Literature Review – Strategic Alliances

Strategic alliances are collaborative organizational arrangements that use resources or governance structures from more than one present organization. Strategic alliances have three main characteristics,

  1. First, two or more firms partnering remain independent to the formation of the alliance.
  2. Second, alliances perform the feature of ongoing mutual interdependence, from which one party is vulnerable to the other party. Mutual interdependence between party leads to shared control and management, which contributes to the complexity of alliance management and often creates significant administrative costs.
  3. Third, because the partners of alliances remain independent, there is uncertainty as what one party expects the other party to do.

Literature Review on Strategic Alliances

Buckley, Glaister, Klijn, & Tan (2009) describe that, two types of knowledge accession partnerships: one pursuit of efficiency and productivity based on complementary knowledge transfer and the other in pursuit of business scope and product adaptability based on supplementary knowledge transfer. They also give differentiation’s between complementary knowledge accession and supplementary knowledge accession, and between complementary knowledge acquisition and supplementary knowledge acquisition In contrast, knowledge acquisition is underpinned by reverse knowledge flows from the alliance to the partner firms. It also involves two types of knowledge transfer between partner firms through the alliance: complementary knowledge acquisition to strengthen individual partners’ core knowledge base and supplementary knowledge acquisition to widen their knowledge range. The firms work together to make the alliance, which called partnership enhancing knowledge transfer. Complementary knowledge accession can help the alliance to strengthen its specialization and core competence, while supplementary knowledge accession leads to a wider knowledge base and business adaptation.

(Buckley, P. J., Glaister, K. W., Klijn, E.,  &  Tan, H. (2009). Knowledge Accession and Knowledge Acquisition in Strategic Alliances: The Impact of Supplementary and Complementary Dimensions. British Journal of Management, 20(4), 598-609.)

Das and Rahman (2006) provide comprehensive framework of the key determinants of partner opportunism in strategic Alliances. Moreover they gives the various eight different preposition for better outcome in partner opportunism in the company the preposition involve, proposition 1, extent of equity involvement will be negatively associated with potential for partner opportunism. Proposition 2, Asymmetric alliance-specific investments will be positively joint with potential for partner opportunism. Proposition 3, Mutual hostages will be negatively associated with potential cause for partner opportunism. Proposition 4, Payoff inequity will be positively associated with partner opportunism. Proposition 5, the cultural diversity among alliance members will be positively associated with opportunism. Proposition 6, Goal incompatibilities among alliance members will be positively associated with partner opportunism. Proposition 7, length of alliance horizon will be negatively associated with potential for partner opportunism. Proposition 8, Pressures for quick results will be positively associated with partner opportunism. More over this article gives comprehensive determinants comprising three categories of factors: economic, relational, and temporal.

(Das,  T. K (2006). Strategic Alliance Temporalities and Partner Opportunism; British Journal of Management, 17(1), 1-21.)

Holmberg and Cummings (2009) provides alliance managers and researchers with (1) a strategic management based industry and partner selection process, (2) a new dynamic partner selection tool for evaluating target industries and specific firms, which is applicable to multiple alliance and industry contexts, and (3) an alliance-rich global travel industry application that illustrates the robustness of our partner selection process and analytical tool. This three definitions fills a gap in the literature with respect to service-business alliances partner selection, presenting a strategic management-based process for evaluating target industries and firms that can help managers appropriate partner selection. this article also provides a new dynamic partner selection tool for evaluating target industries and firms and author also describe the partner selection process which includes four key steps:

(1) Aligning corporate and strategic alliance objectives;

(2) Developing appropriate sets of critical success factors against which to evaluate potential alliance activities;

(3) Mapping potential partner industries, industry-segments and firms;

(4) Using a dynamic partner selection analysis tool to evaluate the potential of various targets.

(Holmberg, S. R.,  &   Cummings, L. (2009). Building Successful Strategic Alliances. Long Range Planning, 42(2), 164-193.)

