Eriksson_2007_ ProcurementEffectsonCoopetitioninClientContractorRelationship(1).pdf

Eriksson_2007_ ProcurementEffectsonCoopetitioninClientContractorRelationship(1).pdf

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Procurement Effects on Coopetition in Client-Contractor Relationships Per Erik Eriksson 1 Abstract: Client-contractor relationships are often criticized for being competitive and adversarial, rather than cooperative. The main purpose of this paper is to examine how construction clients’ procurement procedures affect the balance between cooperation and competition i.e., coopetition in client-contractor relationships. The empirical results, based on a survey to 87 Swedish construction clients, show that clients’ procurement procedures facilitate a focus on competition. It was also found that clients’ earlier experience of a certain procedure heavily affects their procurement choices, thereby preserving old behaviors. Although two-thirds of the clients wish to increase cooperation with contractors, this does not affect their procurement decisions. This study therefore concludes that the theoretical framework, based on transaction cost economics, is correct in prescribing more cooperation than is empirically observed in the construc- tion sector. The theoretical framework can increase clients’ awareness of how procurement affects cooperation and competition, thereby serving as a basis for more unbiased and systematic procurement decisions, facilitating cooperation-based coopetition. DOI: 10.1061/ ASCE 0733-9364 2008 134:2 103 CE Database subject headings: Competition; Partnerships; Client relationships; Procurement; Contractors . Introduction Procurement and transaction governance heavily affect competi- tive advantage in most companies Dyer 1996; Noordewier et al. 1990 . The literature on interorganizational relationships and pro- curement has largely been influenced by transaction cost econom- ics TCE , which is a suitable framework for guiding procurement decisions Heide and John 1990; Noordewier et al. 1990 . As both competition and cooperation are vital to innovation Teece 1992 , competitiveness, and success for individual firms Lado et al. 1997 , interorganizational relationships mostly involve a mix of cooperative and competitive elements Das and Teng 1998 . Be- cause these elements are at odds with each other, one challenge for managers is to find the right balance of cooperation and com- petition Teece 1992 , that is, “coopetition” Brandenburger and Nalebuff 1996 . Coopetition is here defined as the balance be- tween cooperation and competition in a specific transaction rela- tionship, derived from the actors’ simultaneous cooperative and competitive behaviors. As the governance form defines how the parties to an exchange cooperate and compete Williamson 1996 , another managerial challenge is to establish the appropriate gov- ernance form where competition and cooperation should take place Teece 1992 . In many countries, such as Hong Kong, Sweden, the United Kingdom, and the United States, the construction industry is often criticized for lack of cooperation, generating problems regarding both costs and quality Chan et al. 2003a; Egan 1998; Ericsson 2002; Larson 1995 . The relationships are competitive and adver-
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