At the interfaces of governance and competence perspectives: Discussing organizational choices in the Scottish biotechnology cluster

Technology Analysis and Strategic Management

Volumn 19, Issue 1, 2007, Pages 45-68

  Rosiello, Alessandro ^a  

^a UNIVERSITY OF EDINBURGH   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

BIOTECHNOLOGY; ECONOMETRICS; TRANSACTION COST;

EURASIA; EUROPE; SCOTLAND; UNITED KINGDOM; WESTERN EUROPE;

EID: 33845760956     PISSN: 09537325     EISSN: 14653990     Source Type: Journal    
DOI: 10.1080/09537320601065308     Document Type: Article

References (149)

1. The arguments discussed in this paper were developed as part of my doctoral research at the Strathclyde University of Glasgow under the supervision of Professor Neil Kay.
2. Authors such as Williamson (O. E. Williamson, Strategy research: governance and competence perspectives, Strategic Management Journal, 20(12), 1999, pp. 1087-1108)
3. Dosi and Marengo (G. Dosi & L. Marengo, On the tangled discourse between transaction costs economics and competence-based views of the firm, some comments, 1999, LEM working Paper, 1999/08)
4. Langlois and Foss (R. N. Langlois & N. J. Foss, Capabilities and governance: The rebirth of production in the theory of the economic organization, Kylos, 52, 1999, pp. 201-218)
5. Foss (N. J. Foss, The Strategy and Transaction Cost Nexus; Past Debates, Central Questions and Future Research Possibilities, working paper Copenhagen Business School, 2002)
6. Madhok (A. Madhok, Reassessing the fundamentals and beyond: Ronald Coase, the transaction cost and the resources-based theories of the firm an the institutional structure of production, Strategic Management Journal, 23, 2002, pp. 535-550) has examined the topic from a theoretical perspective.
7. Others, such as Poppo and Zenger (L. Poppo & T. Zenger, Testing alternative theories of the firm: Transaction cost, knowledge-based, and measurement explanations for make-or-buy decisions in information services, Strategic Management Journal, 19, 1998, pp. 853-877.)
8. Delmas (M. Delmas, Exposing strategic assets to create new technological competencies: The case of technological acquisition in the waste industry in Europe and North America, Industrial and Corporate Change, 8(4), 1999, pp. 635-671)
9. Hagedoorn and Duysters (J. Hagedoorn & G. Duysters, External sources of innovative capabilities: The preference for strategic alliances, mergers and acquisitions, Journal of Management Studies, 39, 2002, pp. 167-191) developed empirical models that integrate explanations drawn from both perspectives.
10. R. H. Coase, The nature of the firm, in: O. Williamson & S. Winter (Eds), The Nature of the Firm: Origins, Evolution, Development (Oxford, Oxford University Press, 1991), pp. 18-33.
11. We refer to prices at equilibrium in perfect competition.
12. O. E. Williamson, 1991, The logic of economic organization, in: O. E. Williamson & S. G. Winter (Eds), The Nature of the Firm: Origin, Evolution, and Development (Oxford, Oxford University Press, 1991), pp. 90-116.
13. Simon (1957) provides a very effective definition of bounded rationality: 'the capacity of human mind for formulating and solving complex problems is very small compared to the problems whose solution is required for objectively rational behaviour in the real world' (H. Simon, Models of Man (New York, Wiley, 1957), p. 160).
14. Op. cit. ref. 5, p. 91.
15. O. E. Williamson, The Mechanisms of Governance (Oxford, Oxford University Press, 1996) p. 60.
16. Op. cit. ref. 5, p. 94.
17. N. J. Foss, Edith Penrose, economics, and strategic management, Contributions to Political Economy, 18, 1999, pp. 87-105.
18. B. Kogut & U. Zander, Knowledge of the firm, combinative capabilities and the replication of technology, Organization Science, 3, 1992, pp. 383-397