Benjamin Prasad (1995) explain that Multinational Alliances reflects the result of survey of American technology executives. Multi-nation alliances are one of the prominent tools of corporate strategies and senior technology executive play a vital role for shaping multinational alliances. Alliances are important to solve the firm’s strategic problems and also offer the mutual learning opportunity. Strategic alliances are used as major strategies for carrying out global workforce. Alliances were used mainly because of reduced innovation time span, market structure and/ or access and technological compatibility of the allies.The research carried out among senior technology officers of American companies, international or multination corporation, and it was based on questionnaires study. The questionnaires were based on teaming up, partner selectivity and inherent risk. These questionnaires were used as survey instrument which included twelve statements mostly derived from published literature or ideas extended from them. And this study finally concluded that international business alliances are a burgeoning phenomenon and represent corporate level strategic options for both small as well large industries. Strategic alliances are more learning contexts rather than competitive stratagy and they are the solution for the company’s strategic dilemmas.

(Prasad,  S. B. (1995). Multinational alliances: A note on the perception of technology executives. International Journal of Value-Based Management, 8(2), 185 — 193.)

Jeffrey J. Reuer and Maurizio Zollo (2005) explains alliance instability by analyzing the favorability of research alliances’ termination outcomes rather than the longevity of collaborative agreements. And explain the extent to which terminated alliances are successful or failed partnerships, or might simply reflect more neutral outcomes such as contract expiration. Author compared two different streams of the institutional economics literature, evolutionary economics and transaction cost economics, to measure the effects of parent firms accumulation of alliance experience and alliance attributes on their termination outcomes. Evolutionary economics highlights the role of accumulation of alliance capabilities through experience, and focuses on the firm level of analysis. but transaction cost analysis gives more attention to the particular characteristics of individual alliances that give rise to various exchange knowledge hazards. author identify that most alliances terminate due to changes in parent firms strategic priorities is in accordance with the view that alliances should be seen as being embedded in parent firms adaptation choices. Alliances occur with lower frequency in comparison with manufacturing processes and other activities for which positive experience effects have been documented correctly. Second, alliances are more heterogeneous than production processes. Third, alliances are more causally ambiguous compared to typical manufacturing or administrative procedures.

(Reuer, J. J.,  &   Zollo, M. (2005). Termination outcomes of research alliances. Research Policy, 34(1), 101-115.)

Anming Zhang(2005) explain competition models for three types of strategic alliances like vertical, horizontal, and hybrid alliances. Alliance creates a negative direct effect on profit; it might be pursued because it is a dominant strategy of the company. Horizontal alliance reduces competition not only in the market where prior competition between the partners takes place, but also in other markets of the alliance network of the company. A vertical alliance work on a strategic advantage by allowing partners to credibly commit to greater outputs, owing to network complementarities, vertical alliance creates a negative direct effect; it may be pursued because it is dominant strategy in an oligopolistic setting. A horizontal alliance reduces competition not only in the market where prior competition between the partners takes place, but also in other markets of the alliance network. In reality, most alliances are a mix of vertical and horizontal alliances called hybrid alliances it is observed a duopoly-pair environment.

(Zhang,  A. (2005). Competition Models of Strategic Alliances. Research in Transportation Economics, 13, 75-100.)

Dacin, Oliver,  &  Roy (2007) suggests that strategic alliances serve an important legitimating function for firms which is mediated by alliance governance structure and partner selection preferences for the alliance and it has a significant influence on alliance performance. In this paper a theoretical framework that identifies five types of legitimacy associated with strategic alliances, Legitimacy is earned though the participation in a strategic alliance which have a profound impact on economic and competitive success of the firm. Firms that lack market, relational, social, investment and alliance legitimacy, respectively, can be denied access to crucial markets. And it may needed partners to conduct joint projects or share risks and costs, government funding and customer support, critical sources of investment and top management support, and novel opportunities to innovate. The author also give Propositions to explain the mediating role of alliance governance structure and partner selection criteria for legitimacy on firm and alliance performance and specially partner selection criteria.

(Dacin, M. T., Oliver, C.,  &  Roy, J. (2007). The legitimacy of strategic alliances: an institutional perspective. Strategic Management Journal, 28(2), 169 — 187.)

