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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
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© 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
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© IfK, M. Mändle 2009 3
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
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© IfK, M. Mändle 2009 4
• 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
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• 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
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• Forms of organization
Hybrid Networking
Market Control Hierarchic
Control
MarketCooperation
(Hybrid)Firm
eg.
Sales Contract
Exchange
eg.
Co-operative
Network
eg.
Corporation
Trust
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• 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
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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
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• Horizontal cooperation
Types of Networks
Co-operatives
Market
Members… … …
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• Horizontal cooperation
– Working group
– Project-cooperation
– Strategic alliance
Types of Networks
Project-cooperation
Basicnetwork
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• Vertical and conglomerate cooperation
Types of Networks
Externalco-operativecooperation
Market
Members… … …
Verticalcooperation
Conglomeratecooperation
MarketMarket
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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
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• 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
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• 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
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• 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
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• 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
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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
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• 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
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• 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.
Summary and Conclusions
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• Altogether, we suppose that potential for development can be found especially in the area of conglomerate external co-operative cooperations.
Summary and Conclusions