The Two Facets of Collaboration: Cooperation and Coordination in Strategic Alliances

Abstract

This paper unpacks two underspecified facets of collaboration: cooperation and coordination. Prior research has emphasized cooperation, specifically partners' commitment and alignment of interests, as the key determinant of collaborative success. Scholars have paid less attention to the critical role of coordination—the effective alignment and adjustment of partners' actions. To redress this imbalance, we conceptually disentangle cooperation and coordination in the context of inter-organizational collaboration, and examine how the two phenomena play out in the partner selection, design, and post-formation stages of an alliance's life cycle. As we demonstrate, a coordination perspective helps resolve some empirical puzzles, but it also represents a challenge to received wisdom grounded in the salience of cooperation. To stimulate future research, we discuss alternative conceptualizations of the relationship between cooperation and coordination, and elaborate on their normative implications.

Acknowledgements

The authors thank Beth Bechky, Heidi Gardner, Venkat Kuppuswamy, Phanish Puranam, Marlo Raveendran, Luciana Silvestri, Christopher Steele, Sameer Srivastava, Maxim Sytch, Bart Vanneste, Andras Tilcsik and Aks Zaheer for their helpful comments on earlier drafts of this paper, as well as Royston Greenwood for his generous support throughout the project. A previous version of this paper was presented at the 2011 Academy of Management meeting in San Antonio, TX. Authors contributed equally.

Notes

Because the majority of inter-organizational collaborations over the past decades have taken the form of a range of alliances that include JVs (Gulati, 1995a), we will refer to the two concepts interchangeably.

The distinction between “cooperation” and “coordination” has been previously used to delineate the underlying facets of collaboration within organizations (Gulati, 2007b; Gulati, 2010), and across organizational boundaries (Rogers & Whetten, 1982). Here, we apply and extend these notions to develop an analytic framework for the dynamics of inter-organizational collaboration.

Unless otherwise specified, we assume organizational actors rather than specific individuals involved to be the decision-makers in an alliance. A minimum level of cooperation among organizational actors (e.g. exchange of information, arranging logistics) has long been recognized as fundamental to any market transaction, even an arm's-length one (Smith, [1776] 1979; Tuomela, 2000). Our focus here, like that of most contemporary management research on inter-organizational cooperation, is narrower: we are examining enduring close ties, especially alliances of various forms including JVs, which involve deeper levels of mutual engagement, and usually more interdependence and more joint decision-making, than do pure-form transactional relationships (Powell, 1990).

Alliance research often assumes that partners have a shared understanding of the cooperation agreement, and shared expectations about contributions and claims to outcomes that flow from it. But even detailed formal agreements cannot fully and unequivocally specify expectations (Klein, 1996). Thus, partners can have idiosyncratic and shifting understandings of expectations in the partnership, and can subjectively evaluate others’ behavior against their understandings of expectations (Ring & Van de Ven, 1994). Misalignments of partners’ subjective perceptions of expectations and behavior can be reconciled during the course of an alliance if there is adequate communication between the partners. Economic game theorists, for example, have examined in detail when and how partners manage to align expectations to achieve cooperative equilibria in what they call “coordination games” (Camerer, 2003; Knez & Camerer, 1994). Similarly, in the case of alliances, if there is an alignment of expectations, cooperation failure can be avoided. If there is persistent misalignment of expectations among partners, they can lead to conflict, reduced commitment, and partnership dissolution. Unfortunately, the study of the dynamics of partner expectations and behavior during the course of a partnership has not been the subject of extensive prior research.

While some alliance cooperation failures are indeed caused by opportunistic behavior—by “lying, cheating and stealing” partners—many can be traced to less extreme forms of behavior, such as partners’ gradual loss of interest in the alliance due to diminished expectations of future benefits from it or due to a strategic reorientation. A broader conception of cooperation therefore takes into account the level of commitment to the relationship rather than merely the presence or absence of opportunism (Ring & Van de Ven, 1994).

An alternative approach to the threat of opportunism is suggested by the real-options perspective on alliance management (Folta & Miller, 2002; Reuer & Tong, 2005; Seth & Chi, 2006). Here, the emphasis is less on anticipating specific opportunistic behaviors ex-ante. Instead, partners design agreements that allow them to resolve risks dynamically by modifying their partnering decisions (e.g. via the exercise of acquisition or termination options). What this perspective shares with the other economic perspectives is a reliance on individual partners’ strategic acumen to ensure positive outcomes from cooperation.

This emphasis on negotiation of coordination arrangements is in keeping with recent scholarship that views coordination requirements as equivocal and ambiguous, and assumes many interdependencies to be less than fully technologically determined and thus subject to some social deliberation (Raveendran, Puranam, & Warglien, 2012; de Rond & Bouchikhi, 2004; Silvestri, Raveendran, & Gulati, 2012) and some strategic choice (Dyer, 1996, 1997).

Incidentally, Barnard's (1938) research on the role of organizations in managing the division of labor and insuring coordination was published shortly after Coase (1937) conceptualized organizations as a means to mitigate the transaction costs of exchange. That is, the foundational texts on organizations’ coordination and cooperation issues, respectively, were written around the same time.

