Prof. Dr. Theresia Theurl1
Economics of Business Cooperations
Prof. Dr. Theresia TheurlDipl.-Wi.-Ing. Kersten LangeWinter 2009 / 2010
Prof. Dr. Theresia Theurl2
Introduction1
Organisation1.1
Business cooperation – an example
The epoch of cooperations1.3
Agenda
1.2
Prof. Dr. Theresia Theurl3
Introduction1
Organisation1.1
Business cooperation – an example
The epoch of cooperations1.3
Agenda
1.2
Prof. Dr. Theresia Theurl4
Two new english modules offered at the IfG
Economics of Business
Cooperations
Management of Business
Cooperations
Develops the main economic fundamentalsand factors of influence on businesscooperation along a typical cooperationprocess.
Module content Organisation
Develops the main requirements on an effective and efficient cooperationmanagement and their supplementalmethods and tools.
• Offered every winter –starting WS 2009/10
• 2 hrs lecture weekly
• Add. 2 hrs excercises and case studies to deepenand supplement lecturematerial
• Offered every summer –starting SS 2010
• 2 hrs lecture weekly
• Add. 2 hrs excercises and case studies to deepenand supplement lecturematerial
1
2
Prof. Dr. Theresia Theurl5
Modules
Every semester
5 CP module
• Module contents are notsequential
• No Seminar required
• All 5 CPS modules canbe elected as "VWL-Wahlpflichtmodul" or"BWL-Wahlpflichtmodul für Betriebswirte"
Exam(120 Min.)
SummerWinter
Modul UK Ib
Grundlagen und Empirie
Modul UK IIb
Regulierung und Management
Modul UK Ib(English)
Economics of Business Cooperation
Modul UK IIb(English)
Management of Business Cooperation
ExamComment
Both english modules can be selected as 5 credit point modules
Prof. Dr. Theresia Theurl6
Economics of Business Cooperations startingthis semester
Lecture
Exercises& casestudies
Exam
AssistantLecturer
Wednesday, 14:00 – 16:00 c.t., CAWM 1
14.10.0921.10.0928.10.09
04.11.0911.11.0925.11.09
09.12.0906.01.1013.01.10
20.01.1027.01.1003.02.10
Thursday, 14:00 – 16:00 c.t., CAWM 1
05.11.0919.11.0926.11.09
10.12.0914.01.1021.01.10
28.01.10
First exam date will be announced soon
Kersten Lange, [email protected]: 0251 – 83 22895
Prof. Dr. Theresia Theurl7
Relevant information can be found on websitewww.ifg-muenster.de
Shortcut: www.ifg-muenster.de/ebc
Prof. Dr. Theresia Theurl8
Participate in myIfG
Please register online to access lectureresources and materials
• Use ZIV account to register for myIfG
• After initial registration, please use login at the leftside of the homepage
Register at IfG-website Subscribe for this lecture
• Click on „Veranstaltungen“for all current lectures
• Choose this lecture„Unternehmens-kooperation Ib (Englisch)“
• Click on „abonnieren“ to subscribe
• Discuss in the forum
• Download lecture material
• Receive all relevant newsvia e-mail distribution list
Prof. Dr. Theresia Theurl9
Institute's website with a lot ofadditional information
IfG-Website... ...with further information
• Database with old exams("Studium“– "Prüfungen“)
• Glossary for business cooperations("Top-Adressen")
• Coop-Watching – Database withinformation on current businesscooperations ("Top-Adressen")
• IfG contact card ("Studium“)
• New literature on businesscooperations ("Top-Adressen")
Prof. Dr. Theresia Theurl10
Literature
• Contractor, F. J. (Ed.) (2002): Cooperative strategies and alliances, Amsterdam, Pergamnon, pp. 25-33.
• Chen, H. et al. (2003): Governance structures in strategic alliances: transaction cost versus resource based perspective, in: Journal of World Business, No. 38, pp. 1-13.
• Gulati, R. (1998): Alliances and networks, in: Strategic Management Journal, No. 19, pp. 293-317.
