Collaboration Among Competitors Global Economy Term Paper

  • Length: 8 pages
  • Sources: 20
  • Subject: Economics
  • Type: Term Paper
  • Paper: #60310127

Excerpt from Term Paper :

The firms seek to benefit from whatever a partner has to offer. This is different because size of the firms does not matter as long as each is willing to support the other in mutually beneficial manner. Unlike U.S. collaboration units where financial assistance plays a critical role, in Japan, it is the infrastructure that matters.

Unlike the U.S. conglomerates, which accent financial management, Keiretsu are oriented to cooperate in accord with whatever contribution a family member can make to help the other family member. Business units may be cooperating as suppliers of parts, lenders of capital, contributors of production know-how, or providers of access to markets. All these happen quietly. It takes a lot of digging to find out who is supplying what to whom. Even then, many of the arrangements cannot be uncovered. Most of the agreements will never be known. Keiretsu behavior epitomizes cooperation based on mutual advantage. Keiretsus actively seek out joint ventures with a broad range of partners, all over the world. (Starr: 146)

Similar collaborations are found in other countries as well such as South Korea where inter-firm collaboration is called Chaebols. Interesting close connection between partners is possible in other countries but not in the U.S. where anti-trust laws make it almost impossible to foster deeper connections. This also brings us to the question: why collaboration among competitors is more successful in Japan than it is in the U.S. Foreign competition is what prompted many firms in the U.S. To go global and join other successful firms for various ventures. But in the area of high technology, Japanese firms are still far ahead of the U.S. firm which had once been the dominant player in the industry. The reduced market share of European and U.S. firms in the last two decades caused serious concern. But while collaborations are mushrooming all over the country, they are still not very successful and dissatisfaction level is high. Critics believe that it is the institutional structure, which is contributing to success of collaboration in Japan and the failure of the same in the U.S. Ouchi and Bolton [1988, p 12] argue that, "a society which fails to fully provide the help for the creation of multi-firm industry collaboratives will suffer in global competition with a society which is more completely equipped with a range of institutional forms."

The industry structure in Japan is significantly different from the one present in the U.S. In Japan firms are usually owned by some entity other than the firm itself. These are usually the insurance companies and financial institutions. There is a collective structure where all firms can share information, knowledge for standardization of products and services. This allows for greater collaboration and trust. In the 80s decade when U.S. was losing its dominance in microelectronics industry due to greater fragmentation [Jorde & Teece 1989], Japan was consolidating its position by allowing firms to benefit from latest research conducted through research consortia, such as the VLSI Technology Research Association.

Thus while collaboration is increasing, it is not always either successful or satisfactory within the industrial and economic framework of U.S. businesses. The firms measures success in terms of sales growth because these sales indicate profitability and when this indicator is missing, the collaboration is seen as a failure. Another major problem is that of trust, which U.S. legal framework fails to eradicate. In fact, if anything, the current anti-trust laws only add to the air of mistrust among competitors while collaborating. There have been some successful collaboration but normally the issues of adapting with another firm and its culture have always been there and they continue to hinder the progress of collaborations in the country.

References

Astley, W.G. 1984. Toward an appreciation of collective strategy. Academy of Management Review, 9: 526-535.

Jorde, T.M. And D.J. Teece. 1989. Competition and cooperation: striking the right balance. California Management Review, Spring: 25-37.

Ouchi, W.G. And M.K. Bolton. 1988. The logic of joint research and development. California Management Review, Spring: 9-33.

Parkhe, a. 1993. The structuring of strategic alliances: A game-theoretic and transaction-cost examination of interfirm cooperation. Academy of Management Journal, 36: 794-829. Porter, M.E. 1981. Competitive advantage, New York, NY: The Free Press.

North, D.C. (1990). Institutions, Institutional Change and Economic Performance. Cambridge University Press, Cambridge, UK.

M.K. Starr, Global Corporate alliances and the competitive edge (Westport: Quorum Books, 1991)

Sanford V. Berg and Philip Friedman, "Joint Ventures in American Industry," Mergers and Acquisitions (Summer 1978)

Edgar Herzfeld, (1983) Joint Ventures. Jordan & Sons.

Coopers & Lybrand and Yankelovich, Skelly and White, Inc. (1984) Collaborative Ventures: A Pragmatic Approach to Business Expansion in the Eighties. Coopers & Lybrand.

Williamson, O.E. 1991. Comparative economic organization: The analysis of discrete structural alternatives. Administrative Science Quarterly, 36: 269-296.

Management Monograph No. 54, Recent Experience, p.…

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