Sergio G. Lazzarini

Horizontal and Vertical Relationships in Developing Economies: Implications for SMEs’ Access to Global Markets

We integrate the resource-based view, transaction cost economics, and institutional theory to model how collaboration among small-to-medium-sized enterprises (SMEs) in environments of weak infrastructure and institutions help them achieve greater collective efficiencies and access to global markets. Using survey data from 232 Argentine furniture SMEs, we found that different types of ties matter in different ways for these SMEs’ collective efficiencies. For instance, vertical ties yield manufacturing productivity along the supply chain, while horizontal ties enable collective resource use as well as joint product innovation. These collective efficiencies, in turn, serve as competitive currencies helping SMEs access global markets.

Order with Some Law: Complementarity versus Substitution of Formal and Informal Arrangements

While some argue that incomplete incentive contracts facilitate the self-enforcement of informal dealings, other authors submit that they substitute for or crowd out social norms supporting informal arrangements. We use experimental evidence to test these theories by manipulating the extent to which individuals transact repeatedly and the level of contract costs. We find that, by enforcing contractible exchange dimensions, contracts facilitate the self-enforcement of noncontractible dimensions. This complementarity effect is particularly important when repetition is unlikely and thus self-enforcement is difficult. Although our data suggest the existence of reciprocity as an alternative, informal enforcement mechanism, we do not find evidence that contracts substitute for this social norm. Copyright 2004, Oxford University Press.

The Impact of Membership in Competing Alliance Constellations: Evidence on the Operational Performance of Global Airlines

The global airline industry has witnessed the formation of multiple-partner alliances or constellations competing against each other for both clients and members. In this paper I empirically evaluate the proposition that membership in airline constellations allows carriers to capture externalities from other firms in the form of direct or indirect traffic flow, thereby enhancing their operational performance. Analyzing patterns of membership in explicit groups involving formal, multilateral agreements (such as the Star Alliance, Oneworld, SkyTeam, etc.), I find that membership benefits are greatest in constellations involving large aggregate traffic and for carriers contributing with a large portion of the groups capacity. But industry observers have also pointed out the existence of implicit groups comprised of carriers that have more bilateral ties to one another than to firms outside their group. I find that carriers bilaterally linked with key players of such groups are able to increase their operational performance even if they do not belong to any explicit constellation.

Informal and Formal Organization in New Institutional Economics

Exchanges are governed by a set of formal institutions (contracts, incentives, authority) and informal institutions (norms, routines, political processes) that we argue are deeply intertwined.However, for the most part, informal institutions are treated as exogenous forces changing the benefits to using in an alternative formal structures, and formal institutions are treated as mere functional substitutes for informal elements governing exchanges. As a result, scholars have not sufficiently explored the interactions between formal and informal institutions. We contend that the failure to integrate these concepts into a common theory has led to faulty reasoning and incomplete theories of economic organizations. In this paper, we highlight three potential areas of research exploring the interplay between formal and informal institutions: first, whether formal institutions support (complement) or undermine (substitute for) the contributions of informal institutions; second, how vacillation in formal organizational modes allows managers to efficiently alter the trajectory of informal institutions; and third, how certain informal institutions can lead to hierarchical failure, thereby requiring managers to constrain the boundaries of the firm.

Dealing With the Paradox of Embeddedness: The Role of Contracts and Trust in Facilitating Movement Out of Committed Relationships

When there are constantly new, valuable opportunities to transact with alternative partners---a situation we refer to as exchange value uncertainty---long-term or committed transactions among the same individuals are discouraged. However, when opportunism creates exchange hazards, which escalate in nonrecurring transactions, individuals will be reluctant to take full advantage of the gains from switching to more valuable partners, thereby leading to “overembedded” exchanges. Instead of embracing new, valuable exchanges with strangers whose propensity to cooperate is uncertain, individuals may prefer to preserve recurring ties with familiar actors. Two mechanisms may encourage movement out of committed relationships in those conditions. First, formal contracts should serve as a safeguard to market participants, in the sense that they limit potential losses due to opportunistic behavior. Second, trust in general others (as opposed to trust in familiar people) reduces participants perception of hazards in market exchanges, and hence promotes transactions among strangers. By increasing the propensity to initiate new exchanges, general trust also diminishes the role of contracts in causing movement out of committed relationships. In this paper, we present experimental evidence largely consistent with this theory of the interplay between formal and informal mechanisms in the determination of social mobility.In conditions of social uncertainty—i.e., when exchanges are subject to the hazards of opportunism—committed relationships promote both the shadow of the future and the shadow of the past necessary for cooperation. For this reason, some argue that exchanges can be selfgoverned without the need of legal enforcement and other formal controls. While this conclusion is correct when the value of a long-term relationship does not vary much over time, we provide new experimental evidence showing that it is invalid when individuals face high exchange value uncertainty—i.e., when there are constantly new opportunities to transact with more valuable partners outside committed circles. Under both social and exchange value uncertainty, a reduction in commitment can potentially increase exchange performance, at the cost of a potential reduction in cooperation. By creating safeguards in market exchanges, contract enforcement can make individuals more willing to move out of committed relationships and into relationships with higher exchange value.