19. in: N. J. Foss (Ed.), Resources, Firms, and Strategies, (Oxford, Oxford University Press, 1997), pp. 306-325.
20. D. J. Teece, G. Pisano & A. Shuen, Dynamic capabilities and strategic management, Strategic Management Journal, 18, 1997, pp. 509-533
21. in: N. J. Foss (Ed.), Resources, Firms, and Strategies, (Oxford, Oxford University Press, 1997), pp. 269-285.
22. Op. cit. Williamson ref. 2
23. op. cit. Dosi & Marengo ref. 2.
24. Op. cit. Williamson ref. 2.
25. Ibid., p. 1090.
26. N. M. Kay, Searching for the firm: The role of decision in the economics of organizations, Industrial and Corporate Change, 9(4), 2000a, pp. 683-707
27. N. M. Kay, The growth of the firm, in: N. J. Foss & V. Mahnke (Eds), Competence, Governance and Entrepreneurship (Oxford, Oxford University Press, 2000b), pp. 186-206.
28. Organizational issues are addressed largely in relation to those mechanisms leading to a more effective use of economic resources, with particular emphasis on idiosyncratic and firm-specific knowledge.
29. Op. cit. Dosi & Marengo ref. 2.
30. The 'firm is a bundle of productive resources that falls under the direction of an entrepreneur for the purpose of supplying goods and services to the economy' (E. Penrose, The Theory of the Growth of the Firm (Oxford, Oxford University Press, 1959), p. 15).
31. Op. cit. ref 3
32. R. H. Coase, The firm, the law and the market (Chicago, The University of Chicago Press, 1988).
33. While discussing the role of the entrepreneur, Coase argues that 'there is a planning within our economic system which is quite different from the individual planning mentioned before' -that is to say, resources allocation operated though the price system - 'which is akin to what it is normally referred as economic planning' (op. cit. Coase 1988 ref. 20, p. 35).
34. R. Coombs & J. S. Metcalfe, Organizing for innovation: Co-ordinating distributed innovation capabilities?, in: N. J. Foss & V. Mahnke (Eds), Competence, Governance and Entrepreneurship (Oxford, Oxford University Press, 2000), pp. 209-231
35. R. Davidson & J. G. McKinnon, Estimation and Inference in Econometrics (New York, Oxford University Press, 1993).
36. C. K. Prahalad & G. Hamel, The core competence of the corporation, Harvard Business Review, 68, 1990, pp. 79-91
37. in N. J. Foss (Ed.), Resources, Firms and Strategies (Oxford, Oxford University Press, 1997), pp. 235-256.
38. Op. cit. ref. 12.
39. Op. cit. ref. 11
40. B. Kogut & U. Zander, Knowledge of the firm and the evolutionary theory of the multinational corporation, Journal of International Business Studies, 24(4), 1993, pp. 625-645.
41. R. Grant & C. Baden-Fuller, A knowledge accessing theory of strategic alliances, Journal of Management Studies, 41(1), 2004, pp. 61-84.
42. Op. cit. ref. 23.
43. K. Cowling & R. Sugden, The essence of the modern corporation: Markets, strategic decision making and the theory of the firm, The Manchester School, 66(1), 1998, pp. 59-86.
44. Op. cit. ref. 11.
45. R. Nelson, Why firms differ and why does it matter, Strategic Management Journal, 14, 1991, pp. 61-74
46. in N. J. Foss (Ed.), Resources, Firms and Strategies (Oxford, Oxford University Press, 1997), pp. 257-267
47. S. Ghoshal, M. Hahn & P. Moran, Management competence, firm growth and economic progress, Contributions to Political Economy, 18, 1999, pp. 121-150.
48. Op. cit. Kay 2000b ref. 16.
49. D. J. Teece, Strategies for managing knowledge assets: The role of firm structure and industrial context, in: I. Nonaka & D. J. Teece (Eds), Managing Industrial Knowledge: Creation, Transfer and Utilization (London, Sage Publications, 2001), pp. 125-144.
