Article ID: | iaor20063469 |
Country: | South Korea |
Volume: | 11 |
Issue: | 1 |
Start Page Number: | 25 |
End Page Number: | 48 |
Publication Date: | May 2005 |
Journal: | International Journal of Management Science |
Authors: | Kim Bowon, Lee Seungchul |
Keywords: | Infrastructure |
Firms often collaborate on building an infrastructure, which benefits all the firms in the industry, although in unequal magnitudes. Then a difficult and tricky issue is concerned with ‘free riding.’ Should there be only ‘common, i.e., industry-wide’ benefits in such collaboration, the literature indicated that the free rider problem is unavoidable. In this paper, however, we suggest that while collaborating, the firm also learns firm-specific knowledge, experience, and know-how, which can be directly utilized for its own internal improvement. That is, the collaboration between firms provides them with not only ‘industry-wide,’ but also ‘firm-specific’ benefits. Our analysis shows that if there indeed exist two types of benefits simultaneously, depending on the balance between the two, the free rider problem can be mitigated or even eliminated.