their passage. (first hunt, wilderness alone, warfare (Borneo Tribes). Candomble initiate in Brazil (see below). Dangers in this passage can provide great growth potential Lesse tribe, Zaire: girls reach menarche, secluded with other girls. The Zulus of South Africa, and the Cuna of S. America: girls are secluded during the onset of puberty (safe place). The Ndembu of Zambia: girls secluded 3 months: communicate with outside only with melodic messages played on a harp-like instrument. In Kampuchea : seclusion several years. In all cases, women emerge as women and potential brides. Turkey: sunnet = circumcision (7-8) so boy remembers when he became a "man". Paraded on donkey before sunnet, white robe with red ribbon. After, boys take off red ribbon and sit in a lavishly decorated bed to receive gifts and compliments for bravery. Clitoridectomy (female circumcision): Egypt (even mummies) and other Muslim countries. In Egypt, 75% of the females are circumcised. 1) end the girl's phase of androgyny, 2) curb woman's sexual desires as adult (reduces infidelity). If woman is not circumcised, considered unfit for marriage. Not mandated by Islam, but by culture.
84. Implications The higher the group identification, the greater the propensity of individual agents to underestimate or to accept the risk of defection of some members and develop an optimistic forecast on the overall conduct of the group. 86
85. 7Reputation 87
86. Reputation Reputation can be defined as an individual sunk investment made to signal the personal ability to fulfill the assigned tasks and the level and quality of his/her own commitment. 88
87. Reputation and cooperation Reputation can be identified as a barrier against defection: actors with good reputations tend not to choose defection for fear of cancelling the value of their investment in reputation. 89
88. Written Exam Three questions (an hour and a half) General topics/Slides/Classroom presentation Threshold effect Argumentative approach
89. Written Exam Impact of a sanctioning mechanism on the interaction between economic agents Typologies of social dilemmas: social traps and public goods Technological externalities and cooperation between firms Group size and cooperation between agents Ultimatum game: what it is and what it tells us Self-enforcing agreements: main features Heterogeneity and collective action The tragedy of commons and the implications for the cooperation between agents
90. Exogenousvariables and mechanisms 92
91. Exogenous Strategies Preferences and characteristics of the participants are taken as given. The likelihood of cooperation depends on: changes in the structure of payoffs; sanctions mechanisms and incentives entered; involvement of agents outside the group differentiation of agents in decision-making roles 93
92. 2.1Sanctioning systems 94
93. Introduction: public goods game EachFirm (player) receivesfrom the Experimenterntokens at each round. There are 4 firms and 20 roundsof the game. Firms can invest in a common research project (s) or retain the sum ofmoney (1-s). The Experimenterdoubles the valueof the total investment and dividesby 4. EachFirmmaximizes the individual cumulative income.
94. Changes in the payoffstructure Changes in the structureof the dilemma can alter the incentivesofindividuals and make the adoptionof cooperative behavior more likely. Free ridingmaybereduced or canceledifpunishedthroughcertainsanctions and ex ante knownbyagents. 96
95. Impact of sanctioning Fehr and Gächter (2000) introduced a punishmentopportunityinto the public goods game. In their game there are twostages. Stage oneis a public goods game. In stage two, afterevery player in the grouphasbeeninformedabout the contributionsofeachgroupmember, each player can assign up to ten punishmentpointstoeachof the otherplayers. The assignmentofonepunishmentpointreducesthe first-stageincomeof the punishedsubjectby ten per cent and alsoreduces the incomeof the punisher. 97
96. Impact of sanctioningPredictions with rational and self-regarding players Since punishment is costly for the punisher, the self-interest hypothesis predicts zero punishment. Since rational players will anticipate this, the self-interest hypothesis predicts no difference in the contribution behavior between the standard public goods game and the game with a punishment opportunity. In both conditions zero contributions are predicted. 98
97. Impact of sanctioningExperimental regularities The experimentalevidencecompletelyrejectsthisprediction. In contrastto the standard public goods game, wherecooperationdeclinesovertime and iscloseto zero in the finalperiod, the punishmentopportunitycauses a sharpjump in cooperation and a steady increaseuntilalmostallsubjectscontributetheirwholeendowment. The sharpincreaseoccursbecausefree-ridersoftengetpunished, and the lesstheygive, the more likelypunishment is. Cooperatorsfeelthatfree-riders take unfairadvantage and are thuswillingtopunishthem. 99
98. Impact of sanctioning 100
99. Impact of sanctioning 101 Mascalet et al. 2003
100. 102
101. Impact of sanctioning “The actual rate of punishment is very low in the last few periods: the mere threat of punishment, and the memory of its sting from past punishments, is enough to induce potential free-riders to cooperate” (Camerer and Fehr). 103