• Ménard, C. (2004): The Economics of Hybrid Organizations, Journal of Institutional and Theoretical Economics (JITE), Vol. 160, pp. 1-32 and pp. 345-376.
• Oxley, J./Silverman, B. (2008): Inter-firm Alliances: A News Institutional Economics Approach, in: Brousseau, E./Glachant, J.-M. (Ed.): New Institutional Economics: A Guidebook.
• Theurl, T. (Ed.) (2005): Economics of Interfirm Networks, Tübingen.
Prof. Dr. Theresia Theurl11
Interesting websites
• Collaboration. The one essential key to success.http://www.cnbc.com/id/26868473
• SMEs and cooperationhttp://ec.europa.eu/enterprise/policies/sme/files/analysis/doc/smes_observatory_2003_report5_en.pdf
• Meshbox – Marketing cooperationshttp://www.mesh-box.com
• Directorate General for Competition – European Commissionhttp://ec.europa.eu/dgs/competition/index_en.htm
• COOP-Watchinghttp://www.ifg-muenster.de
All interesting websites will be posted at www.ifg-muenster.de/ebc - Send us your links!
Prof. Dr. Theresia Theurl12
Kennenlernabend at the IfG –you are invited to join!
When: 21. October 2009, 19.00 pm
Where: CAWM, 2nd floor
Please use registration listsand sign in!
Informal get-together for all current and prospective IfG-students
Prof. Dr. Theresia Theurl13
Various perspectives for students of business cooperations
Organisation ConceptionManagement
In companies:• Project teams• Corporate functions• Management
Consulting
In consulting firms and investment banks:• Mergers & aquisitions• Post-merger-integration• Network-specialists
ConceptionImplementation
Regulation EffectsRegulation
In competition authorities:• EU commission• Federal cartel office• Federal network agency
Prof. Dr. Theresia Theurl14
Introduction1
Organisation1.1
Business cooperation – an example
The epoch of cooperations1.3
Agenda
1.2
Prof. Dr. Theresia Theurl15
Business cooperations have many different characteristics and facets
empiricallyverified
theoreticallywell-founded
international
multifaceted
related topractice
multidisciplinary
Design
Dyn
amic
s
Cau
ses
Regulation Effects
Management
Prof. Dr. Theresia Theurl16
Cooperations matter in every industry!
What are the reasons for firms to cooperate?
Prof. Dr. Theresia Theurl17
Reasoning behind cooperations
Source: Fontanari, M.: Kooperationsgestaltungsprozesse in Theorie und Praxis, Berlin, 1996.
Usually more than one reasonaccountable for cooperations
Prof. Dr. Theresia Theurl18
Cooperation Example: DESERTEC Industrial Initiative
Initial participating partners Background
• Erection of solar power plants and wind farms in the MENA region –Middle East and Northern Africa, i.e. Sahara Desert
• Target: Covering 15% of Europe'syearly energy demand in 2050
• 12 participating companies –including banks, insurancecompanies, energy corporationsand solar cell producers
Source: DESERTEC website: www.desertec.org
Prof. Dr. Theresia Theurl19
Strategic initial situationThe example DESERTEC
Phase I: Strategic positioning
Shortage of oil and natural gas
resources
Use of renewable energies in
Europe limited
High efficiency gains in
renewable energy generation
Rising energyprices
Rising energy demand
Global warming
Source: DESERTEC website: www.desertec.org
Prof. Dr. Theresia Theurl20
First step: Establish partner network and increase public relationsThe example DESERTEC
New members since October2009: Grid operators fromFrance, Italy, Spain and companies from Marocco, Tunesia and Egypt
Phase II: Internal preparation
Source: DESERTEC website: www.desertec.org
...and formation of DESERTEC foundation
Three studies withpositive results...
...trigger establishment of partner network
"... a hub for realizing theDESERTEC Concept. Itwill also work for creatinga global alliance to ensuresecurity of energysupplies, to promoteeconomic development, and to stabilize the world’sclimate"
Evaluation of...