Dussauge, Garrette,  &  Mitchell (2000) investigates the outcomes and durations of strategic alliances among competing firm, using alliance outcomes. Moreover alliance outcomes vary systematically across link and scale alliances. Link alliances can be inter-firm partnerships to which partners contribute different capabilities, while scale alliances are partnerships to which partners contribute similar capabilities. Scale alliances are more likely to continue without material changes. The two types of alliances are equally likely to shut down, at similar ages Inter-firm learning and skill transfers appear to occur more often in link alliances than in scale alliances by associating partners that contribute different capabilities to the joint endeavor, link alliances create favorable conditions in which such way that the transfer of knowledge may take place. Author also discuss about collaboration, Collaboration is a key method by which firms learn new capabilities. The reorganization of a collaboration, either as a reshaped alliance or a takeover by a partner firm, then may help firms that have learned new skills and protect the value of those skill. And with the data collected and prepositions the author suggested that Firms often must collaborate with other businesses that possess complementary resources in order to survive and grow.

(Dussauge, P., Garrette, B.,  &  Mitchell, W. (2000). Learning from competing partners: outcomes and durations of scale and link alliances in Europe, North America and Asia. Strategic Management Journal, 21(2), 99 — 126.)

Kim and Arvind Parkhe (2009)show the two variables for the partner selection, competing similarity and cooperating similarity, In developing a comprehensive model that forces a simultaneous focus on partner characteristics and partner capabilities in global strategic alliance.

Author determine that alliances permit the leveraging of different, unique and complementary resources and capabilities, such as geographical market coverage, product market coverage and technological expertise on methodology author use empirical test of this model on a sample of 70 global strategic alliances indicated mixed support for our hypotheses, and suggested that competing similarity has a negative effect Find out the relation of the strategic alliance on

(1) By including the impact of competing similarity on alliance outcomes;

(2) By refining the dimensions of cooperating similarity;

(3) By including relational efforts as moderating variables;

(4) By empirically testing this refined model.

(Kim, J.,  &   Parkhe, A. (2009). Competing and Cooperating Similarity in Global Strategic Alliances: An Exploratory Examination. British Journal of Management, 20(3), 363-376.)

Robert J. Mockler(1997) provides an analytical framework for understanding multinational strategic alliances, and application frameworks for entering into and managing such strategic alliances more effectively. The article focuses on multinational strategic alliances from multiple viewpoints: what they are, kinds of strategic alliances, and management tasks such as enterprise-wide strategic alignment; negotiating strategic alliances; selecting alliance partners people and company or government body; determining specific type and structure appropriate for individual situation requirements; making them work managing and leading. This paper describe that Strategic alliances have been defined as having three main characteristics on the manager’s prospective, First, The two or more firms that unite to pursue a set of agreed upon goals remain independent subsequent to the formation of the alliance. Second, The partner firms share the benefits of the alliance and control over the performance of assigned tasks perhaps the most distinctive characteristic of alliances and the one that makes them so difficult to manage. Third, the partner firms contribute on a continuing basis in one or more key strategic areas, for example technology products. Author also explains the process and activities of the managers on the multinational strategic alliances.

(Mockler,  R. J. (1997). Multinational strategic alliances: a manager’s perspective. Strategic Change, 6(7), 391 — 405.)

Agarwal, Croson, &  Mahoney(2010) examines the determinants of the deviation between potential and realized value creation in strategic alliances. In this paper author use an experimental design that juxtaposes two important factors that affect alliance members decisions: economic incentives and communications. The Evidence from our experiment sheds light on the relative impact of each, and more importantly, how both factors interact to explain successful outcomes. Strategic alliances are an important mode of capability development in the face of environmental changes and increases in competitive intensity. Successful outcomes from cooperative alliances are contingent on exchange partners’ decisions to contribute to the strategic alliance. This finding of research suggests that factors like coordination costs, bounded rationality, and lack of trust in the absence of shared knowledge can create endogenous uncertainty regarding partner actions, and it may cause realized value creation to be less than potential value creation. The ability to communicate significantly increases the probability of success due to strategic alliance.

(Agarwal, R., Croson, R.,  &  Mahoney, J. T. (2010). The role of incentives and communication in strategic alliances: an experimental investigation. Strategic Management Journal, 31(4), 413 — 437.)