Economists use the term coordination failure to denote situations in which economic actors could have achieved better cooperative equilibria had they coordinated their actions (Cooper, 1998). But research on economic coordination failure often focuses on problems that prevent actors from providing resources to a mutually beneficial joint effort (in our terminology, cooperation problems), rather than problems that affect the combination or integration of resources in a joint effort. The organization-theory conception of coordination failure, on which we base our arguments, concentrates on these combination and integration problems.

Flawed design encompasses factors like erroneous task decomposition, misconceived task allocation (such as assigning tasks to agents ill equipped to handle them), and misspecification of coordination mechanisms such as communication interfaces (Puranam, Raveendran, & Knudsen, 2012; Raveendran & Puranam, 2012). Failures of implementation can include actors’ mistakes while performing assigned tasks and failure to use specified coordination mechanisms properly.

The task of managing cooperation and coordination, and by extension managing relational and operational risks, may be assigned to different sets of people within the partnering organizations (Argyres & Mayer, 2007). For example, ensuring cooperation often falls on senior managers (who control resource allocation decisions) and lawyers who oversee the contracts. The design and operation of detailed coordination mechanisms, by contrast, are often the responsibility of lower level employees and managers.

The assumption of organizational inertia has especially important implications for partner selection: because the partners will have a difficult time adapting their organizational structures and resources to the needs of the alliance, it is critical for the long-term evolution of the collaboration to select partners with a high level of fit to the task at hand and to one's own organization's resources.

Economic game theorists also consider the role of implicit understandings and conventions in allowing or preventing mutually beneficial equilibria (Sugden, 1995; Van Huyck, Battalio, & Rankin, 1997; Young, 1993). A frequently invoked simple example is two cars approaching each other from opposite directions on a road. In most countries, convention leads both drivers to steer to the right side of the road from their own perspective, and thus to pass each other rather than colliding.

Preference for partner familiarity and proximity is strongest when the exchange hazards in the transaction are greatest (Meuleman, Lockett, Manigart, & Wright, 2010; Sorenson & Stuart, 2008), suggesting that a desire to reduce relational risk is an important motivation for such behavior.

Little is known about how firms manage complementarity and compatibility issues in partner selection, and in particular about whether and when tradeoffs are involved. Existing studies suggest a “Goldilocks principle”: a preference for partners that are not too similar and not too dissimilar, in terms of resources and capabilities, to ensure synergistic benefits while avoiding excessive coordination costs (Baum, Cowan, & Jonard, 2010; Mitsuhashi & Greve, 2009). However, most studies use proxy variables to assess who partners with whom; there have been no field-based efforts to directly study the deliberations over complementarity and compatibility that precede the formation of alliances.

For example, a contract can specify in detail the responsibilities of the parties and penalties for nonconformance, reducing the probability of shirking. It can include contingencies as to when and how the relationship can be terminated, reducing the probability of holdup. Finally, it can impose restrictions—backed up by appropriate penalties—that limit the use of tangible or intangible resources.

For example, such agreements could reduce the need for further renegotiation to adapt to easily foreseen contingencies. Such renegotiations typically allow the partner with the dependence advantage to appropriate more of the gains of exchange (Hamel, 1991).

Such experiential learning also occurs in the design of cooperation-related contractual clauses. However, coordination-related clauses are usually more idiosyncratic to the task and the partners, while cooperation-related clauses are frequently standardized into legal boilerplate (Vanneste & Puranam, 2010). Furthermore, knowledge of the design of coordination-related clauses typically resides with the organization's managers, while the design of cooperation-related clauses is often handled by external counsel (Argyres & Mayer, 2007).

Such rigidities may be harder to overcome in alliances than in organizations because process changes can rarely be imposed by fiat, and typically must be negotiated among the partners (Rogers & Whetten, 1982).

Most studies implicitly assume either cooperation or coordination problems to be solved or trivial; only few make this assumption explicit (see, e.g. Puranam, Singh, & Chaudhuri, 2009 for exception). In both cases, the exclusive focus on either cooperation or coordination systematically precludes consideration of possible influences of one on the other.

The interdependencies can play out at two different levels. First, the quality of the cooperation is dependent on the quality of the coordination and vice versa. Second, the marginal effect of quality of cooperation on outcomes is dependent on the quality of the coordination and vice versa: in other words, there is a superadditive effect of cooperation and coordination on performance.

Note that in the Poppo and Zenger (2002) study, the sheer extent of coordination arrangements produces a complementary benefit to cooperation arrangements, independent of the effectiveness of those arrangements (i.e. their proximal outcomes). In Luo's (2002) study, however, it is the quality of cooperation, i.e. the level of achieved trust that underlies such complementarity.

Misattributions of alliance success not only can initially fuel the reinforcement loops between cooperation and coordination but can also account for their eventual breakdown. There are limits to how much investment in cooperation will pay off as better coordination and vice versa. If they overinvest in the wrong tools to ensure collaboration success, actors may not be spending their resources wisely and may leave a real problem to fester.