Adaptation in Vertical Relationships: Beyond Incentive Conflict

57 Pages Posted: 11 Nov 2004  

Ranjay Gulati

Harvard Business School - Organizational Behavior

Paul R. Lawrence

Harvard University, Harvard Business School (HBS) (deceased)

Phanish Puranam

INSEAD

Abstract

In this study, we extend the analysis of adaptation in theories of economic organization beyond traditional considerations of incentive conflict (hold-up). We conceptualize adaptation as coordinated and cooperative response to change, and define the adaptive capacity of a vertical relationship as the ability to generate coordinated and cooperative responses across procurer and supplier to changes in procurement conditions. We draw on the concepts of differentiation and integration to dimensionalize the adaptive capacity of different modes of procurement. Using data on all component classes procured internally and externally by Ford and Chrysler, we show that different procurement modes differ in terms of their adaptive capacity and performance. We also show that performance differences across modes of procurement arise as a function of the match between adaptive capacity and adaptation requirements associated with the exchange, and not only the match between governance form and transaction hazards.

Keywords: Coordination, Adaptation, Vertical Relationships

JEL Classification: L10, L23

Suggested Citation

Gulati, Ranjay and Lawrence, Paul R. and Puranam, Phanish, Adaptation in Vertical Relationships: Beyond Incentive Conflict. Strategic Management Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=616626

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

Paul R. Lawrence

Harvard University, Harvard Business School (HBS) (deceased)

Phanish Puranam (Contact Author)

INSEAD ( email )

1 Ayer Rajah Avenue
Singapore, 138676
Singapore

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

Register to save articles to
your library

Register

Paper statistics

Downloads
646
rank
36,686
Abstract Views
2,782
PlumX