Economizing and Strategizing: How Coalitions and Transaction Costs Shape Value Creation and Appropriation

Strategic Management Journal, Forthcoming

48 Pages Posted: 11 Sep 2020

See all articles by Christian Geisler Asmussen

Christian Geisler Asmussen

Copenhagen Business School

Kirsten Foss

Norwegian School of Economics (NHH)

Nicolai J. Foss

Copenhagen Business School - Department of Strategy and Innovation

Peter G. Klein

Baylor University - Hankamer School of Business; Norwegian School of Economics (NHH) - Department of Strategy and Management; Ludwig von Mises Institute

Date Written: July 29, 2020

Abstract

Research has examined how “economizing” and “strategizing” mechanisms interact in driving competitive outcomes, but the role of coalitions in this process has received little attention. Coalitions between players are established to increase value creation (i.e., economizing), as well as to facilitate positioning (i.e., strategizing). Based on a coalitional model we derive several non-intuitive results. Contrary to Williamson (1991), economizing is not always the best strategy as creating more value may lead other players to strategize more aggressively, offset-ting the additional value creation. Furthermore, creating countervailing power — that is, building a coalition against players with significant power such as monopolists or monopsonists — not only allows the coalition to appropriate more value, but also increases overall benefits by reducing value-destroying competition among the coalition members.

Keywords: economizing, strategizing, transaction costs, cooperative games, bargaining

JEL Classification: M21, L1, C71, D23

Suggested Citation

Asmussen, Christian Geisler and Foss, Kirsten and Foss, Nicolai J. and Klein, Peter G., Economizing and Strategizing: How Coalitions and Transaction Costs Shape Value Creation and Appropriation (July 29, 2020). Strategic Management Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3664134 or http://dx.doi.org/10.2139/ssrn.3664134

Christian Geisler Asmussen

Copenhagen Business School

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Kirsten Foss

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

Nicolai J. Foss

Copenhagen Business School - Department of Strategy and Innovation ( email )

Kilen
Frederiksberg, 2000
Denmark

Peter G. Klein (Contact Author)

Baylor University - Hankamer School of Business ( email )

Waco, TX 76798
United States
254-710-4903 (Phone)

Norwegian School of Economics (NHH) - Department of Strategy and Management ( email )

Breiviksveien 40
N-5045 Bergen
Norway

Ludwig von Mises Institute ( email )

Auburn, AL
United States

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