Organizational Arrangements and Transaction Costs

Symbioses can follow, in theory, any of the common types of industrial organization described, for example, by Williamson (1979). Williamson suggests that organizational arrangements between firms are shaped by efforts to minimize transaction costs. Kalundborg is based on a complex of contracts and alliances that have arisen with little or no outside intervention from government or other sets of interests. Unlike a spot market such as is typical in handling metal scrap, this type of structure affords symbioses more certainty and continuity than exchanges in pure markets can offer. Vertical integration, the common ownership of one or more successive stages in the production process, would go even further and might arise if continuity in the movement of by-products became a critical factor.

Other forms of industrial organization more common outside the USA have some relevance to the emergence of symbiotic arrangements (Lenox 1995). The cross-ownership structure of the Japanese keiretsu is a highly elaborated form of integration in which the transaction costs and risks could be spread among potential participants in an exchange of by-products. Another possibility is central ownership as is found in Germany where banks may own substantial equity, and participate actively, in the management of a number of firms. Other financial institutions could play a similar role. Schwarz and Steininger (1995) point to an extensive recycling network among firms in the Styria region of Austria, acknowledging that the activity is largely unconscious and thus uncoordinated. To reduce the coordinative problems with eco-industrial parks discussed above, some form of common ownership or institutional management power vested in the developer of the park can improve the context for the emergence of symbiotic patterns. The Kalundborg partners now jointly support an information arm, The Symbiosis Institute (www. symbiosis.dk).

Impediments other than strictly economic ones exist as well, although Williamson might argue that all can be represented in terms of transaction costs. Symbiosis requires interchange of information about nearby industries and their inputs and outputs that is often difficult or costly to obtain. Kalundborg's small size of about 20 000 residents and relative isolation have made for a tight-knit community in which employees and managers interact socially with their counterparts on a regular basis. This cultural feature leads to what a local leader calls 'a short mental distance between firms' (V. Christensen, personal communication 1994). Cultural pressures are also important. As in many Scandinavian settings, there is a backdrop of environmental awareness. In Kalundborg, no deliberate institutional mechanism was needed to promote conversations among the potential partners. Inter-firm trust is important in establishing alliances or contracts among participants (Gulati 1995). An atmosphere of trust in Kalundborg existed even in the absence of specific experience between firms.

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