Monday, 17 March 2014

24. Problems of cooperation

 What are the risks of collaboration? First, there are risks of dependence. Collaboration is no problem as long as partners do not become dependent on each other and can easily step out when dissatisfied. But relationships without dependence are usually shallow. Dependence can arise from unique value of the partner, for which there is no replacement, from specific investments that have value only in the relationship, or because one is not allowed to step out (as in tasks assigned in public administration). When dependence is one-sided the least dependent partner is tempted to use the resulting power to exact a greater share of jointly created value.

One remedy is to equalize dependence, in shared ownership of specific assets, an offer of unique quality, or market position. One-sided dependence may also be mended by building coalitions with others to build countervailing power.

A second risk is that of spillover: unintended transfer of knowledge or competence that is expropriated or imitated and used to compete. This risk can be direct, in the partner becoming a competitor, or indirect, in spillover through the partner to a competitor with whom the partner collaborates. This risk has often been overestimated. The issue is not only whether sensitive information reaches a potential competitor, but also whether he then has the absorptive capacity for it, and the resources needed to exploit it, and the incentives to do so. If by the time all those conditions are fulfilled the information has become obsolete, the risk disappears.

One instrument of control of spillover is to demand exclusiveness: to forbid application in collaboration with third parties. For this one pays a price of locking the partner up in a conceptual prison. It is important for oneself that the partner keeps on learning and improving, and it is by engaging in relationships with others, also one’s competitors, perhaps especially one’s competitors, to tap from more varied sources of knowledge and competence, that the partner learns.

An important factor is reputation: partners are withheld from doing damage because it will affect their reputation and thereby options for future collaboration, also with others. . For this, it is important that a reliable reputation mechanism is in place.

Beyond control, one can aim for trust on the basis of values, ethics, morality or empathy, identification, friendship and routinization. Trust is a slippery and complex notion that I will discuss in some detail later in this blog.

In view of the problems it is tempting to integrate the collaborating parties under an overarching management with the authority to demand information, resolve conflicts and impose sanctions, in ways that would not be possible between separate, autonomous organizations. However, unified hierarchy mostly reduces variety as a source of ideas, reduces speed of decisions and implementation, and reduces the motivation to perform that comes from independence and one’s own responsibility to survive. The challenge is to resist this reflex of integration and to learn the art of managing the risks of collaboration between autonomous parties.

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