interfirm

Competition Law and the Political Legitimacy of Interfirm Cooperation' which appeared in the Business Ethics Quarterly.

Virtual interfirm integration (Zaheer and Venkatraman 1994)--a specific form of quasi-integration achieved through the deployment of specific information systems between supply chain partners--has assumed a key role in information systems (e.g.

Bradach and Eccles (1989) defined trust as "a type of expectation that alleviates the fear that one's exchange partner will act opportunistically." Dore (1983) and Sako (1992) studied the case of interfirm relations in Japan, leading them to identify goodwill as a factor in interfirm relations.

They note especially the difference between liberal market economies (LMEs) and coordinated market economies (CMEs), both having the following spheres in which firms must develop relations to resolve coordination problems: (1) industrial relations, (2) vocational training and education, (3) corporate governance, (4) interfirm relations, and (5) employee relations.

In recent years, researchers have made substantial efforts to identify the factors that affect companies' selection of various collaborative interfirm control and governance mechanisms, including information integration.

Despite adherence to this tenet, prior studies have seemed to prescribe conflicting governance modes to manage the interfirm differences.

Schwieterman and Miller suggest that factors such as increased competition for critical resources will intensify the pressure on supply chain managers to leverage their knowledge and experience of handling interfirm relationships in order to ensure their firms can provide products and services to customers.

Another strand of research indicates that the granting of notes and accounts payable requires robust trust between firms ('interfirm trust' hereafter) (Johnson et al., 2002; Fafchamps, 2004; Fisman and Raturi, 2004) based on the assumption that interfirm trust creates confidence that payment will be made after delivery of the goods or services.

Such interfirm collaborations have become common in high-tech industries, which are often characterized by rapid technological development, short product lifecycles, and increasing product complexity.

The Dynamics of Interfirm Relationships: Markets and Organization in Japan

* Jing Cai, University of Michigan, and Adam Szeidl, Central European University, "Interfirm Relationships and Business Performance"