Integrating Soft Factors into the Assessment of Cooperative Relationships between Firms: Accounting for Reputation and Ethical Values

14 Pages Posted: 28 Dec 2009

See all articles by Bernhard Hirsch

Bernhard Hirsch

Bundeswehr University Munich

Matthias Meyer

Technical University Hamburg-Harburg (TUHH)

Abstract

Alliances and other forms of cooperation between firms often promise great benefits, for example, by the exchange of knowledge or co-specialization of resources. At the same time, the necessary actions to realize these benefits can augment vulnerability to opportunistic behaviour of partners. In addition to formal contracts to mitigate the resulting behavioural uncertainties, often, mechanisms, such as reputation or ethical values, are suggested as important supplements. However, when it comes to assessment of a specific cooperation opportunity, it is difficult to account systematically for the economic consequences of these ‘softer factors’. Therefore, this paper aims to surpass mere financial analysis of chance and risk and to integrate systematically both reputation and ethical values into an economic assessment of cooperative relationships. For this purpose, we develop a theoretical framework that is based on a simple-decision model to account for reputation and ethical values of potential partners as drivers of behavioural uncertainty reduction. We also discuss how this framework can be used to assess cooperative relationships and illustrate these ideas with reference to the inter-organizational accounting practices of a large drugstore chain and its suppliers.

Suggested Citation

Hirsch, Bernhard and Meyer, Matthias, Integrating Soft Factors into the Assessment of Cooperative Relationships between Firms: Accounting for Reputation and Ethical Values. Business Ethics: A European Review, Vol. 19, Issue 1, pp. 81-94, January 2010, Available at SSRN: https://ssrn.com/abstract=1527913 or http://dx.doi.org/10.1111/j.1467-8608.2009.01580.x

Bernhard Hirsch (Contact Author)

Bundeswehr University Munich ( email )

Werner-Heisenberg-Weg 39
Neubiberg, 85577
Germany

HOME PAGE: http://www.unibw.de

Matthias Meyer

Technical University Hamburg-Harburg (TUHH) ( email )

Schwarzenbergstr. 95
Hamburg, 21073
Germany

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