50. A. Madhok, Reassessing the fundamentals and beyond: Ronald Coase, the transaction cost and the resources-based theories of the firm and the institutional structure of production, Strategic Management Journal, 23, 2002, pp. 535-550.
51. Op. cit. Williamson ref. 2, p. 1090.
52. Op. cit. ref. 8, p. 307.
53. Op. cit. Foss ref. 2, p. 15.
54. Ibid., p. 20.
55. Op. cit. ref. 23.
56. T. Fujimoto, Reinterpreting the resource-capability view of the firm: A case of the development-production systems of the Japanese auto-makers, in: A. D. Chandler Jr., P. Hagstrom & O. Solvell (Eds), The Dynamic Firm (Oxford, Oxford University Press, 1999), pp. 15-44.
57. W. Powell, Inter-organizational collaboration in the biotechnology industry, Journal of Institutional and Theoretical Economics, 152, 1998, pp. 228-240.
58. Ibid., p. 207.
59. Ibid., p. 20.
60. J. H. Dyer and H. Singh, The relational view: Cooperative strategy and sources of interorganizational competitive advantage, Academy of Management Review, 23(4), 1998, pp. 660-679.
61. Op. cit. Nelson ref. 30.
62. Op. cit. Ghosal ref. 30, p. 131.
63. Op. cit. Foss and Langlois ref. 2, p. 15.
64. Ibid.
65. R. Grant, Knowledge and organization, in: I. Nonaka & D. J. Teece (Eds), Managing Industrial Knowledge (London, Sage Publications, 2001), pp. 145-169.
66. Op. cit. Dosi & Marengo ref. 2, p. 7.
67. Ibid., p. 8.
68. Op. cit. Foss ref. 2.
69. G. B. Richardson, The organization of industry, Economic Journal, 82, 1972, pp. 883-896.
70. Op. cit. ref. 28, p. 74.
71. N. M. Kay, The Boundaries of the Firm (London, Macmillan Press Ltd, 1999).
72. Ibid.
73. op. cit. Kay 2000b ref. 16.
74. F. Chesnais, Technological agreements, networks and selected issues in economic theory, in: R. Coombs, A. Richards, P. Saviotti & V. Walsh (Eds), Technological Collaboration (Cheltenham, Edward Elgar, 1996), pp. 18-34.
75. We refer here not only to a departure from a purely transaction cost-based analysis, but also the necessity to distinguish between modes and domains (op. cit. Kay 2000a ref. 16).
76. On the one hand, for Kay (ibid.) strategic control may extend beyond the firm's boundaries as well as market can be found within them. On the other hand, collaborative agreements encompass a number of different arrangements whose rationale consists of gaining a strategically strong position rather than cost reduction.
77. Op. cit. Coase 1988 ref. 20.
78. Op. cit. ref. 8.
79. P. Klein & H. Shelansky, Empirical work on transaction cost economics, Journal of Law, Economics and Organizations, 11, 1995, pp. 335-341.
80. Op. cit. ref. 8.
81. Our definition of collaborative agreements includes a number of arrangementswhose distinguishing features are: (1) they are longer term with respect to standard contracts; (2) they may occur explicitly or implicitly, between two or more firms and organizations; (3) when disputes arise in relation to explicit contracts, they can be resolved either through courts or arbitration; (4) however, as far as implicit and open agreements are concerned, the resolution of disputes requires mutual consent; (5) they may entail forms of co-operative behaviour (e.g. consult, advise, communication) and of reciprocal commitment; (6) they are often supported by social mechanisms that guarantee the parties fromopportunismsuch as trust and reputation; and, (7) they may involve the swap or the sharing of goods or services, rather than exchange for money.
82. In our survey, they are defined as either the purchase of a productive unit or the self-directed development of a specific activity.
83. A. D. Jr Chandler, What's a firm? European Economic Review, 36, 1992, pp. 483-494.
84. Op. cit. Kay 2000a ref. 16.
85. Op. cit. Kay 2000b ref. 16, p. 79.
86. B. Noteboom, Problems and solutions in knowledge transfer, in D. Fornahl & T. Brenner (Eds), Cooperation, Networks and Institutions in Regional Innovation Systems (Cheltenham, Edward Elgar, 2003), pp. 105-125.