102. Monetary and nonmonetary sanctionsMascalet et al. 2003 Monetary sanctions = opportunity of decreasing monetary payoff of other’s player Nonmonetary sanctions (opportunity to communicate a level of disapproval of each other player's contribution) 104
103. Monetary and nonmonetary sanctionsMascalet et al. 2003 “Monetary and nonmonetary sanctions (opportunity to communicate a level of disapproval of each other player's contribution) initially increase contributions by a similar amount. Over time, however, monetary sanctions lead to higher contributions than nonmonetary sanctions. After the opportunity to impose sanctions is lifted, contributions fall to similar levels…”
104. Trust and sanctioning mechanism Mulder,Van Dijk, De Cremer, Wilke (2006) “Sanctioningsystems in social dilemmas are oftenmeanttoincrease trust in others and toincreasecooperation. Sanctioningsystemsmayalsogive people the idea thatothersact in theirownself-interestand undermine the beliefthatothers are internallymotivatedto cooperate. Whenthereis a sanction on defection, trust in othersbeinginternallymotivatedto cooperate isundermined: participants, whohadexperienced the presenceof a sanctioning system, trustedfellowgroupmemberslessthanparticipantswhohadnot. In a similarvein, the sanctionunderminedcooperationwhen trust wasintitially high.”
105. Trust and sanctioning mechanism: monitoring systems 107 Coletti et al. 2004: For improving cooperation firms can enhance the control systems used to govern collaborative agreements. Through increased monitoring, sanctioning, and rewarding, firms can reduce the incentives for opportunistic behavior. Periodic monitoring increases the probability that opportunistic behavior will be detected, and sanctioning (rewarding) systems impose penalties (bonuses) on collaborators who engage in such behavior.
106. Trust and sanctioning mechanism: monitoring systems Prior research suggests that control systems can have unintended negative consequences with regard to trust and cooperation. Specifically, a number of researchers argue that control systems signal mistrust and therefore reduce cooperation. Monitoring costs may be lower than previously believed: control systems may actually engender trust, reinforcing the positive effects of control. Participants cooperate more when there is a control system in place than when there is none.
107. Constraints Change of the structure of payoffs or introduction of sanction rules require collective action. Obstacles affecting cooperation in the original dilemma act with the same intensity when decisions are made to alter the structure of the game 109
108. Entering a sanction system first orderdilemmas (concerning the original problem of collective action); second-orderdilemmas (regarding the provision of mechanisms for sanctioning opportunism; the sanction mechanism is a public good). 110
109. Differences in the nature of dilemmas Elementary cooperation; Instrumental cooperation (Yamagishi 1986) 111
110. The role of instrumental cooperation Second order cooperation can be seen as a costly preplay game. Only the contributors are allowed to join the game and if the contributions are positive the mechanism is provided. The original dilemma will be solved since: 1) No-one will have incentives for defection 2) All the contributors are safe by exploitation 112
111. Large and small groups In smallgroups, social ties, identity and otherfactorsmayactasdeterrentsagainstopportunism and elementarycooperationmotivationmaybesufficient; In largergroups, cooperation can only emerge ifagents are motivatedbyfactorsotherthanthoseofelementarycooperation. Cooperationin largegroupsdepends on the safeguardsagainstopportunism 113
112. Large and small groups In largegroupscooperationdepends on the costofmonitoring and sanctioningaswellas on the expectedlevelofpayoff; In additioncooperationisnot a functionof a timehorizonin whichcollectiveactionisdeveloped; The efficiencyofinvestment in the sanctiongstructuretendstovaryaccordingtogroupsize 114
113. 2.2The centralization of decision-making 115
114. Centralization of decision-making Centralization of decision-making = Allocation of decision-making, sactioning, redistributive tasks to an authority internal to the group 116
115. Pros Reduction of coordination and regulation costs; Increased fairness in the distribution of the output Increase of the efficiency of sanctions; Output closer to the optimum level of cooperation. 117
116. Non-hierarchical Team
117. Non-hierarchical Team N(N-1)/2=15
118. Hierarchical Team (N-1)=5
119. Pros Reduction of coordination and regulation costs; Increased fairness in the distribution of the output Increase of the efficiency of sanctions; Output closer to the optimum level of cooperation. 121
120. Cons Reducing the volume ofinformationexchanged in the group; Stratificationofsocial roles (powerconcentration). 122
121. Empirical evidence The groups deviating most from the optimal use of resources are those that are most ready to adopt solutions to centralize decision-making processes (Rutte and Wilke 1984) Individuals elected for the role of leader are those most able to complete his/her tasks, who show behavior similar to the voters’, who have approximated optimal use of the common resources and have prevented its depletion. 123
