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EXECUTIVE SUMMARY
The purpose of this paper is to delineate the conditions and governance structures that facilitate cooperation among firms, which are by default competitors. The theoretical lenses of resource dependence theory, institutional theory, and transaction cost theory are employed to show how organizations can coordinate to achieve the optimum level of cooperation along two dimensions, uncertainty and technology. An alternative paradigm of competitive interdependencies is presented, based on the classical notion that organizations by nature are cooperative systems with harmonious interdependence among subsystems. This paper aims to contribute to the competitiveness literature by showing that mutual gains from collaborative advantage are not only possible in assuming infinite possibilities for creating value, but necessary for long-term organizational survival.
Keywords: Cooperation, Uncertainty, Technology, Resource Dependence Theory, Institutional Theory, Transaction Cost Theory
INTRODUCTION
Pooling resources and responding to threats are two conventional reasons for establishing cooperative efforts (Axelrod, 1984). While the notions of free markets and unremitting competition pervade U.S. culture and remain embedded in its laws and regulations (Browning, Beyer, & Shetler, 1995), the challenges confronted by organizations suggest a growing need to sustain profitability through cooperation. Hamel and Breen (2007) suggested the following as new challenges for organizations: competitive advantage is eroding more rapidly than ever before; deregulations along with new technology are dramatically reducing the barriers to entry across wide range of industries; de-verticalization, disintermediation and outsourcing are leaving business firms with less and less control over their destinies; digitization is threatening companies in intellectual-based industries; the internet is rapidly shifting bargaining power from producers to consumers; plummeting communication costs and globalization are opening up industries to ultra-low-cost competitors.
Research has shown that, in industries with rapidly changing technologies, proprietary standards create an intense level of competition fueled by the law of increasing returns: the "firstest with the mostest" gets farther and farther ahead (Arthur, 1990). Thus, a paradox arises: to be at the apex of competitive prowess an organization inevitably engages in the pooling of resources in order to respond to threats in the competitive domain, precisely acts characterized by Axelrod (1984) to engender cooperation. To the extent that competition is a de facto force that propels the market and organizations need resources, legitimacy, and efficient transactions from other organizations to effectively...