87. Op. cit. Madhok ref. 2, p. 540.
88. Ibid., p. 542.
89. Op. cit. ref. 11.
90. J. B. Barney & W. Lee, Multiple considerations in making governance choices: Implications of transaction cost economics, real option theory, and knowledge-based theories of the firm, in: N. J. Foss & V. Mahnke (Eds), Competence, Governance, and Entrepreneurship (Oxford, Oxford University Press, 2000), pp. 305-317
91. R. Sanchez, Demand uncertainty and asset flexibility: Incorporating strategic options in the theory of the firm, in: N. J. Foss & V. Mahnke (Eds), Competence, Governance, and Entrepreneurship (Oxford, Oxford University Press, 2000), pp. 318-331.
92. R. Gulati, Alliances and networks, Strategic Management Journal, 19, 1998, pp. 293-317
93. P. Kale, H. Singh & H. Perlmutter, Learning and protection of proprietary assets in strategic alliances; building relational capital, Strategic Management Journal, 21, 2000, pp. 217-237.
94. P. Patel & K. Pavitt, The wide spread of technological competencies in the world's larger firms: A challenge to conventional wisdom, in: A. D. Chandler Jr., P. Hagstrom & O. Solvell (Eds), The Dynamic Firm (Oxford, Oxford University Press, 1999), pp. 192-213.
95. A. Bureth, S. Wolff & A. Zanfei, Cooperative learning and the evolution of inter-firm agreements in the European electronic industry, in: A. Gambardella & F. Malerba (Eds), The Organization of Economic Innovation in Europe (Cambridge, Cambridge University Press, 1999), pp. 202-239.
96. J. Badaracco, The Knowledge Link (Cambridge, MA, Harvard Business School Press, 1991), p. 105.
97. Op. cit. Kogut & Zander 1993 ref. 25.
98. R. N. Langlois, 'Transaction Costs in Real Time', Industrial and Corporate Change, 1, 1991, pp. 99-127
99. in N. J. Foss (Ed.), Resources, Firms, and Strategies (Oxford, Oxford University Press, 1997), pp. 287-303.
100. Op. cit. Delmas ref. 2, p. 646.
101. Op. cit. ref. 66, p. 115.
102. Op. cit. ref. 77.
103. Op. cit. Hagedoorn & Duysters ref. 2, p. 171.
104. D. J. Teece, Designing issues for innovative firms: Bureaucracy, incentives and industrial structure, in: A. D. Chandler Jr., P. Hagstrom & O. Solvell (Eds), The Dynamic Firm (Oxford, Oxford University Press, 1999), pp. 134-165.
105. Op. cit. Delmas ref. 2.
106. We call this phenomenon technological obsolescence. Environmental conditions such as the faster frequency of introduction of innovation and the shortage of technologies become are seen as critical.
107. Barney and Lee (op cit. ref. 70) argue that economic uncertainty breeds tensions between the transaction cost considerations and the need for increasing flexibility. In this context, strategic option critically refers to the firm's capability to make effective decision about how to access to specific resources and manage inter-firm relationships in an environment characterized by dynamic competition.
108. Op. cit. ref. 12, p. 288.
109. A similar method has been adopted by other studies such as Kogut and Zander (op. cit. ref. 25)
110. Delmas (op. cit. ref. 2)
111. Robertson and Gatignon (T. S. Robertson & H. Gatignon, Technology development mode: A transaction cost conceptualization, Strategic Management Journal, 19, 1998, pp. 515-531).
112. M. Fransman, Designing Dolly: Interactions between economics, technology and science and the evolution of hybrid institutions, Research Policy, 30, 2001, pp. 263-273.
113. The definition of biotech cluster used by Scottish Enterprise includes, among private institutions, dedicated biotech companies, pharmaceutical companies, producers of medical devices, and intermediaries providing specialized services. We did not include in the sample intermediaries.
