In presenting the concepts and the logical structure of the reasoning offered by game theory and their applications, the book explains the rational process of decision making in the framework of firm management and market competition. The book will expose both general teachings and a comprehensive analysis applied to specific case studies of various sectors of the economy.
From Traditional Forms of Cooperation Toward New Collaborative Practices
Understanding the phenomenon of cooperation mainly depends on how we define "agreement". The purpose of this chapter is to carry out an in-depth study of the concept of cooperation. The general characteristics of cooperation agreements (object, actors involved, products/services concerned and duration) are introduced in the first section of this chapter. The main forms of cooperation are analyzed in the second section, which will enable us to provide a general definition for agreements. This chapter concludes with a typology of agreements.
1.2. What is cooperation?
The tools used for defining cooperation are numerous and vary according to the authors. The definitions we will consider in this chapter can be articulated around four chief axes: the object of cooperation, the different actors involved, products/services and applications, and duration of agreements.
1.2.1. The object of cooperation
Our intention is not to analyze the different motivations that entice the companies to cooperate (risk-sharing, the pursuit of economies of scale and/or of economies of scope, sharing distinctive resources and/or fundamental competencies and so on) but to stress its main purpose and the means to achieve it. [TEE 92] provides an ample definition:
"Agreements characterized by the commitment of two or more firms to reach a common goal, involving the pooling of resources and activities."
Cooperation would not be possible unless each part expected to get at least as much as it would have obtained had it remained independent; that is to say, unless there was a mutual gain. Each actor assesses benefits and costs, at least in a rudimentary way, but the result of cooperation is not always evident.
One of the main difficulties is the distribution of gains among the different members of the partnership. Cooperation should guarantee enough benefit appropriation not only at the moment when the agreement is passed, but also from start to finish [JAC 87]; otherwise, one of the partners could end up disadvantaged. A posteriori, it could be proved that cooperation led to the domination of one partner over the other. In fact, cooperation between firms produces an impact not only on the exterior of the coalition but also internally, on the partners themselves, because while being close collaborators in certain domains, the partners are simultaneously competing against each another in other fields. As it has been pointed out by Doz et al. (1986), cooperation is not a new concept, but arises as the extension of competition in a different shape. Furthermore, cooperation may reinforce the competing position of a firm to the detriment of a partner, who could end up in a situation of dependency or of lasting inferiority [DEW 88].
1.2.2. The actors
This book will particularly focus on the case of cooperation between firms. Cooperation between countries shall not be taken into consideration except in the cases where it has paved the way for alliances between firms. In fact, governments can play a key role in a complex board when the alliance concerns a relation between two, three or many players, generally firms. In fact, governments may favor certain agreements between firms or privilege a specific alliance to the detriment of a different agreement (see Chapter 8).
With regard to firms, these may be public or private [ROO 88]. Collaboration may refer to "complementary firms within the same economic group" [DUS 90] as well as competing or potentially rival firms working on the same economic branch. In fact, two firms may cooperate to develop a certain type of technology, while directly competing against each other for marketing purposes [DUS 88]. In general, agreements do not necessarily imply an international character, but can bind two firms of the same nationality.
Besides, these alliances may concern both small businesses and large, often multinational, industrial groups [DUS 90].
Two observations come to mind concerning the multinationalization of firms and of cooperation. [ROO 88] distinguishes between two types of cooperation: interfirm and intrafirm. Interfirm cooperation points to cooperation in the case of a multinational company1 (MNE), between the parent company and a subsidiary firm holding more than 50% share. This percentage has been fixed arbitrarily, in the sense that there is no existing property threshold that could make it possible to distinguish between the subsidiaries under control from those that are not [ROO 88]. Other authors [BUC 88] have approached cooperation mainly from the perspective of company multinationalization and suggested that cooperation mainly concerns MNEs. Yet, numerous studies have proved the existence of cooperation phenomena without entailing multinationalization practices and vice versa.
1.2.3. Products and services involved
Cooperation relations between companies include both a material and an immaterial dimension [GAF 90], to the extent that when firms collaborate, they exchange tangible and intangible resources, knowledge, know-how, learning practices and so on, in order to provide goods or services. With regard to the products involved in cooperation agreements, these may refer to final products or intermediary ones (systems, sub-systems, components). Since the end of the 1990s, cooperation has focused less on the products themselves, but on the fine competencies associated to the value chain (R&D, production, purchases, quality control tests, marketing, after-sales services, etc.) [JOF 86] referred to "intrafunctional exchange", whereas [DEM 89b] uses the term "competence exchange", as when a specific network exchanges information concerning patents.
1.2.4. Agreement duration
Some authors [FRI 81] have agreed upon the fact that cooperation relations are sustainable in time. However, very few of them have been precise as to the exact duration of collaboration:
"A cooperation agreement may or may not entail financial remuneration. On certain occasions, the contracting parts may agree on exchanging information or other goods or services. But in both cases we are referring to cooperation agreements. According to this definition, the agreement has to be set for a long time: an isolated purchase of goods and services does not constitute a cooperation agreement, whereas the commitment to purchase all production factors to a unique supplier for the next ten years is a cooperation agreement" [MAR 83].
[ROO 88] provided the following definition:
"In an international agreement, as in other types of long-term cooperation [.], the long term does not refer to a specific time frame, but rather to a length of time that exceeds the necessary span for market transactions."
Other authors [ROB 06] equally employ the expression "long term" without going into the details of the duration. In view of this, it seems more sensible to reflect upon the agreement's fragility rather than its sustainability in time (see Chapters 2-4). In contrast to what happens with traditional joint ventures, [CHE 88] stressed that many alliances are restricted to the short term, even when the contributions of the different partners may be complementary and clearly differentiated. This is due to the fundamental ambiguity of alliances, in which two ambivalent aspects are present: cooperation and conflict, which could be due to different reasons: divergence of interests, technological looting and exacerbated rivalry between the partners. We will discuss the principles of coopetition in the following chapters (see Chapter 6).
This is similar to the idea developed by [GAR 89]:
"Alliances often result from a delicate balance. Since it is a hybrid form between market and hierarchy, an alliance is torn between two forces, one pulling towards breakup (return to competition and market) and the other, pulling towards merger or acquisition (hierarchy internalization)."
This observation echoes the notions of success or failure of an alliance, which are often difficult to determine. A priori, duration could be interpreted as a sign of success. However, as [DOZ 86] pointed out, the success of an alliance is not systematically defined by either its duration or by a particularly efficient complementarity between the partners' contributions. This could indeed change from partner to partner. One of the participants may profit from a lasting alliance in order to improve its own performance to the detriment of the other firm. From this perspective, the duration of the agreement does not constitute a factor of success for all the partners involved. Likewise, the end of an alliance does not necessarily denote a sign of failure.
"The survival, duration and stability of alliances are not conclusive synonyms of success. They could even be associated with poor performances. Conversely, a rupture, a short lifespan or the evolution of alliance modalities are not indisputable signs of failure, because they could be associated with excellent performances."
The explanatory factors that could account for the failure of an agreement are numerous and cannot always be clearly identified. Should we attribute the failure of an alliance to the inherent risk of the shared activity (this problem is particularly acute in the case of R&D) or to the difficulties associated with managerial and organizational hassles? According to...