Buyer-supplier and Supplier-supplier Alliances: Do They Reinforce or Undermine One Another?

Previous research has portrayed buyersupplier and suppliersupplier alliances as important mechanisms to foster learning and exchange efficiencies. Controversy remains, however, as to how these alliances interact. While some propose they reinforce one another (e.g. learning in horizontal ties generates positive spillovers to vertical ties), others propose a negative interplay (e.g. when increasing vertical-tie intensity, suppliers may weaken horizontal ties to avoid retaliation from buyers who wish to preserve bargaining power). We empirically test these competing views using survey data from the Brazilian auto-parts industry. In an attempt at reconciliation, we propose that the positive or negative interaction between vertical and horizontal alliances depends on the level of technological uncertainty of goods exchanged. Vertical ties seem to inhibit horizontal ties when technological uncertainty is low; when technological uncertainty is higher, vertical and horizontal ties do not seem to have any meaningful form of interaction. We discuss implications for theory and practice.

A formação de constelações: o caso da indústria global de transporte aéreo

Constellations are alliances among multiple autonomous firms, such that these groups compete against each other in the same orsimilar industries for both clients and members. Airline carriers, in particular, have not only formed formal groupings in a multilateral fashion – which we call “explicit constellations” – but have also engaged in a web of bilateral ties configuring alternative groups of firms that have more bilateral ties to one another than to firms outside their group – which we call “implicit constellations”. We find that explicit constellations tend to grow by luring firms holding diverse resources and that are associated with key members through an implicit group. At the same time, members of an explicit group tend to create implicit associations with partners holding resources that are similar to their own resources, thereby creating a cluster of firms adjacent to the explicit constellation. Explicit associations also tend to exhibit more inertia over time than implicit ones, possibly due to the larger non-redeployable investments and contractual commitments required for the formation of explicit groups.

Private Operation with Public Supervision: Evidence of Hybrid Modes of Governance in Prisons

Received theories suggest a possible cost-quality tradeoff when private outsourcing arrangements are used in public services. Using data from Brazilian prisons, our study provides evidence that contradicts this prediction: the prisons not only run at a lower cost, but also show similar or improved performance on a range of quality indicators. The attenuation of the cost-quality dilemma in our context is due to the hybrid management, which allocates control rights to a state-appointed public supervisor. We also discuss conditions in which the public supervisor may refrain from colluding with the private agent, therefore guaranteeing an effective monitoring of service quality.

Mudar Tudo para não Mudar Nada: Analisando a Dinâmica de Redes de Proprietários no Brasil como ‘Mundos Pequenos’

This study analyzes ownership networks, whereby ties between owners are defined by common ownership of one or several companies, in order to analyze changes in these ties due to the restructuring events that occurred in Brazil from 1995 to 2003 (privatizations and entry of foreign capital). Using network analysis, it is observed that ownersx92 networks are characterized as small worlds: while there are groups of owners extensively connected with one another, there are some few central actors that help connect different groups. Due to their strategic position in the network, such owners-chiefly, pension funds and the government-could exploit acquisition opportunities resulting from the restructuring of the economy. Consequently, contrary to interpretations usually found in the literature, in the period under analysis the position of certain local owners, vis-a-vis foreign firms and investors, was apparently reinforced.

Determinants of firm competitiveness in Latin American emerging economies: Evidence from Brazil's auto‐parts industry

Purpose – The aim of this paper is to theoretically model and empirically analyze determinants of competitiveness of Brazilian manufacturing firms. Going beyond traditional manufacturing management literature, it integrates firm‐, inter‐firm, and institutional level theoretical arguments to explain manufacturing competitiveness in emerging economy environments.Design/methodology/approach – The model investigates the influence of firm‐, inter‐firm, and institutional level factors on the competitiveness of individual companies. The authors surveyed 182 firms, and interviewed a representative sub sample of 15 general managers. The survey and interview questions covered practices at the three theoretical levels, as well as firm performance. In a subsequent step, the authors used this data to statistically model the theory framework through a structural equation system.Findings – The paper finds that institutional level support, in the form of stronger participation in institutional organizations, enhances the...