Blurring Tactics in Inter-firm Relationships

Otto Andersen Ellen K. Nyhus

University of Agder University of Agder

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Characteristics of successful inter-firm relationships:

•Relationship investments

•Activities to maintain or improve the relationship

•Open communication

Communication presumed the most important

element to a successful inter-firm relationship (cf. Bleeke and Ernst, 1993)

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Communication: What and how?

•Communication involves the transfer of knowledge representations between the exchange partners

•Such knowledge representations can be classified into general, particular and interpretive knowledge (Boland et al., 2001)

•We focus on knowledge representation as a set of ontological commitments, meaning that we are “making a set of decisions about how and what to see in the world” (Davis et al., 1993: 19)

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MotivationAn important assumption underlying the literature on inter-firm

knowledge transfer is that that the transferred knowledge is correct.

This assumption may be unrealistic since it- neglects the possibilities that one or both actors may wish to attain a

larger share of the value created by the knowledge transfer

(not just a win-win situation but also a win-lose situation)

- neglects that firms may be unwilling to transfer truly and completely sensitive knowledge

- neglects limits in human judgmental capacity and the possibility of these being exploited.

Failing to recognize attempts to influence judgments and decisions in the knowledge transfer, may be costly for the firm.

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Blurring tactics

The purpose of blurring tactics is to

•obtain congruence with what and how the exchange partner perceives and interpret the relationship, with what we wish her/him to perceive

•obscure the total value created for the exchange partner

• transfer knowledge in a vague/indistinct way so that the recipient firm cannot completely absorb and utilize the knowledge

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What is blurring?

The core competenciessender wishes to send to receiver

Sender’s beliefsabout own core competencies

A DB C

Figure 1: Blurring in the knowledge transfer process

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Examples of blurring

• Anchoring the reference point

• Framing

• Emphasising sunk cost

• Interacting socially

The value function(Kahneman & Tversky, 1979)

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Theoretical perspectives

(1) Transaction cost analysis (TCA)

(2) Resource-dependence theory (RDT)

(1) Assumptions TCA:

• Bounded rationality

• Opportunism (failure to honor a contract; cf.

Williamson, 1975)

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Theoretical perspectives (cont.)

(1) Main dimensions TCA:

• Asset specificity (idiosyncratic investments made

by one (or both) of the exchange partners)

• Behavioral uncertainty (difficulties one exchange

partner may have in evaluating and monitoring

the other exchange partner’s performance)

• Environmental uncertainty (unanticipated changes in

circumstances surrounding the exchange)

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Theoretical perspectives (cont.)

(2) Resource-dependence theory (RDT)

Assumptions: Organizations require resources from the environment, and thus become interdependent of actors that can provide such resources

Building blocks of RDT: Power and dependence (cf. Emerson, 1962)

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Theoretical perspectives (cont.)

(2) Resource-dependence theory (RDT)

Dependence: An actor A is dependent upon actor B (i) in proportion to A’s need for resources that B can provide, and (ii) in inverse proportion to the availability of alternative actors providing the same resources.

High degree of power dependence for actor A represents a form of vulnerability

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Theoretical perspectives (cont.)

In addition to the theoretical perspectives above, we include culture as an independent variable to predict the use of blurring tactics.

Culture distance (between the seller and buyer) can be measured as a composite index, containing the dimensions of individualism, uncertainty avoidance, power distance, and masculinity (Hofstede, 1980)

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Specific investments

Use of blurring tactics

Behavioural uncertainty

Environmental uncertainty

Cultural distance

Power dependence

P1 (-)

P2 (+)

P3 (+)

P4 (+)

P5 (-)

Figure 2 Conceptual Framework

When are blurring tactics most likely to be used?

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Discussion and Conclusions

•Decisions about if, and with which firms to form or continue long-term relationships, are often complex and characterised by a high degree of uncertainty

•Opponents or partners with knowledge of the cognitive mechanisms at play when someone makes judgments and decisions, may use them tactically in formal and informal communication.

•Unless managers are aware of such blurring tactics they may fall into judgment and decision traps that may be costly for their firm.

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Discussion and Conclusions (cont.)

Research implications:

•Conceptualization and measurement of blurring tactics

Managerial implications:

• Identify from who, what, and when knowledge transferred is likely to be blurred