• the anticipated water and power needs through 2050 in Europe and MENA
• the potential for renewable energy in MENA
• the potential for an electric power transmission grid connecting the three regions.
Prof. Dr. Theresia Theurl21
Institutionalization of cooperationinfrastructure and signing of contractsThe example DESERTEC
Phase III: Institutionalization
Source: DESERTEC website: www.desertec.org
Memorandum of Understanding
Foundation of DESERTEC
Industrial InitiativeCooperation contract
• Declaration of intent of all participatingcompanies and institutions
• Signed 13.07.2009
• Foundation is planneduntil end of 2009 as a GmbH
• Target is coordinationand preparation of cooperation contract
• Reach signature stateof negotiations in 2012
Prof. Dr. Theresia Theurl22
Operative cooperation management and continuous performance reviewThe example DESERTEC
Phase IV + V: Operative cooperationmanagement and controlling success
Source: DESERTEC website: www.desertec.org
No information available yet:
• Cooperation managementthrough Desertec Industrial Initiatve GmbH?
• Controlling of project risks, costs and distribution of earnings?
Prof. Dr. Theresia Theurl23
Reasoning behind this cooperation?The example DESERTEC
Cost advantages
Time advantages
Access to markets
Access to ressources, know-how and technologies
Distribution of risks
Takeover protection
Prof. Dr. Theresia Theurl24
Lecture is structured along a typical 5-step cooperation process
StrategicPositioning
Internalpreparation
Institution-alization
Operative cooperationmanagement
Controlling success
1 2 3 4 5
Modification
ContinuationStabili-zation
Strategic repositioning
Termination and re-initationFlexibility
Prof. Dr. Theresia Theurl25
1. Introduction1.1 Organisation1.2 Business cooperation – an example1.3 The epoch of cooperations
2. Strategic Positioning2.1 Economic Causes for Business Cooperations
2.1.1 Empirical drivers for Business Cooperations2.1.2 Classical science: market power vs. efficiency2.1.3 Transaction Costs
2.2 Economic effects and the management decision2.2.1 Outsourcing2.2.2 Analysis of cooperation targets2.2.3 Core competencies and boundaries of the firm
Agenda in detail (1/3)Economics of Business Cooperations
02.10.2009
Prof. Dr. Theresia Theurl26
3. Internal Preparation3.1 Determination of microeconomic cooperation targets3.2 Evaluation of cooperation competence (strategy and culture)3.3 Interface analysis of value chains3.4 Decision on cooperation mode
3.4.1 Cooperation modes3.4.2 Constitutive attributes3.4.3 Efficiency criteria: stability vs. flexibility
3.5 Partner selection
4. Institutionalization4.1 Institutionalization of cooperation management
4.1.1 Implementation4.1.2 Organisational anchoring4.1.3 Types of institutionalization
4.2 Institutionalization of the cooperation4.2.1 Target harmonization4.2.2 Agreement on rules
4.3 Fundamentals on regulation4.3.1 Necessity for regulation4.3.2 Economic fundamentals
Agenda in detail (2/3)Economics of Business Cooperations
02.10.2009
Prof. Dr. Theresia Theurl27
5. Operative Cooperation Management5.1 Operationalisation of cooperation targets5.2 Principal-agent-theory5.3 Property rights5.4 Trust management – joint cooperation culture5.5 Internationalisation – Challenge international cooperation5.6 Conflicts of interests – Game theory in Business cooperations
6. Controlling Success6.1 Process controlling6.2 Target controlling6.3 Value reporting6.4 Adjust, modificate or exit
Agenda in detail (3/3)Economics of Business Cooperations
02.10.2009
Prof. Dr. Theresia Theurl28
Objectives of this lecture (1/2)Economics of Business Cooperations
Empirics
Typicalcooperation
process
Types of cooperation
• Learn the empirical findings on cooperation. • Understand how current economic conditions promote and shape cooperative
arrangements. • Understand why enterprises cooperate and assess success factors of cooperation.
