Economic perspectives

Abstract

Chapter 2 addresses cooperation from economic perspectives, namely market-power theory, transaction cost economics, agency theory, resource-based theory, transaction value theory, dynamic capabilities theory, real-options theory, and increasing-returns theory. Cooperation can engender market power. Transaction cost economics views cooperation and alliances as potentially cost-reducing methods of organizing business transactions. Agency theory is concerned with the behavior of alliance partners. Both are “agents” of the other and as such systems must be set up to reduce the risk of self-serving opportunism. The resource-based perspective suggests that partners set up alliances to tap into each other’s specialized resources and strategic assets. Transaction value theory focuses on joint value maximization for the collaborative transaction. Alliances can be considered a real option to invest under conditions of uncertainty. Increasing returns are the norm in knowledge-based industries, and the formation of a network of alliances enables companies to operate as significant players in such markets.