Theoretical Foundation and Related Research


This chapter provides the foundation for our research on cooperative sourcing. In the first part (section 2.1), the theoretical foundation is developed from different economic and organizational theories, while the second part (2.2) reviews the application of these theories to the outsourcing phenomenon in earlier related research on identifying the determinants of outsourcing decisions. Based on the results of this chapter and the empirical data in chapter 3, the formal cooperative sourcing model is developed in chapter 4.


Transaction Cost Business Process Banking Industry Agency Cost Agency Theory 
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  1. 7.
    The “fundamental principle of effective and efficient value chain modification” states that the opportunities for improvement will increase disproportionally to the extension of the improvement attempt of superior system layers. Furthermore, the relative optimization costs will decrease (Pfeiffer et al. 1999).Google Scholar
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    The hold-up problem describes a situation where two parties are able to work efficiently by cooperating, but refrain from doing so due to concerns that they may give the other party increased bargaining power (Klein et al. 1978).Google Scholar
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    IOS are defined as the technological means by which integration of multiple firms’ information systems are carried out (Cash and Konsynski 1985; Johnston and Lawrence 1988).Google Scholar
  4. 12.
    Agency theory surfaced in two different branches (Williamson 1985, 27–28). The second strand, positivist agency theory (Alchian 1950; Alchian and Demsetz 1972), or the nexus-of-contract view of the firm, is “concentrated on modeling the effects of additional aspects of the contracting environment and the technology of monitoring and bonding on the form of the contracts and organizations that survive. Capital intensity, degree of specialization of assets, information costs, capital markets, and internal and external labor markets are examples of factors in the contracting environment that interact with the costs of various monitoring and bonding practices to determine the contractual forms” (Jensen 1983, 334-5). The common approach of this research strand is to empirically identify situations in which principal and management interests diverge and to demonstrate which mechanisms (a certain contract or implementation of an information system) will solve this problem (Eisenhardt 1989).Google Scholar
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    One criticism of all of these models of repeated relationships is the assumption of independence among periods. Intertemporal interdependence is introduced for risk-sharing and incentive purposes but is not inherent in the structure of the models. For example, an agent’s activity may produce long-term effects. (Lambert 1983)Google Scholar
  6. 14.
    If the following conditions are given (DeAngelo 1981): spanning: the set of existing financial instruments, available at the capital market contains all possible cash flow structures which can be created by the firm’s own activities. competitivity: static valuation system for market values (in a certain environment comparable to a stable interest rate for maximizing net present value).Google Scholar
  7. 19.
    There is much discussion about the similarities and differences between these concepts. For more information, see (Amit and Schoemaker 1993; Dierickx and Cool 1989; Stewart et al. 2002).Google Scholar
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    Forbearance is defined as forgoing certain behavior that is not in the best interest of both parties (Marcolin and Ross 2005, 33). (Footnote is not part of the citation.)Google Scholar
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    A comprehensive list of fundamental works in the literature of relationships and the concepts and dimensions used can be found in (Kern 1997, table 2+3). Goles and Chin (2005) give a more actual overview about the different items used in the analysis of IORs.Google Scholar
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    In the literature on standardization research (i.e. why and how a network of autonomous agents decides to adopt a common technology/standard), this is called the “standardization problem” (Weitzel et al. 2006; Wiese 1990, 1)Google Scholar

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