Comparing ad-hoc versus developing capabilities approaches when firms develop new industrial symbiosis exchanges

While IS has been shown to create firm- and region-level value (Bansal and McKnight, 2009; Paquin, Busch, and Tilleman, 2015), for many firms, managing by-product through IS exchanges is a novel and untested action (Paquin and... [ view full abstract ]

While IS has been shown to create firm- and region-level value (Bansal and McKnight, 2009; Paquin, Busch, and Tilleman, 2015), for many firms, managing by-product through IS exchanges is a novel and untested action (Paquin and Howard-Grenville, 2013). We explore how firms’ approach to developing IS exchanges – either viewing IS as an ad-hoc solution to a one-time by-product issue, or as an opportunity to develop new capabilities for value creation through IS (Winter, 2003) – influences exchange outcomes. These approaches likely influence both firms’ efforts in developing and the potential outcomes from exchanges. Yet, given limited insight into this, we ask: what is the impact of choosing an ad hoc versus developing capabilities approach to developing new IS exchanges?

Using a unique UK national-level dataset including 841 firms, 2,714 IS exchanges from 2004-2012, manager interviews from 23 firms, we develop and test a number of hypotheses to explore the impact of firms’ choice of partners, type of exchange (batch vs. continuous), and financial and environmental outcomes, in relation to firms’ approach to developing IS exchanges.

We find all firms are more likely to develop exchanges with experienced IS partners, though this is more pronounced for ad-hoc firms. Ad-hoc firms are also more likely to develop one-time batch (versus continuous) exchanges, likely because they require lower asset specific investments. Though all firms are more likely to complete exchanges as the prospect of financial and environmental value increases, ad-hoc firms are more likely to be influenced by the potential financial value of an exchange. For firms developing capabilities, we find the influence of financial gain is J-shaped as subsequent exchanges create decreasing then increasing value.

Our contributions include empirically showing the differential influence of firms’ approach to IS on their potential outcomes. Specifically, we show ad-hoc firms appear to be more influenced by the promise of near-term financial value, while firms developing capabilities are more likely to trade off near-term for longer-term financial value. We show a non-linear relationship between developing capabilities and increased value creation from developing additional exchanges, suggesting the need for firms to invest in IS-related capability to realize potential gains from exchanges. By supplementing our quantitative findings with manager interviews, we explore the varied reasons firms may pursue developing IS-related capabilities.

REFERENCES

Bansal P, McKnight B. 2009. Looking Forward, Pushing Back and Peering Sideways: Analyzing the sustainability of industrial symbiosis. Journal of Supply Chain Management 45(4): 26-37.

Paquin RL, Busch T, Tilleman SG. 2015. Creating Economic and Environmental Value through Industrial Symbiosis. Long Range Planning 48(2): 95-107.

Paquin RL, Howard-Grenville J. 2013. Blind Dates and Arranged Marriages: Longitudinal Processes of Network Orchestration. Organization Studies 34(12).

Winter SG. 2003. Understanding dynamic capabilities. Strategic Management Journal 24(10): 991-995.