Undertaking this economic decision as a sole firm partly however rests on the
ability of the wind energy producer to culture products at a similar or lower average
cost than if they had negotiated a contract or formed a joint venture with a firm who
specializes in mariculture. The lack of knowledge on the different modes of conduct
in the mariculture section could act however, as a major impediment to such sole
ownership scenario of a wind farm enterprise. Thus, while a sole ownership
approach may initially appear promising, the degree of risk involved in operating
two very different businesses at the same location is high. The relative risk of
internalizing both productive activities can be somewhat combatted by the degree to
which personnel with specialized knowledge could be brought into oversee and
conduct these operations. Current lines of research are assessing the economic
merits of a joint mariculture-wind energy facility and will help illuminate the
viability of such a venture from multiple perspectives (Griffin and Krause 2010).
11.7.1.2 Negotiated Contract
Forming alliances is a common commercial strategy that is employed to organize
and mitigate activities that are riskier than a firm’s average inside project. These
alliances occur more in riskier industries (Robinson 2008). Expanding to an
industry-level analysis, Robinson (2008) found that alliance intensity across
industries is positively associated with the risk difference between the two industries. This dynamic could play an important role in alliance formation versus single
firm management of a multi-use facility. Therefore negotiated contracts are a
alternative path to mitigate and manage the risk associated to an integrated facility.
Such categories of agreement may cover a multitude of different settings, such as a
joint venture or a consortium or any form of subcontracts. Central hereby is the fact
that the outlined interdependence between firms must provide benefit to each party
(Pareto-improving) and be perceived as fair by the participating entities. Continued
cooperation between parties must be sustainable by the underlying game structure
(Grandori and Soda 1995). Alliance between firms that both hold unique capabilities that neither partner could efficiently provide alone, have the highest potential
for coordination. Michler-Cieluch and Krause (2008) showed that under such an
umbrella there is sufficient scope for such wind farm-mariculture cooperation in
terms of operation and maintenance activities.
However, the process of drawing up a contract that delineates the lines of
cooperation between firms is fraught with challenges. Hold-up hazards increase
when complexity and uncertainty make writing and enforcing contracts difficult
(Williamson 1979), and when products require asset-specific investments, two
conditions that hold in this case. Only when there are offsetting economic benefits
and sufficient efficiency scope to doing so firms are compelled to engage in integrated organisational structures over simple contracts or sole ownership (Johnson
and Houston 2000). Such economic benefits pertain to any of the previously outlined benefits from cooperation, such as reduced production costs, organisational
efficiencies, or pooling risk—but these benefits are not guaranteed. Because of the
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337
ability of the wind energy producer to culture products at a similar or lower average
cost than if they had negotiated a contract or formed a joint venture with a firm who
specializes in mariculture. The lack of knowledge on the different modes of conduct
in the mariculture section could act however, as a major impediment to such sole
ownership scenario of a wind farm enterprise. Thus, while a sole ownership
approach may initially appear promising, the degree of risk involved in operating
two very different businesses at the same location is high. The relative risk of
internalizing both productive activities can be somewhat combatted by the degree to
which personnel with specialized knowledge could be brought into oversee and
conduct these operations. Current lines of research are assessing the economic
merits of a joint mariculture-wind energy facility and will help illuminate the
viability of such a venture from multiple perspectives (Griffin and Krause 2010).
11.7.1.2 Negotiated Contract
Forming alliances is a common commercial strategy that is employed to organize
and mitigate activities that are riskier than a firm’s average inside project. These
alliances occur more in riskier industries (Robinson 2008). Expanding to an
industry-level analysis, Robinson (2008) found that alliance intensity across
industries is positively associated with the risk difference between the two industries. This dynamic could play an important role in alliance formation versus single
firm management of a multi-use facility. Therefore negotiated contracts are a
alternative path to mitigate and manage the risk associated to an integrated facility.
Such categories of agreement may cover a multitude of different settings, such as a
joint venture or a consortium or any form of subcontracts. Central hereby is the fact
that the outlined interdependence between firms must provide benefit to each party
(Pareto-improving) and be perceived as fair by the participating entities. Continued
cooperation between parties must be sustainable by the underlying game structure
(Grandori and Soda 1995). Alliance between firms that both hold unique capabilities that neither partner could efficiently provide alone, have the highest potential
for coordination. Michler-Cieluch and Krause (2008) showed that under such an
umbrella there is sufficient scope for such wind farm-mariculture cooperation in
terms of operation and maintenance activities.
However, the process of drawing up a contract that delineates the lines of
cooperation between firms is fraught with challenges. Hold-up hazards increase
when complexity and uncertainty make writing and enforcing contracts difficult
(Williamson 1979), and when products require asset-specific investments, two
conditions that hold in this case. Only when there are offsetting economic benefits
and sufficient efficiency scope to doing so firms are compelled to engage in integrated organisational structures over simple contracts or sole ownership (Johnson
and Houston 2000). Such economic benefits pertain to any of the previously outlined benefits from cooperation, such as reduced production costs, organisational
efficiencies, or pooling risk—but these benefits are not guaranteed. Because of the
11 The German Case Study: Pioneer Projects of Aquaculture …
337