122. Individualschosenfor the roleof leader behaveverysimilarlyto the expectationsofthosewhohavevotedthem. Theyimprove the previous performance and tendtolimit the exploitationofindividual and collectiveresources and todistribute aggregate benefits in anequitable way amonggroupmembers Empirical evidence 124
123. Leadership styles Van Vugt, Jepson,Hart, De Cremer 2004: “Researchers have focused almost exclusively on autocratic style (Messick & Brewer, 1983). This has led some analysts to conclude that the only viable solution to social dilemma conflicts is the adoption of a coercive, non-democratic regime. Hobbes asserted that only a strong central authority or leader figure can save society from the ruthless competition of selfish individuals. This is echoed in the work of many contemporary writers who claim that social dilemma stragedies can only be prevented if groups are willing to implement dictatorial solutions (Arrow, 1951; Hardin, 1968; Messick & Brewer, 1983)”.
124. Leadership styles “After group members repeatedly failed to provide the public good through voluntary contributions, they had an opportunity to choose a leader to improve their group’s performance. Among a range of leaders with different styles, an autocratic leader was preferred the least, whereas a democratic, consultative leader was preferred the most.”
125. Leadership styles “Autocratic leadership effectively resolves social dilemmas by forcing members to invest in their group. Although this is true in situations where escape from a group is impossible, in many situations group members not only have a choice between investing or not investing in a group, but also between staying in the group or leaving, thereby affecting the group’s welfare and stability (cf. Ziller, 1965). Stay/exit decisions may have important consequences for a group’s ability to provide public goods, particularly step-level goods, because they require a minimum number of members to contribute. Hence, effective leaders must not only be able to solve the free-rider problem in their groups, but also to keep a sufficient number of members committed to those groups, thereby preventing them from taking their resources elsewhere.”
126. Leadership styles Autocratic leader: effective in long run only if group members are not allow to exit Democratic leader: (control over decision process) effective in step-level public good provision (the group size is crucial); Laissez-faire leader: (leader provides only information) always ineffective
127. “A cluster of firms with different competencies cooperating for the realization of a large plant may, and often do, concede to one firm the right to determine the behaviours of the other firms within a given ‘zone of acceptance”, to coordinate their actions, to speak on everybody’s behalf and to exert technical leadership (Grandori and Soda 1995) Centralization of decision making: goals and forms
128. Centralization of decision making: goals and forms (Gulati and Singh 1998) “The commandstructure, authority systems, and standard operatingproceduresallmakeiteasierto coordinate tasksbetweenpartnersbyclarifyingdecision-makingprocedures and anticipatingissuesbeforetheyarise. …Hierarchicalelements in alliances can effectivelyaddress the anticipatedcoordinationcostsresultingfrominterdependenceforseveralreasons.”
129. Centralization of decision making: goals and forms Joint ventures: A separate administrativeh hierarchy of managers oversees day-to-day functioning and addresses contingencies as they arise. This provides an independent command structure and authoritysystem with clearly defined rules and responsibilities for each partner Minority alliances:Hierarchical supervision is typically created by the investing partner joining the board of directors of the partner that received the investment Contractual alliances:Few if any command structures, authority systems, incentive systems, standard operating systems, dispute resolution procedures, or non-market pricing systems are necessarily part of such arrangements.
130. Centralization of coordination The centralization of coordination means entrusting a limited and specialized subset of agents to define incentives for the synchronisation of courses of action and selection of the coordination equilibrium . 132
131. Centralization and coordination of cost reduction Centralization allows exploitation of economies of scale in gathering relevant information; The reduced number and greater uniformity of decision makers lowers the cost of information transfer and reduces individual informational symmetries. Because they are selected on the basis of their competences, the components of the decision board work without requiring significant additional knowledge investment. 133
132. 2.3 Institutions and Goverments
133. Institutions=rules of games (law; judiciary system; antitrust authority, ecc.)
134. Institutions= Parliaments, Governmental bodies (Ministries; Local goverment, …); Semipublic entities; Branch of public entities; Economic associations, …. Max Weber
135. Institutions and Goverments Coordination of macroeconomic policies (reduction of uncertainty; transaction costs; etc); Industrial policies (providing a route in sectoral change); Increase of social capital; Support to overcome collective market failure (R&D interfirm projects, antitrust, …); Support to collective initiatives ( GI in agriculture and food industry; Unido, etc) Garantees of independent and non opportunistic behavior inside collective action (Consortia).
