Heuristics as an Aid to Inter-organizational Value Creation

Ganesh Prasad Neupane

Abstract


The purpose of this paper is to analyze the moderating effects of heuristics on the relationship between asset specificity, formal contracting/relational contracting and value creation. More importantly, this paper explores the role of heuristics on the inter-organizational relationships. An integrative theoretical framework is proposed, grounded on literature review on transaction cost economics (TCE) and heuristics. Then, the relationships between heuristics, asset specificity, formal contracting/relational contracting and value creation are analyzed, using the proposed theoretical framework. Heuristics has different implications to the choice of governance mechanisms (formal contracting and relational contracting) and value creation. Moreover, this work develops hypotheses indicating how heuristics moderates the relations between these constructs and highlights future research directions relating to inter-organizational relationships. Heuristics, assets specificity and governance mechanisms alone have limited capacity of improving inter-organizational value creation, but combined them can support improvement initiatives. Nevertheless, heuristics, assets specificity and governance mechanisms can also suppose some novel obstacles to effective inter-organizational value creation. Several studies have analyzed value creation in the inter-organizational relationships, but, to the best of our knowledge no study has focused on the role of heuristics. This work can draw attention of the managers by making them aware of how important is heuristics as a decision-making tool which can influence governance of asset specificities.  

Keywords: Transaction cost economics, supplier -manufacturer relationship, strategy, governance, social factors

JEL Classifications: M30, M31


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