TAILAN CHI (2010) develops a theoretical framework for analyzing the exchange structure in the trading of imperfectly imitable and imperfectly mobile firm resources of the firm. A major part of the paper is devoted to developing an integrative model for assessing the exchange structure between firms that are involved in the trading of strategic resources in the face of significant transaction cost problems. The paper explains definition of trading is needed to conduct a full analysis of the exchanges involving imperfectly imitable and imperfectly mobile firm resources. It exploring the conceptual relationships between some prominent imitation barriers and various exchange difficulties, The paper identifies four primary transaction cost problems in the trading of strategic resources: adverse selection, Moral hazard, cheating and holdup. Adverse selection and moral hazard result from difficulties in measuring the capabilities and efforts of an exchange partner and cause friction to the value creation process in the trading of strategic resources for the firm. Cheating and holdup result from resource created through the exchange and can cause failures in the coordination between the exchange parties that is necessary for the realization of the maximum possible rent from their resources. The analysis show that a collaborative view has a wide range of structural flexibility in dealing with multiple transaction cost problems and it affecting the resources from both of the transacting parties and thus tends to be a more robust mode of transaction.

(Chi T,(2010). TRADING IN STRATEGIC RESOURCES: NECESSARY CONDITIONS, TRANSACTION COST PROBLEMS, AND CHOICE OF EXCHANGE STRUCTURE. Stratagic management journal, 15, 271-290.)

Doz (1996) find that the Strategic alliances between firms mediate between the initial conditions and the outcomes of these alliances. Successful alliance projects were highly evolutionary and went through a sequence of cycles of learning, re-evaluation and readjustment. Failing projects, conversely, were highly inertial, with little learning Or divergent learning between cognitive understanding and behavioral adjustment, or frustrated expectations. Although strategic alliances may be a special case of organizational learning. Author also believe analyzing the evolution of strategic alliances helps transcend too simple depictions of inertia and adaptation, in particular by suggesting that initial conditions may lead to a stable ‘imprinting’ affixed processes that make alliances highly inertial. Author also explains that the early imprinting was not necessarily static, and mutation was not random. The early imprinting could lead alliances down an adaptive dynamic development path by providing alliance partners with a capacity to learn how to learn’ over a range of conditions, By triggering learning cycles, initial conditions were a key enabler of alliance evolution. The tensions inherent to closely collaborating with a ‘foreign body’ and the conflict between inertial and adaptive forces in the alliances are observed, as compared to market’s length transactions or situations such as acquisitions. The second most important point author found is this paper is that, strategy content, and outcomes, are hard to understand without an understanding of how participants in the processes that generate these outcomes interact with each other.

(Doz,Y.(1996). THE EVOLUTION OF COOPERATION IN STRATEGIC ALLIANCES: INITIAL CONDITIONS OR LEARNING PROCESSES?. Stratagic management journal, 17, 55-83.  )

Inkpen,  (2000) explain that dynamics of alliance learning and develop a conceptual framework designed to capture the tension between cooperation and competition. Based on the concepts of private and common benefits and relative scope, the authors explore firms’ learning behavior patterns. Many alliance forms that exist (and new forms are emerging all the time), alliance researchers have two choices. One is to focus on a specific form, such as equity joint ventures. The other is to incorporate variables that capture aspects of alliance. For example, develop a framework for understanding how relational rents are earned and preserved. One of the constructs in the framework is effective governance, which allows the authors to introduce issues associated with different alliance forms. The modus operandi is to rely on simple, stylized models from economic theory’ but, because these simple models are divorced from the reality of alliance management, the models provide only a partial view of alliance Research argument and the learning process. The race to earn in alliances is an intriguing concept, as is the notion of learning alliances in which the primary objective of the partners is to learn.

(Inkpen,  A. C. (2000). A note on the dynamics of learning alliances: competition, cooperation, and relative scope. Strategic Management Journal, 21(7), 775 — 779.)

Mowery, Oxley, Silverman (1996) explains inter-firm knowledge transfers within strategic alliances using a new measure of changes in alliance partners’ technological capabilities, based on the citation patterns of their patent portfolios. Author analyze changes in the extent to which partner firms’ technological resources ‘overlap’ as a result of alliance participation. This measure allows author to test hypotheses from the literature on inter-firm knowledge transfer in alliances, with interesting results. In this paper author Consistent with the argument that alliance activity can promote increased specialization, resulting in the capabilities of partner firms become more divergent in a substantial subset of alliances. Research on resource and knowledge-based views of the firm, along with related work on inter-firm alliances, has been hampered by the lack of measures of firm-specific capabilities. These difficulties have meant that discussion of the motives and effects of alliance activity has proceeded in a virtual empirical vacuum, and competing views of alliance activity have rarely been brought into sharp focus. This paper uses a novel technique for measuring change in firms’ technological capabilities that allows us to track the effects of alliance activity on inter-firm knowledge transfers and the transfer of technology-based capabilities from one partner to another, Author also suggests the need for a richer conceptual framework in considering the effects of alliance activity on firm-specific knowledge and capabilities. The analysis of this paper also provides some support for the importance of ‘absorptive capacity’ in the acquisition of capabilities through alliances and bolsters the argument that experience in related technological areas is an important determinant of absorptive capacity

