Does Familiarity Breed Trust? The Implications of Repeated Ties for Contractual Choice in Alliances

Exploring the factors that explain the choice of governance structures in interfirm alliances, this study challenges the use of a singular emphasis on transaction costs. Such an approach erroneously treats each transaction as independent and ignores the role of interfirm trust that emerges from repeated alliances between the same partners. Comprehensive multiindustry data on alliances made between 1970 and 1989 support the importance of such trust. Although support emerged for the transaction cost claim that alliances that encompass shared research and development are likely to be equity based, there is also strong evidence that repeated alliances between two partners are less likely than other alliances to be organized using equity.

[1]  K. Llewellyn,et al.  WHAT PRICE CONTRACT? -AN ESSAY IN PERSPECTIVE , 1931 .

[2]  Stewart Macaulay.  Non-contractual relations in business: a preliminary study , 1963 .

[3]  E. Ramsden.  Group Process and Productivity , 1973 .

[4]  K. Arrow.  The limits of organization , 1974 .

[5]  H A Juris,et al.  The economics of collective action. , 1976, A report of the ... National Forum on Hospital and Health Affairs. National Forum on Hospital and Health Affairs.

[6]  G. Simmel.  The Philosophy of Money , 1979 .

[7]  Peter V. Marsden,et al.  Introducing Influence Processes into a System of Collective Decisions , 1981, American Journal of Sociology.

[8]  R. Eccles.  The quasifirm in the construction industry , 1981 .

[9]  Kirk Monteverde,et al.  Appropriable Rents and Quasi-Vertical Integration , 1982, The Journal of Law and Economics.

[10]  R. Smiley,et al.  Co-Operative Agreements and the Organization of Industry , 1983 .

[11]  O. Williamson.  Credible Commitments: Using Hostages to Support Exchange , 1983 .

[12]  R. Dore.  Goodwill and the Spirit of Market Capitalism , 1983 .

[13]  D. H. Mills.  The Logic and Limits of Trust , 1983 .

[14]  S. Masten.  The Organization of Production: Evidence from the Aerospace Industry , 1984, The Journal of Law and Economics.

[15]  G. Walker,et al.  A Transaction Cost Approach to Make-or-Buy Decisions , 1984 .

[16]  Linda Weiss,et al.  The Italian state and small business , 1984, European Journal of Sociology.

[17]  John H. Aldrich,et al.  Linear probability, logit and probit models , 1984 .

[18]  Thomas Palay,et al.  Avoiding Regulatory Constraints: Contracting Safeguards and the Role of Informal Agreements , 1985 .

[19]  Charles F. Sabel,et al.  HISTORICAL ALTERNATIVES TO MASS PRODUCTION: POLITICS, MARKETS AND TECHNOLOGY IN NINETEEN-THCENTURY INDUSTRIALIZATION , 1985 .

[20]  A. V. D. Ven,et al.  Sociologists, Economists, and Opportunism , 1985 .

[21]  Mark S. Granovetter.  Economic Action and Social Structure: The Problem of Embeddedness , 1985, American Journal of Sociology.

[22]  J. Lewis,et al.  Trust as a Social Reality , 1985 .

[23]  W. Diebold,et al.  The Second Industrial Divide , 1985 .

[24]  Karen J. Hladik.  International joint ventures: An economic analysis of U.S.-foreign business partnerships , 1985 .

[25]  Trond Petersen,et al.  A Comment on Presenting Results from Logit and Probit Models , 1985 .

[26]  Sanford J. Grossman,et al.  The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration , 1986 .

[27]  L. Zucker.  Production of trust: Institutional sources of economic structure, 1840–1920. , 1986 .

[28]  Paolo Leon.  The Economic Institutions of Capitalism , 1986, The Antitrust Bulletin.

[29]  B. Wernerfelt,et al.  Technical change, competition and vertical integration , 1986 .

[30]  W. Dugger.  The Economic Institutions of Capitalism , 1987 .

[31]  P. Joskow.  Contract duration and relationship-specific investments: Empirical evidence from coal markets , 1987 .

[32]  J. Hackman,et al.  The design of work teams , 1987 .

[33]  R. Fernandez,et al.  Social networks and social movements: Multiorganizational fields and recruitment to Mississippi Freedom Summer , 1988 .

[34]  J. Hennart,et al.  A transaction costs theory of equity joint ventures , 1988 .

[35]  S. Lenway,et al.  Cooperative Strategies in International Business , 1988 .

[36]  D. Teece,et al.  Joint Ventures and Collaborative Arrangements in the Telecommunications Equipment Industry , 1988 .

[37]  G. Pisano.  Using Equity Participation to Support Exchange: Evidence from the Biotechnology Industry , 1989 .

[38]  B. Kogut.  The Stability of Joint Ventures: Reciprocity and Competitive Rivalry , 1989 .

[39]  R. Osborn,et al.  Forms of Interorganizational Governance for Multinational Alliances , 1990 .

[40]  John W. Clarr.  Cooperative Strategies in International Business , 1990 .

[41]  W. Baker.  Market Networks and Corporate Behavior , 1990, American Journal of Sociology.

[42]  Joseph L. Badaracco,et al.  The knowledge link , 1990 .

[43]  Rosabeth Moss Kanter,et al.  Inter-organizational Bonds and Intra-organizational Behavior: How Alliances and Partnerships Change the Organizations Forming Them , 1991 .

[44]  N. Nohria,et al.  Global strategic linkages and industry structure , 1991 .

[45]  G. Davis.  Agents without Principles? The Spread of the Poison Pill through the Intercorporate Network , 1991 .

[46]  Y. Doz,et al.  Managing DMNCs: A search for a new paradigm , 1991 .

[47]  Terry L. Amburgey,et al.  Strategic momentum: The effects of repetitive, positional, and contextual momentum on merger activity , 1992 .

[48]  P. Ring,et al.  Structuring cooperative relationships between organizations , 1992 .

[49]  Sachin Gupta,et al.  An empirical analysis of consumer durable replacement intentions , 1992 .

[50]  Andrea L. Larson.  Network Dyads in Entrepreneurial Settings: A Study of the Governance of Exchange Relationships , 1992 .

[51]  Blair H. Sheppard,et al.  Business on a handshake , 1992 .

[52]  Andrew H. Van de Ven,et al.  The Institutional Theory of John R. Commons: A Review and Commentary , 1993 .

[53]  Arvind Parkhe.  Strategic Alliance Structuring: A Game Theoretic and Transaction Cost Examination of Interfirm Cooperation , 1993 .

[54]  O. Williamson.  Calculativeness, Trust, and Economic Organization , 1993, The Journal of Law and Economics.

[55]  S. Balakrishnan,et al.  Information asymmetry, adverse selection and joint-ventures* Theory and evidence , 1993 .

[56]  E. Zajac,et al.  FROM TRANSACTION COST TO TRANSACTIONAL VALUE ANALYSIS: IMPLICATIONS FOR THE STUDY OF INTERORGANIZATIONAL STRATEGIES* , 1993 .

[57]  C. Sabel.  Studied Trust: Building New Forms of Cooperation in a Volatile Economy , 1993 .

[58]  O. Williamson.  Comparative Economic Organization: The Analysis of Discrete Structural Alternatives , 1994 .