Coordination in Vertical Relationships: The (Un) Importance of Information Flows

41 Pages Posted: 30 Jun 2008

See all articles by Phanish Puranam

Phanish Puranam

INSEAD

Ranjay Gulati

Harvard Business School - Organizational Behavior

Date Written: February 2008

Abstract

We argue that common ground - knowledge that is shared and known to be shared - can reduce the need for information flows in coordinating specialized activities within the firm, compared to between firms. Consistent with our predictions, in a sample of procurement relationships in the automobile industry, we find that the relationships within the firm involve a lower level of information sharing compared to market relationships once we statistically ensure comparability of transactions within and between firms. This does not appear to be sub-optimal for performance. Tacit coordination based on common ground may therefore be a distinctive feature of how the division of labour is managed within the firm.

Keywords: Coordination, firm boundaries, knowledge

JEL Classification: L14, D23

Suggested Citation

Puranam, Phanish and Gulati, Ranjay, Coordination in Vertical Relationships: The (Un) Importance of Information Flows (February 2008). Available at SSRN: https://ssrn.com/abstract=1153119 or http://dx.doi.org/10.2139/ssrn.1153119

Phanish Puranam (Contact Author)

INSEAD ( email )

1 Ayer Rajah Avenue
Singapore, 138676
Singapore

HOME PAGE: http://www.insead.edu/facultyresearch/faculty/profiles/ppuranam/

Ranjay Gulati

Harvard Business School - Organizational Behavior ( email )

Soldiers Field Road
Morgan 317
Boston, MA 02163
United States
617-495-8554 (Phone)
617-496-6568 (Fax)

HOME PAGE: http://www.hbs.edu

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