Intrafirm collaboration Myth or Reality?

Can competitive firms have a collaborative relationship in a fast changing and competitive market? I tried to address this question in this short essay on collaborative strategy I developed for a client last year. I post here a short extract.

An extensive literature review reveals how Intrafirm collaboration is often the result of an egoistical behavior, a wish of disproportionate collaborative rents and advantages, expected long-term externalities and sometimes irrational trust on alliance partners.
We can observe that there is asymmetry of expected pay-off depending on the size of the firm, the invested resources and the kind of private and common benefits that arise in collaborating in a project in particular or in the organisation in general.
We also note how trust and cultural fit are important for a successful alliance. Change in the external environment and distance from the buyer can become a powerful stimulus and interest aggregator for alliances. We argue that when a fast-changing market is not under control, even strong partners’ private interests can have more chances to overlap with common interests, consequently alliances are more likely to be successful.

From the above discussion and in particular from Khanna et al (1998) ‘relative scope’ concept we propose a conceptual framework (figure 1).

We identified four archetypes of partners in alliances according to the ‘relative scope’ and the interest to collaborate (‘collaboration factor’). The ‘relative scope’ values are from zero to one, a firm that scores zero will have no interests in participating in the alliance.

If the value is closer to ‘one’ the firm will have interests only in markets or areas of strategic interests covered by the alliance.

The ‘collaborative factor’ represents the collaborative effort of a firm in the organisation, its values are from high (H) to low (L).

The proposed archetypes are:

• Philanthropic: these are firms that do not have high interests in the organisation but still continue to be active in everyday works, for example, for strategic or political reasons. A philanthropic company should evaluate whether to continue or not the collaboration or, alternatively, reduce its activities (blue arrow).

• Blasé: firms in this quadrant of the model should be leaving the organisation soon, they probably do not fit anymore with the alliance, for example, for changed market conditions.

• Hyperactive: They are the fostering members and have strong interests and commitments in the organisation.

• Selfish: the decision of these firms to collaborate is strong only when their private interests overlap with current activities. Some of them were ‘Hyperactive’ members (red arrow) that have fulfilled their urgent interests.

Companies can sit everywhere in the face of the cube and will tend to follow the path described by the arrows in the direction of an alliance’s self extinction.

Figure 1: The cube of collaborative alliance

Source: own analysis.

We identified in this section a number of structural conditions and internal and eternal factors able to facilitate companies to act and behave as collaborators instead of as rivals.

We believe that is worth now to select and summarize them. We found that alliances are likely to be effective and succeed when there are number of conditions (not necessary all together):

• the cost of developing and working in the alliance is lower than future benefits;

• common and private benefits overlaps or are expected to overlap;

• there is no zero-sum game, where the benefit of one member entails a corresponding loss for others;

• organisations are diverse and belongs to a variety of complementing and competing industries;

• there is strategic and cultural fit;

• members of the alliance compete in some but not in all markets;

• there is distance to buyer’s interests,

• absorptive capacity and

• redistribution of knowledge among business units.