136. 154.47-015 Kentucky Wood Products Competitiveness Corporation -- Governing board. (1) The Kentucky Wood Products Competitiveness Corporation is created and established, as a de jure municipal corporation and political subdivision of the Commonwealth of Kentucky which shall be a public body corporate and politic, performing functions and purposes essential to improving and promoting the health and general welfare of the people of the Commonwealth through promoting, enhancing, and developing the Commonwealth's secondary wood products industries by: (a) Disseminating information; (b) Providing services; (c) Developing workforce training measures and standards to support value-added functions with regard to design, processing and manufacture, and marketing of wood products; and (d) Providing financial support for the deployment of new or improved technology and world-class manufacturing systems to businesses engaged in the production and manufacture of value-added wood products.
137. (2) The corporation shall be governed by a board of thirteen (13) members, consisting of seven (7) members representing the private sector including four (4) representatives of Kentucky's secondary wood products industry; one (1) member representing the Kentucky Forest Products Council as created and established by KRS 154.47-110; one (1) member representing the Education and Workforce Development Cabinet; and four (4) members representing the following universities with one (1) member each representing the University of Kentucky, the University of Louisville, Eastern Kentucky University, and Morehead State University.
138. (3) The initial appointments to the board shall be made on or before October 1, 1994, in the following manner: (a) Seven (7) private sector members shall be made by the Governor from names of persons submitted on or before August 30, 1994, in the following manner: 1. Two (2) from a list of six (6) nominees from the secondary wood products industry submitted in writing by the Kentucky Wood Manufacturers Network; 2. Two (2) from a list of six (6) nominees from the secondary wood products industry submitted in writing by the Kentucky Forest Industries Association; 3. One (1) from a list of three (3) nominees submitted in writing by the Mountain Association for Community Economic Development; 4. One (1) from a list of three (3) nominees submitted in writing from grass roots community economic development organizations that have a demonstrated interest in the development of secondary wood products industries; and
139. 5. One (1) from a list of three (3) nominees from private business submitted in writing by the Kentucky Economic Development Partnership. (b) The Kentucky Forest Products Council, the secretary of the Education and Workforce Development Cabinet, and the presidents of the University of Kentucky, the University of Louisville, Eastern Kentucky University, and Morehead State University shall each designate a representative of their respective organizations to be appointed by the Governor to the board. (c) If any organization or institution as specified in paragraph (a) of this subsection does not nominate persons for appointment as prescribed therein, the Governor may solicit names from any other source, or he may appoint from the list of names submitted by the remaining organizations. (d) The initial term of office for the seven (7) private sector members shall be staggered so that four (4) members shall serve for a term of three (3) years and three (3) members shall serve for a term of four (4) years. Subsequent appointments shall be made in the same manner as prescribed for original appointments, and shall be for four (4) year terms each. (4) Except as prescribed in subsection (3)(d) of this section and for the appointee representing the Education and Workforce Development Cabinet, all appointments shall have a term of four (4) years. The term for the person appointed from the Education and Workforce Development Cabinet shall be the same as that of the Governor. Any appointment made by the Governor to fill an unexpired term shall be only for the remaining time of the vacated appointment. Nothing contained in this section shall be construed as prohibiting the reappointment of a member of the board to succeeding terms if, the person to be reappointed has been nominated or designated in the manner as prescribed for original appointments set forth in this section. Effective: June 25, 2009 History: Amended 2009 Ky. Acts ch. 11, sec. 44, effective June 25, 2009. -- Amended 2006 Ky. Acts ch. 211, sec. 77, effective July 12, 2006. -- Created 1994 Ky. Acts ch. 224, sec. 3, effective July 15, 1994
140. Topics not fully covered in this course Contractualsafeguards Differences in dyadic and multifirmalliances Specifitiesof single phasesofinterfirmcooperation Factorsinfluencing the evolutionofinterfirmcooperation “Coordinationdevices” Distintive characteristicsofinternationalstrategicalliance management