Network interactions and mutual dependence: hypotheses and a test in the car industry

By engaging in specific investments a firm may develop a unique competence value for its partner, which makes the partners mutually dependent. This may neutralize any hold-up risk of an opportunistic partner that is tempted to exploit the dependence and appropriate a greater share of the value added in the relation. The purpose of this paper is to investigate such mechanisms of mutual dependence. The analysis builds on previous theoretical and empirical research by the authors. It is based on an integration of transaction cost economics with the resource (competence, capabilities) view and a social exchange view, from a dynamic perspective. The paper asks the following: How do competencies develop in interaction between firms? The social exchange view brings in trust as an important dimension of governance. The research question asks how risks of mutual dependence between firms may be mitigated without either hierarchical or legal control. Five hypotheses concerning such mechanisms of mutual dependence ar...