• Study the dynamic process of a cooperation. • Understand the 5-step-management approach and the contents of each step.
• Learn about the different types of cooperation. • Learn criteria for selecting a special type of cooperation. • Assess the circumstances under which a special type of cooperation is
advantageous.
Prof. Dr. Theresia Theurl29
Objectives of this lecture (2/2)Economics of Business Cooperations
Theory of cooperation
• Learn theoretical basics on cooperation. • Understand how size and efficiency interact. • Understand the combination of flexibility and stability that shape cooperation. • Understand the role of transaction costs and information asymmetries. • Understand how the theoretical concepts result in decisions on cooperation.
Dynamics of cooperation
Economicimpact of
cooperationand mergers
Regulation: Goals and
implementation
• Understand the determinants of development of cooperation.
• Understand the rationale for cooperation.• Identify possible interferences with competition law.
• Understand the economic purpose of governmental regulations. • Assess regulation impacts.
Prof. Dr. Theresia Theurl30
Introduction1
Organisation1.1
Business cooperation – an example
The epoch of cooperations1.3
Agenda
1.2
Prof. Dr. Theresia Theurl31
Definition of Business Cooperations
A business cooperation is an...
• intensive (at least for medium term),
• usually contractually stipulated (but voluntary),
• bonding with other legally (and economically) independent companies
− which affects single corporate activities
− comprises repeated actions
− achieves microeconomic objectives better than the isolatedcooperation partners would
− and can be terminated
Prof. Dr. Theresia Theurl32
Differentiation: Business cooperationsvs. mergers & acquisitions
Mergers
ResultExplanation
Acquisitions
Merger of companies to onelegal unit (absorption or newfoundation).
One or morecompanies lose their legal entity
Companies remain legally
independent
Equity participation or bargaining of companies, assets or strategicshares to gain control of economic activities.
Prof. Dr. Theresia Theurl33
Boundaries of the firm are no longer clear cutbut become rather blurry
Leads to continuous optimization of organization and institutionalization
Costs for internaltransactions and
coordination
Costs for externaltransactions and
coordination
Prof. Dr. Theresia Theurl34
Boundaries of the firm are no longer clear cutbut become rather blurry
Costs for internaltransactions and
coordination
Costs for externaltransactions and
coordination
The cooperation of companies concerns thedivision of labor and therefore counts as one of the key questions for economists:
Economic question: What institutional solutionis needed under which set of circumstances?
Organisation of microeconomic activities
Coordination of microeconomic activities
Prof. Dr. Theresia Theurl35
Nobel prize 2009 was awarded for the work on the boundaries of the firm
Oliver Williamson was awarded with theNobel prize 2009...
"for his analysis of economic governance, especially theboundaries of thefirm"
Prof. Dr. Theresia Theurl36
Source: Clemons/Reddi/Row (1993): The Impact of Information Technologyon the Organization of Economic Activity: The Move to the Middle Hypothesis, in: Journal of Management Information Systems, Vol. 10, Nr. 2, S. 9-35.
Future development support cooperations
Market-near organisationswill gain importance
Move-to-the-markethypothesis
Transaction risks
Information asymmetries
Reduction of transactionsand partners
Intensive, long-term relations
Move-to-the-middlehypothesis
Prof. Dr. Theresia Theurl37
1950 20001900
Small independent businesses
Large corporate
conglomerates
Decentralized cooperation networks
Source: Thomas Malone: The Future of Work, Boston 2004.
