Just to halt any false expectation you may have, this is a
blog post about how sets of three (or more) firms can collaborate for innovating over time. It is a very interesting and important topic because the approach
for doing innovations has changed a lot recently, and especially in fast-moving
industries involving information technology: apps, smartphones, internet
servers, automotive computer controls for example. We have long done research
on firms being innovative (on their own), and we are beginning to know a lot
about firms pairing up to make innovations. Unfortunately, the new approach is
to do innovations in groups of three or more, and to keep working in different
configurations of firms. That is something we know little about.
Fortunately, a forthcoming paper in Administrative Science Quarterly by Jason Davis has important insights. He looks at the central problem of
how these groups of firms can stay together and maintain the high trust and low
conflict needed to be innovative over time. Using data on collaborative
projects from firms in the computing industry, he found a key insight that is
only possible by understanding how different interfirm collaboration is from
interpersonal collaboration.
People can form stable collaborative relations if one of
them acts as a leader and is recognized as such, or if they form a cohesive
team with all members staying close. That’s not what makes firm collaborations
stable and innovative. Firms cannot have one leader over time because repeated
projects typically involve different configurations of interests and
capabilities. They cannot be cohesive because each project typically has
greater complementarities between one pairing (dyad) of firms than between the
other two. As a result, the configurations that work for people fall apart in
conflict or in distrust when firms try to repeat collaborative innovations.
Instead, what is special about firm is recognition that firms are
interdependent and that they need to work together in the future, even if they
do not collaborate closely at a specific time point. This leads to a form of
collaboration called group cycling: each pair of firms that are most
interdependent works together closely, with the third at a distance, but they
remain in touch and aware of the need to reconfigure with a different focal
pair later on. Conflict is avoided because the most complementary firms work
together. Trust is kept because all partners see current collaborations as
preparations for future collaborations.
Interfirm collaborations is a special kind of network among
organizations. Part of its special status comes from the realization that,
unlike many other networks, what works for firms is different from what works
for people. This is a good insight in management because we often think that
intuition carries over from one level to the next.
