The light side and the dark side of inter-firm collaboration: How to govern distrust in business networks

Abstract

In front of globalization, hypercompetition and turbulence (D’Aveni, 1994, 1995), it’s more and more frequent to see inter-firms relationships increase exponentially: alliances, partnerships, social groups, clans. Networks are becoming a prevailing organizational form in the21st century (Cravens, Piercy, 1994). The unit of analysis, in this article, is the strategic systems and more precisely the strategic network that develops within a territory (business districts, destinations) or a virtual set and that is even denser and more complex than ordinary networks: local resources can be relevant for the whole aggregate and relations are also physically or virtually particularly closed. Strategic networks and inter-firm collaborations have often been analysed with respect to their main success factors. Less attention has been paid to the more obscure and less satisfying aspects that someway explain why, in some cases, they fail or at least do not take off. Even theoretical frameworks usually adopted as Resource-Based Theory (Rumelt, 1982; Wernerfelt, 1984; Barney, 1991, 2007) Transaction Cost Economics (Williamson, 1975, 1981) and Social Network Theory (Granovetter, 1973, 1982; Lieberskind et al., 1996, Wasserman, Faust, 1999) are used according to a positive approach, aimed at finding and analyzing mainly successful initiatives. The aim of this article is to analyse, in particular, situations of distrust, that can either continue pushing firms not to cooperate or rather evolve towards more trustful situations and therefore with more chances of really developing business networks. A specific model is proposed, to manage distrust and to evolve towards trustful situations. The process, however, requires a specific intervention of a network governance actor, that can stimulate it. This actor must have distinctive capabilities and competences to manage the process. The proposed model is developed with the help of Game Theory (Fudemberg, Tyrole, 1991; Gibbons, 1992; Myerson, 2002, 2006) and can be applied empirically to verify what prevents actors from cooperating and how the governance actor can lead the process towards trust situations. Game theory is also used to study the possible level of coopetition (Brandenbruger, Nalebuff, 1996), that is the collaboration that can be put forward among competitors. Firms involved in these processes vary their own approaches both in terms of realizing the opportunities brought about by collaboration and of assuming a positive vs opportunistic behaviour. But the latter often prevails….The results offered by the model will also have some managerial implications since they should be able to give useful hints to decision makers on how to govern distrust. The model will be tested empirically on a sample of firms operating in tourism sector in Southern Italy, involved in local networks. In tourism industry, cooperation between players operating in the same destination is something needed to compete against global destinations. It will be then applied to other industries characterized by small and medium enterprises that have invested in the same area/district, with a high potential for collaboration.