Extending the notion of transaction value, which is the synergy of joint value creation via an inter-firm alliance, we frame transaction value perspective (TVP) as a novel perspective to shed light on a new theory of the firm. TVP differs from the extant theories of the firm in three major aspects. First, TVP posits that any transaction involves not only cost but also value, so the core raison d'etre of the firm is not only to minimize transaction cost, but also to maximize transaction value. Second, TVP also posits that transaction involves not only asset configuration but also task coordination, so the core raison d'etre of forming a firm is not only to bundle assets, but also to govern tasks. Third, TVP finally posits that the scope of the firm does not exist only at the single-firm level, but also at the network level with the firm’s interaction with other firms.

According to the above three principles, TVP makes three contributions to a new theory of the firm. First, it is the diverse co-specialization that defines the transaction value on the dimension of asset configuration from diverse yet complementary asset pooling and resource bundling. Second, it is the relationship-specific shared-trust that defines the transaction value on the dimension of task coordination from trust-based commitment to conflict resolution and harmony enhancement. Third, it is the above two core features that make alliance a unique network form, rather than a hybrid of market and hierarchy forms. Hence, with bilateral synergy as its core, transaction value derives from the leverage of complementary assets from diverse co-specialized partners as well as the leverage of relationship commitments from the partners based on the shared-trust, especially for co-exploration to avoid core rigidity. Core rigidity refers to the inherent inertia of hierarchy form as hierarchy cost that turns core competence into core rigidity, which is ignored by the theories of transaction cost economics (TCE) and resource-based view (RBV).

We apply TVP to strategic alliance in two major aspects. First, we apply TVP to explain alliance as a new organizational form by extending the theory of the firm to inter-firm cooperation. Second, we apply TVP to guide the practice of effective management of alliance. In particular, we focus on the role of organizational form in organizational learning. While TCE and RBV emphasize unilateral learning, TVP highlights bilateral learning. In sum, TVP supplements TCE and RBV in the sense that TVP integrates task coordination with resource configuration as the two dimensions of organizational form at both inter-firm and inter-unit levels (TCE only for task coordination, and RBV only for resource configuration, both being at the single-firm or single-unit level).

The course's development of personal competences:

The overall goal of this elective is to enhance the students’ understanding and capabilities concerning alliance management in general and the management of international strategic alliance in particular. We do so by evoking TVP in contrast to TCE and RBV and then building an integrate framework so as to help the students understand the nature, features, triggers and drivers of alliance in the context of globalization and knowledge-based competition. In particular, we want to focus on the capabilities of managing the process of developing cross-border strategic alliances.

Required Textbook:

John Child, David Faulkner and Stephen Tallman (2005). Cooperative Strategy: Managing Alliances, Networks, and Joint Ventures (Paperback Edition). UK: Oxford University Press.

Extra Reference Books:

Ranjay Gulati (2007).Managing Network Resources: Alliances, Affiliations, and Other Relational Assets(Paperback Edition). UK:Oxford University Press.

Further Suggested Readings:

Christensen, C.M. 1997. The innovator’s dilemma: When new technologies cause great firms to fail. Boston, MA: Harvard Business School Press.

Doz. Y.L. & Hamel, G. 1998. Alliance advantage: The art of creating value through partnering. Boston. MA: Harvard Business School Press.

Dyer. J.H. & Chu, W. 2003. The role of trustworthiness in reducing transaction costs and increasing information sharing: Empirical evidence from the United States, Japan, and Korea. Organization Science, 14: 57-68.

Hoffmann, W.H. 2007. Strategies for managing a portfolio of alliances. Strategic Management Journal, 28: 827-856.

Holmqvist, M. 2003. A dynamic model of intra- and interorganizational learning. Organization Studies, 24: 93-121.

Inkpen, A.C. 2000. Learning through joint ventures: A framework of knowledge acquisition. Journal of Management Studies, 37: 1019-1043.

Koza, M.P. & Lewin, A.Y. 1998. The co-evolution of strategic alliances. Organization Science, 9: 255-264.

Lavie, D. & Rosenkopf, L. 2006. Balancing exploration and exploitation in alliance formation. Academy of Management Journal, 49: 797-818.

Leonard-Barton, D. 1995. Wellsprings of knowledge: Building and sustaining the sources of innovation. Boston. MA: Harvard Business School Press.

Levinthal, D.A. and March, J.G. 1993. The myopia of learning. Strategic Management Journal, 14: 95-112.

Li, P.P. 1998. Toward a geocentric framework of organizational form: A holistic, dynamic and paradoxical approach, Organization Studies, 19: 829-861.

Li, P.P. 2008. Toward a geocentric framework of trust: An application to organizational trust. Management and Organization Review4: 413-439.

Li, P.P. 2010. Toward a learning-based view of internationalization: The accelerated trajectories of cross-border learning. Journal of International Management (Special issue: 50 Years of IB Research), 16: 43-59.

Li, Y., Li, P.P., Liu, Y. & Yang, D.2010. Learning Trajectory in Offshore OEM Cooperation: The Transaction Value for Local Suppliers in the Emerging Economies. Journal of Operations Management, 28: 269-282.

Lorenzoni, G. & Lipparini, A. 1999. The leveraging of interfirm relationships as a distinctive organizational capability: A longitudinal study. Strategic Management Journal, 20: 317-338.

Madhok, A. 1997. Cost, value and foreign market entry mode: The transaction and the firm, Strategic Management Journal, 18: 39-61.

Martin, X. & Salomon, R. 2003. Knowledge transfer capacity and its implications for the theory of multinational corporations. Journal of International Business Studies, 34: 356-373.

Parkhe, A. 1993. “Messy” research, methodological redispositions, and theory development in international joint ventures. Academy of Management Review, 18: 227-268.

Powell, W.W.1990.Neither market nor hierarchy: Network forms of organization. In L.L. Cummings & B. Staw (eds.), Research in organizational behavior (12): 295-336. Greenwood, CT: JAI.

Uzzi, B. 1997. Social structure and competition in inter-firm networks: The paradox of embeddedness. Administrative Science Quarterly, 42: 35-67

Volberda, H.W. and Lewin, A.Y. 2003. Co-evolutionary dynamics within and between firms: From evolution to co-evolution. Journal of Management Studies, 40: 2111-2136.

Yoshino, M.Y. & Rangan, U.S. 1995. Strategic alliance: An entrepreneurial approach to globalization. Boston, MA: Harvard Business School Press.

Zajac, E.J. & Olsen, C.P. 1993. From transaction cost to transaction value analysis: Implications for the study of inter-organizational strategies. Journal of Management Studies, 30: 131-145.