114. Out of 134, 69 valuable assets had been acquired using standard contacts, 45 using collaborative agreements and 25 through internal development or by the buying up of a plant that was already providing them. Seventy-five were tangibles, while 59 were classified as intangibles.
115. This type of model allows multiple-equation extensions of the basic binary logit. Yet, it is still based on the assumption that error terms are independently distributed as a logistic function and presents the advantage that a likelihood function can be formed and maximized in a straightforward fashion (P. Kennedy, A Guide to Econometrics, 4th edn (Oxford, Blackwell Publishers, 1996). This gives the opportunity to split the data set to test two binomial models: (i) 'spot markets vs. collaborative agreements' and (ii) 'collaborative agreements vs. integrated structures'.
116. The coefficient associated with the variable Complexity is positively and significantly correlated to the selection of collaborative agreements in Tables 1 (P = 0.051) and 2 (P = 0.034). Explanatory variables have been considered as statistically significant at the 5% as well as the 10% level.
117. The coefficient associated with the variable Tacitness is positively and significantly correlated to the selection of collaborative agreements in Tables 1 (P = 0.060), 2 (P = 0.084) and 3 (P = 0.079).
118. I.e. Richardson 1972 (op. cit. ref. 52).
119. Op. cit. ref. 40, p. 231.
120. M. Sharp & J. Senker, Organizational learning in cooperative alliances: some case studies in biotechnology, Technology Analysis & Strategic Management, 9, 1997, pp. 35-50
121. L. G. Zucker, M. R. Darby & J. Armstrong, Commercializing knowledge: university science, knowledge capture, and firm performance in biotechnology, NBER Working Paper No. 8499, 2001.
122. Op. cit. Delmas ref. 2. The coefficient associated with the variable Technological Uncertainty is positively and significantly correlated to the selection of collaborative agreements in Tables 1 (P = 0.000) and 2 (P = 0.001).
123. The coefficient associated with the variable Demand Uncertainty is positively and significantly correlated to the selection of collaborative agreements inTables 1 (P = 0.011 and 0.037), 2 (P = 0.040) and 3 (P = 0.36).
124. Op. cit. Delmas ref. 2, p. 642.
125. Op. cit. ref. 12.
126. The coefficient associated with the variable Sunk Cost is negatively and significantly correlated to the selection of collaborative agreements in Table 3 (P = 0.064).
127. Op. cit. ref. 74
128. P. J. Buckley & M. Casson, Joint ventures, in: P. J. Buckley & J. Michie (Eds), Firms, Organizations, and Contracts (Oxford, Oxford University Press, 1996), pp. 410-428.
129. Op. cit. ref. 54
130. op. cit. ref. 101.
131. The coefficient associated with the variable Shift Suppliers is positively and significantly correlated to the selection of collaborative agreements in Tables 2 (P = 0.028) and 3.
132. The coefficient associated with the variable Redeployability is positively and significantly correlated to the selection of collaborative agreements in Table 1 (P = 0.060).
133. Op. cit. Kay 2000b ref. 16.
134. Ibid.
135. Op. cit. ref. 8.
136. Op. cit. Kale et al. ref. 71.
137. The coefficient associated with the variable Core Assets is negatively and significantly correlated to the selection of collaborative agreements in Table 2 (P = 0.017).
138. The coefficient associated with the variable Legal Protection is negatively and significantly correlated to the selection of collaborative agreements in Tables 1 (P = 0.049) and 3 (P = 0.85).
139. Op. cit. ref. 8.
140. Op. cit. Kale et al. ref. 71.
141. Op. cit. ref. 23.
142. Op. cit. ref. 12.
143. Op. cit. ref. 28, p. 70.
144. Op. cit. Madhok ref. 2.
145. Op. cit. ref. 76.
146. Op. cit. ref. 8
147. op. cit. Foss ref. 2.
148. Op. cit. ref. 23.
149. Op. cit. Barney & Lee ref. 70, p. 307.