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The Game: the 'Evolution of Cooperation' and the New Frontier O Master’s Course in Management and Governance Curr. Accounting and Management a.a. 2013/2014 THE GAME THE ‘EVOLUTION OF COOPERATION’ AND THE NEW FRONTIER OF KNOWLEDGE MANAGEMENT Author: Sara Trenti Supervisor: Prof. Luigi Luini Assistant supervisor: Prof. Lorenzo Zanni December 2014 I ABSTRACT This research is intended to investigate Cooperation and to understand how we can stop the self-interested behaviour of the individual from damaging the long-term interests of the group. Indeed, it is reasonable to think that following cooperation could lead to a mutual benefit for everyone. Nevertheless, reality is often controversial, as selfishness and individuality dominate. This create problems, because people and organizations fail to coordinate and to make optimal decisions. Because of the wide-ranging nature of the issue, we relied on a largely interdisciplinary theoretical base, grounding on a managerial, micro- economic, financial, epistemological and sociological literature and empirical cases. Our methodological approach grounds on the Thompson’s Epistemic-Ontological Alignment Theory (2011), by combining an Entitative Dimension (models of reality) and a Process Dimension (flux of interactions) to create a consistent and justifiable Mid-Range Theory. By departing from the Prisoner’s Dilemma and the Axelrod’s solution, Coordination Games and models of cooperation between firms, we then analysed flux of cooperative interactions and knowledge creation. We eventually found out that the so-called Future Game® and the Scenario Game represent a practical embodiment of the Evolution of Cooperation envisaged by Axelrod, and an important contribution to the Reformation of Cooperation envisaged by Sennett, to avoid the spread of the uncooperative self. They also constitute an example of the emerging practice of gaming, acknowledged as the New Frontier of knowledge management and managerial consultancy. This work wants to be a new beginning for a new research stream around cooperation and knowledge creation through gaming, and around the Scenario Game and the related Future Game®, to create a base for further discussions by departing from the insights produced by our analysis. II TABLE OF CONTENTS ABSTRACT ............................................................................................................................ II INTRODUCTION............................................................................................................... VII 1. CHAPTER ONE – MODELS OF COOPERATION .................................................. 1 1.1. THE PRISONER’S DILEMMA GAME (1950S) ................................................................ 2 1.2. THE EVOLUTION OF COOPERATION ............................................................................ 3 1.2.1. The Axelrod’s Model (1981) ............................................................................ 4 1.2.1.1. TIT FOR TAT Strategy .................................................................................. 6 1.2.2. How to promote cooperation .......................................................................... 11 1.2.3. Other advances in Cooperation theory based on Prisoner’s Dilemma ........... 12 1.2.3.1. Labels, Stereotypes and Status Hierarchies................................................ 13 1.2.3.2. Reputation and Deterrence ......................................................................... 14 1.2.3.3. Regulation and Standards ........................................................................... 15 1.2.3.4. Territoriality ............................................................................................... 15 1.3. THE COMPLEXITY OF COOPERATION ........................................................................ 15 1.3.1. The Genetic Algorithm for strategies’ evolution .................................................. 16 1.3.2. Coping with Noise .......................................................................................... 18 1.3.3. Norms and Metanorms Game ......................................................................... 19 1.3.4. The Landscape Theory of Aggregation .......................................................... 22 1.3.5. Standard Setting .............................................................................................. 25 1.3.6. The Tribute Model .......................................................................................... 28 1.3.7. Disseminating culture ..................................................................................... 30 1.4. COORDINATION GAMES: FROM INDIVIDUALS TO TEAMS .......................................... 33 1.5. CONCLUDING REMARKS .......................................................................................... 36 2. CHAPTER TWO – MODELS OF COOPERATION BETWEEN FIRMS ............ 39 2.1. THEORIES ON INTER-FIRM COOPERATION ................................................................ 40 2.1.1. A Managerial perspective: Models on how corporate dynamics influence Cooperation ..................................................................................................................... 40 III 2.1.1.1. A Process Framework for the development of cooperative Inter- organizational Relationships ...................................................................................... 41 2.1.1.2. An Action Pattern Model of Inter-firm Cooperation .................................. 44 2.1.1.3. The Dimensions of Culture in a cross-border managerial perspective ...... 46 2.1.2. A Financial perspective: How Cooperation influences Corporate Value ....... 51 2.1.2.1. How to choose a compatible “companion”: The Balance Model .............. 51 2.1.2.2. Drivers for Value Increasing M&A ............................................................ 53 2.1.2.3. Causes for Value Reduction ........................................................................ 56 2.1.2.4. Research Joint Venture: a cooperative game for competitors.................... 59 2.1.3. An Industrial perspective: How Cooperation influences Industrial Dynamics 63 2.1.3.1. Direct Competitors and Substitutes ............................................................ 64 2.1.3.2. The threat of New Entrants ......................................................................... 72 2.1.3.3. Buyers and Suppliers: vertically related markets ....................................... 79 2.1.3.4. A step toward innovation: R&D Cooperation ............................................ 86 2.2. CONCLUDING REMARKS .......................................................................................... 89 3. CHAPTER THREE – COOPERATION AND KNOWLEDGE MANAGEMENT: THE “GAME” ....................................................................................................................... 93 3.1. COLLABORATION AS FLUX OF INTERACTIONS .......................................................... 94 3.1.1. Cooperation, according to Sennett .................................................................. 95 3.1.1.1. Dialogics ..................................................................................................... 96 3.1.1.2. Cooperation Online .................................................................................... 98 3.1.2. Competition and Cooperation: the Fragile Balance ........................................ 99 3.1.2.1. The Spectrum of Exchange ........................................................................ 100 3.1.2.2. Reformation of Cooperation: the “artisanal” Workshop ......................... 102 3.1.3. Cooperation Weakened ................................................................................. 103 3.1.3.1. Inequality .................................................................................................. 104 3.1.3.2. The Social Triangle ................................................................................... 105 3.1.3.3. The Uncooperative Self ............................................................................. 106 3.1.4. Cooperation Strengthened ............................................................................. 107 3.1.4.1. The Craftsman ........................................................................................... 107 IV 3.1.4.2. Everyday Diplomacy ................................................................................. 109 3.2. KNOWLEDGE MANAGEMENT IN COOPERATION ..................................................... 110 3.2.1. Nonaka and Takeuchi: a source of inspiration .............................................. 111 3.2.1.1. The knowledge-creating Company ........................................................... 113 3.2.1.2. Knowledge and Management .................................................................... 114 3.2.2. Organizational Knowledge Creation: from the Individual…to the Firm…and to the Network............................................................................................................... 117 3.2.2.1. Theory of (inter)organizational knowledge creation ................................ 117 3.2.2.2. Middle-up-down management process for knowledge creation ............... 122 3.2.3. Collaborative Knowledge and Communities of Practice .............................. 124 3.2.4. A step forward: “the Game” as a New Driver .............................................. 128 3.2.4.1. Gamification, Serious Games and Simulation .......................................... 128 3.2.4.2. What happens when “people are playing”? ............................................
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