Relational view (Dyer and Singh, 1998 and 2018 ) PDF

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Relational view (Dyer and Singh, 2018)/1998 Relational view suggest that firms create value in alliances when they: 

identify partners with complementary resources,

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build high levels of informal trust,

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share knowledge and make investments that are customized to the partner.

However, the original relational view model was a static model that did not consider how cooperation, value creation, and value capture unfold over time (Dyer and Singh, 2018). Interdependence between the complementary resources of partners is the critical factor determining alliance value creation. Competition for value capture may evolve over time, Relational rent is a supernormal profit achieved only through the partnership that cannot be reached when firms work individually. Four sources of interorganisational competitive advantage: 

Relation-specific assets – Safeguards protect firms against opportunism. Partners are more likely to make investments in relation-specific assets when they have crafted effective safeguards (TCA, Williamson, 1985). The longer the duration the higher the investment in relation-specific assets and the potential of higher relational rents. Williamson (1985), who claims that transactors engaging in frequent, recurring transactions can afford to adopt more specialized and complex governance structures. Hence, the greater the volume of exchange, the bigger the potential for relational rents.

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Knowledge-sharing routines (information and know-how) – a regular pattern of interfirm interactions that permits the transfer, recombination, or creation of specialized knowledge (Grant, 1996) Simply put, listening to customer & suppliers feedback will lead to joint learning and innovation and encourages transparency and discourage free riding. Know-how is difficult to transfer as it is tacit and difficult to codify, unlike information. However, know-how is more likely to result in advantages that are sustainable and provide competitive advantage.

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Complementary, but scarce resources/capabilities – recourses that cannot be purchased on a secondary market and their marginal return to one resource increases in the presence of the other. The greater the proportion is of synergysensitive resources owned by alliance partners that, when combined, increase the degree to which the resources are valuable, rare, and difficult to imitate , the greater the potential will be to generate relational rents. o Difficulty in finding a partner with complementary resources – prior alliance experience results in more future partnerships due to gained experience. Depends on the resources and timely manner of the firm to identify a firm with complementary resources. The ability of firms to generate relational rents by combining complementary resources increases with the film's (1) prior alliance experience, (2) investment in internal search and evaluation capability, and (3) ability to occupy an information-rich position in its social/economic networks. The ability of alliance partners to generate relational rents from complementary strategic resources increases with the degree of compatibility in their organisational systems, processes, and cultures (organisational complementarity). o Dyer and Singh (2018) highlight interdependence between the complementary resources of partners as the critical factor determining the pattern of alliance value creation.

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Effective governance - Governance plays a key role in the creation of relational rents because it influences transaction costs , as well as the willingness of alliance partners to engage in value-creation initiatives. An important objective for transactors is to choose a governance structure (safeguard) that minimizes transaction costs, thereby enhancing efficiency (North, 1990; Williamson, 1985). A number of scholars have suggested that informal safeguards (e.g., goodwill trust) are the most effective and least costly means of safeguarding, which reduce transaction costs related to bargaining and monitoring, thereby enhancing performance (Hill, 1995). If transaction costs minimising and value maximising (e.g. investing in relation-specific assets,

sharing knowledge, or combining complementary strategic resources) are aligned with governance structures, the greater the potential for relational rents. Yet, some studies have found either no relationship or a negative relationship between goodwill trust and performance in alliances (2018). Trust decreases transaction costs but also boosts a firm’s confidence and expectations e.g. for the next time these firms form an alliance which may lead to a negative experience and decrease value in the alliance.

However, complementary resources are only likely to generate value without subsequent investments in RSA or KSR when the resources are characterized by a low level of interdependence. High interdependence between complementary resources will require investments in RSA and KSR due to coordination demands.

Implications: 

RBV overlooks the (dis)advantages of an individual firm and does not consider the link to the (dis)advantages of its ecosystem of partnerships. RBV states that competitive advantages are achieved utilising resources and capabilities that are controlled by the firm and are within the firm.

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GM's transaction costs are persistently higher than Toyota's and Chrysler's primarily because suppliers view GM as a much less trustworthy organization .

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To illustrate, a Toyota supplier may generate rents by actively participating in the knowledge-sharing processes in Toyota's supplier association. However, the supplier will be unable to generate the knowledge rents if the other members decide to exclude it from the network.

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For example, according to the RBV, an individual firm should attempt to protect, rather than share, valuable proprietary know-how to prevent knowledge spillovers, which could erode or eliminate its competitive advantage. However, an effective strategy from a relational view may be for firms to systematically share valuable know-how with alliance partners (and willingly accept some spillover to competitors) in return for access to the stock of valuable knowledge residing within its alliance partners. Of course, this strategy makes sense only when the expected value of the combined inflows of knowledge from partners

exceeds the expected loss/erosion of advantages due to knowledge spillovers to competitors....