The epoch of cooperations
Prof. Dr. Theresia Theurl38
Significant share of sales already generatedthrough cooperations
Source: Odenthal/Hannes Säubert/Andreas Weishaar (2002), S.271) DACH = Germany (D), Austria (A), Switzerland (CH)
16
710
25
35
7
0
10
20
30
40
50
0 0-10 10-25 25-50 > 50 NA
Share of sales (%)
Share of companies (%)
Worldwide DACH1 region
19
4
8
23
41
5
0
10
20
30
40
50
0 0-10 10-25 25-50 > 50 NA
Share of sales (%)
Share of companies (%)
Prof. Dr. Theresia Theurl39
• Cmpetition, mobility, flexibility• Competition affects relevant market• Pressure to adapt is rising
• New positioning at the market through cooperation• Adaptability
• Time based competition• Short product lifecycles
• Cooperations in R&D reduces time until readiness for market anddistribute risks
• Specialization• High need for cost reduction
• Use of economies of scales and compentences
General conditions promote cooperations (1/2)
Prof. Dr. Theresia Theurl40
• Information and communication technology (ICT)• Transaction cost sinking, increase in knowledge
• Management of cooperations• ICT facilitate cooperations
• Consumer are not committed to specific companies• Search for comprehensive solutions, Individualization
• Cooperations may offer market-ready, individualized solutions
• Public tasks• Reduction of public expenditure quota
• Cooperations between public and economic companies offer new perspectives• New value-added chains
• Regulative affordances• Cost pressure (e.g. Basel II, Solvency II, Unbundling)
• Cooperations offer new basis of valuation• Risk reduction / Compensation of lost synergies
General conditions promote cooperations (2/2)
Prof. Dr. Theresia Theurl41
Economiesof
Scale
Economiesof
Risks
Economiesof
Scope
Economiesof
Skills
General motives for cooperations
Prof. Dr. Theresia Theurl42
Reasoning behind cooperations (rep.)
• Cost advantages
• Time advantages
• Access to markets
• Access to ressources, know-how and technologies
• Distribution of risks
• Takeover protection
Source: Fontanari, M.: Kooperationsgestaltungsprozesse in Theorie und Praxis, Berlin, 1996.
Usually more than one reasonaccountable for cooperations
Prof. Dr. Theresia Theurl43
Share of european SME (%)
0 10 20 30
Access to new and larger markets
Broader supply of products
Access to know-how and technology
Additional production capacity
Reduced costs
Access to labour
Access to capital
Source: ENSR Enterprise Survey 2003. Note: multiple selections were possible
Empirical studies support these motivesSmall and medium-sized enterprises
Prof. Dr. Theresia Theurl44
Ranking of motives differ with company sizeSmall and medium-sized enterprises
Source: ENSR Enterprise Survey 2003. Note: multiple selections were possible
Access to capital
Reduced costs
Additional productioncapacity
Access to new and larger markets
Small enterprises(10-49 employees)
Access to capital
Access to know-how and technology
Broader supply of products
Access to new and larger markets
Micro enterprises(0-9 employees)
Access to capital
Last ranked reason
Access to new and larger markets3rd ranked reason
Access to know-how and technology2nd ranked reason
Reduced costs
1st ranked reason
Medium enterprises(50-249 employees)
Prof. Dr. Theresia Theurl45
Cooperations play major role in every industrySmall and medium-sized enterprises
0 10 20 30 40 50
Manufacturing
Transport/Communication
Business service
Share of european SMEs (%)
Non-formal
Formal
Retail
Construction
Personal service
Wholesale
Source: ENSR Enterprise Survey 2003. Note: multiple selections were possible
Prof. Dr. Theresia Theurl46
Cooperations improve competitivenessSmall and medium-sized enterprises
0
20
40
60
80
100
Ø 82
NO ATIS
Share of SME with improved competitvestrength through cooperation
Country
IE ES CH FI LI EL IT SWFRPTDKNLBELUDUK
Source: ENSR Enterprise Survey 2003. Note: multiple selections were possible
Prof. Dr. Theresia Theurl47
Lessons learnedChapter 1
• Wide scope of motives accountable forcooperations
• Definition of business cooperation
• Differentiation between cooperation, mergersand acquistions
• Boundaries of the firm no longer clear-cut – keyquestion: What institutional solution is needed?
• Move-to-the-market vs. Move-to-the-middle?
• The epoch of the cooperation
• General conditions promote cooperations
• Empirical research underlines importance of business cooperations