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Collaborative innovation: weak commitments and unenforceable contracts

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  • John D. Hanson
  • Joachim Henkel

Abstract

Innovation that crosses organisational boundaries, such as those between buyers and sellers, requires complementary investments of assets by participants. This creates a contracting problem with the possibility of opportunistic behaviour. We show that this problem can be overcome using the mechanism of weak commitments. In situations where both parties can see a return on their investment in innovation that increases with their partner's investments, there is a bounded range of commitment that can be made unilaterally by either party within which cooperative behaviour becomes the dominant strategy for both parties. This finding is important because it shows that collaborative innovation is possible without the need for elaborate contracts or reliance on intangible constructs such as relational trust or reputational cost. This suggests that collaboration is possible in situations where it was previously considered unlikely and suggests new approaches to research on inter-firm collaborations.

Suggested Citation

  • John D. Hanson & Joachim Henkel, 2020. "Collaborative innovation: weak commitments and unenforceable contracts," International Journal of Procurement Management, Inderscience Enterprises Ltd, vol. 13(1), pages 63-82.
    • Handle: RePEc:ids:ijpman:v:13:y:2020:i:1:p:63-82
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    Cited by:

    1. Rodney Duffett & Myles Wakeham, 2022. "Modeling a New Supplier Preference Paradigm: A Business-to-Business and African Developing Economy Context," Sustainability, MDPI, vol. 15(1), pages 1-27, December.
    2. Evgeniya Tsytsyna & Teemu Valminen, 2024. "How are actor dynamics balanced in ecosystems? An in-depth case study of an autonomous maritime transportation ecosystem," Review of Managerial Science, Springer, vol. 18(9), pages 2547-2582, September.

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