1 housing co-operatives’ networks in germany – performance enhancing through hybrid forms of...

1

Housing Co-operatives’ Networksin Germany – Performance Enhancing through

Hybrid Forms of Organization

MARKUS MÄNDLE

Professor of Economics

Institute for Co-operative Studies (IfK)

Nürtingen-Geislingen University (HfWU)

ERES Conference, Stockholm, June 2009

© IfK, M. Mändle 2009 2

1 Hybrid Networking

2 Types of Networks 2.1 Horizontal Cooperation 2.2 Vertical Cooperation

2.3 Conglomerate Cooperation

3 Evaluation

4 Summary and Conclusions

Agenda


1 Hybrid Networking



3 Evaluation


Agenda


• Economies of scale– Cost degression of the average

costs (AC) up to the minimum optimal scale (MOS)

• Economies of scope

c (a, b) < c1 (a) + c2 (b)

Hybrid Networking

MOS

AC

AC

q


• Co-operative banking sector Mergers– Hierarchic form of unified governance

• Housing industry Business cooperations – Relatively small MOS in relation to the market volume facilitates polypolistic market structures

– Possibility to compensate diseconomies of scale by business cooperations while maintaining entrepreneurial autonomy

– Business cooperation housing co-operative cooperation

Hybrid Networking


• Forms of organization

Hybrid Networking

Market Control Hierarchic

Control

MarketCooperation

(Hybrid)Firm

eg.

Sales Contract

Exchange

eg.

Co-operative

Network

eg.

Corporation

Trust


• A housing co-operative cooperation can be categorized as an inter-corporate network.They are typically regional networks with a polycentric structure.

• Hybrid networks use simultaneously… – the advantages of an integrated large-scaled firm (economies of scale and scope, transaction cost economies) and

– the advantages of a small-scaled firm (flexibility, specialization)

– while at the same time avoiding diseconomies of scale.

Hybrid Networking


1 Hybrid Networking



3 Evaluation


Agenda


• Horizontal cooperation

Types of Networks

Co-operatives

Market

Members… … …


• Horizontal cooperation

– Working group

– Project-cooperation

– Strategic alliance

Types of Networks

Project-cooperation

Basicnetwork


• Vertical and conglomerate cooperation

Types of Networks

Externalco-operativecooperation

Market

Members… … …

Verticalcooperation

Conglomeratecooperation

MarketMarket


1 Hybrid Networking



3 Evaluation


Agenda


• Different kinds of institutionalization – Governance structure = relational contracting (O.E. Williamson)

– Specificities (quasi rents) institutional protection against opportunistic behaviour is needed

– In practice: more or less formalized agreements (oral gentleman’s agreements, written contracts, equity cooperations, joint ventures)

– Degree of institutionalization (formalization) ceteris paribus ex ante-transaction costs (TC) , exit-costs of cooperation ex post-transaction costs (TC) – Note: Inter-corporate networks do not per se create institutiona- lized trust due to a lack of immanent sanction-mechanisms!

Evaluation


• Trade-off between stability and flexibility of thecoalition a delicate balance is needed

• Size of the coalition-group – In practice, bi-, tri- or multilateral relationships can be found

– Smaller groups are generally effective when there is a need for an intensive (economic) teamwork or a trustful relationship (TC ) – Non-excludability free rider-behaviour selective incentives

Evaluation


• Horizontal cooperation – Currently the most significant type of collaboration

– Working group: rather open, multilateral coalition-groups Synergetic effects created by a lower degree of formalization Public goods promoters domino-effect

– Project-cooperation: resorts to a working group as a basic network

– Strategic alliance: small, strongly formalized coalition-groups Merger-like economic benefits can be created while retaining the co-operatives’ autonomy and individuality Problem: a high degree of personal trust and agreement in managerial activities is needed (otherwise ex post-TC )

Evaluation


• Conglomerate cooperation – This type will probably be more important in the future

– Win-win situation for all participants

– Chance for systematically enhancing the co-ops’ performance

– Specificities, immanent foreignness of the partners ex ante-TC – We assume that synergy to the core-product housing seems to be a key factor for success (product-synergy)

– So far, external co-operative cooperations are in practice indeed exceptional, but they provide the opportunity to complement product-synergy by co-operative synergy (TC )

Evaluation


1 Hybrid Networking



3 Evaluation


Agenda


• Housing co-ops’ cooperations typically are regional, polycentric and heterarchic inter-corporate networks.

• We differentiate between horizontal, vertical and conglomerate forms of cooperation.

• In practice, housing co-ops’ prefer to collaborate horizontally. It can be observed, however, that conglomerate forms of cooperation will become more important in the future.

Summary and Conclusions


• No form of organization can a priori be regarded as superior for enhancing the housing co-operatives’ performance. The adequateness depends on the characteristic features of each situation.

• We deducted 1) the degree of institutionalization (depending especially on transaction cost economies), 2) the nature of the product and 3) the finding of a delicate balance as factors that should be considered to determine an appropriate governance structure.



• Altogether, we suppose that potential for development can be found especially in the area of conglomerate external co-operative cooperations.


1 housing co-operatives’ networks in germany – performance enhancing through hybrid forms of...

Documents