Collective Strategy is the attempt of organizations

Abstract
Collective Strategy is the attempt of organizations to manage their interdependence
by substituting contractual for competitive interconnectedness,
creating a partially endogenous social environment. This paper
discusses the concept of Collective Strategy and applies it to the collaboration
of firms in an industry, which have the objective to reduce
competition within the collective in order to increase firm value. It is
argued that a collective strategy can be a useful and sometimes necessary
complement to traditional strategies that attempt to create a
competitive advantage on the firm level. Like for an individual firm,
industry-attractiveness and the competitive position vis-à-vis rivals are
determinants of a collective’s ability to increase firm value; both can be
addressed by collective strategies. Collective strategies are discussed in a
new strategic context, which is characterized by lower transaction costs,
reduced barriers to entry, hypercompetitive tendencies, and increased
uncertainty. Some of its characteristics make collective strategy more a ttractive
and practicable, whilst others increase the particular coordination
problems typical of collective action. The distinctive incentive
problems that result from the prisoner’s dilemma nature of the payoffs
from collusive collective strategy are analyzed; solutions are evaluated
with respect to their likely effectiveness in the new strategic context.
Based on the discussion of the attractiveness and feasibility of alternative
structures of collusion, suggestions as to the optimal design of
collusive collective strategy are made.