Contracts or Relationships

John Kay

in The Business of Economics

Published in print October 1996 | ISBN: 9780198292227
Published online November 2003 | e-ISBN: 9780191596520 | DOI:
 Contracts or Relationships

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“Architecture” is introduced as the basis of competitive advantage for many companies. It refers to a network of relationship contracts within, or around, the firm. It can be sub‐divided into internal architecture (relationships with employees), external architecture (relationships with their suppliers and customers) and networks (relationships among a group of firms engaged in related activities). It adds value by helping to create organizational knowledge and routines that enable the company to respond flexibly to changing circumstances and allow easy exchanges of information. Such capabilities can only add value in the context of a long‐term relationship, which penalizes opportunistic behaviour.

Keywords: architecture; competitive advantage; core competencies; distinctive capabilities; organisational knowledge; organisational routines; resources; strategy

Chapter.  6853 words.  Illustrated.

Subjects: Microeconomics

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