(MOWERY D, OXLEY J, SILVERMAN B.(1996). STRATEGIC ALLIANCES AND INTERFIRM KNOWLEDGE TRANSFER. Stratagic management journal, 17(W), 77-91.  )

McCutchen  &   Swamidass (2004) measure the alliance of pharmaceutical industry worldwide. factors tend to encourage the use of external sourcing of new product technology in this industry: (1) the licensee firm’s functional capabilities have a high absorptive capacity for new technologies; (2) top management thinks that the external source will complement internal sources; (3) the environment is perceived to be too hostile and risky for R&D investment because of rapid changes in products, and regulatory uncertainties; (4) the firm’s management is averse to risk; (5) the firm has had a lot of external sourcing experience; (6) the firm’s management has a strong global orientation; and (7) there are substantial opportunities for external sourcing. Author give various proposition depending upon the firm size, number of licenses, and market access and author also develop the various proposition to understand the motivation factors in this article. Small firm licensors indicate the lack of financial resources to be an important motivation for entering the alliance while larger firms never indicate this reason; technical compatibility is much more important to small firms than larger firms; two-thirds of large licensors indicate that market access was one of their motivations; strategic behavior provides a strong motivation for strategic alliance. However, synergy, in the form of asset complementarily, helps with the selection of the partner to the Alliance. So strategic alliances in this industry are motivated by strategic behavior, asset complementarily, firm size, and ownership of technology.

(McCutchen Jr, W. W.,  &   Swamidass, M. (2004). Motivations for strategic alliances in the pharmaceutical/biotech industry: Some new findings. Journal of High Technology Management Research, 15(2), 197-214.)

Karl Morasch (2000) suggest strategic alliances is examined as an alternative to strategic trade policy. The performance of the policy options in a more general setting depends on a number of interacting factors including (i) The share of domestic consumption; (ii) The nature of product market competition; (iii) The initial number of firms in the industry, and (iv) The feasibility of international alliances. Irrespective of the nature of product market competition, the alliance solution performs particularly well for low to medium shares of domestic industry. The author analyzed performance of strategic alliances relative to strategic trade policy and find out the following factors have shown to be relevant, (i) The share of domestic consumption- strategic trade policy and the alliance solution differ because the effect on consumer surplus is neglected by the cooperating firms. (ii) The nature of product market competition- Changes in the nature of product market competition do not affect the relative performance of alliances and trade policy in qualitatively. The rank of these policy options in comparison to non-intervention is more sensitive to the demand structure and market conduct. (iii) The initial number of firms in each of the producing countries- The initial number of firms in each of the producing countries crucially influences the equilibrium of the alliance formation. (iv) Whether firms can form international alliances or are restricted to national Alliances- international alliances are feasible is only of minor importance in industries with many competitors: Without domestic consumption, trade policy usually performs somewhat better than the alliance solution

(Morasch,  K. (2000). Strategic alliances: a substitute for strategic trade policy? Journal of International Economics, 52(1), 37-67.)

T. K. Das (2000) suggest the resource based theory for stratagic alliance measure, resource based theory covers four major aspects of strategic alliances, Rationale, Formation, Structural preferences, and Performance. The resource-based view can make particularly valuable contributions. Author examine various resource types and structural preferences for this theory like property based resource (example human resource, patent copy right, physical resource) and knowledge based resource (example organizational resource, technological resource, managerial resource) Transaction cost economics and the resource-based view share a concern about the characteristics of a firm’s internal elements, the aim of transaction cost economics is to minimize the costs involved in inter-firm transactions. Such a view has been criticized for paying exclusive attention to cost minimization and neglecting value-creation in strategic alliances. In contrast, the resource-based view suggests that the rationale for alliances is the value-creation potential of firm resources that are pooled together. Moreover partner resource alignment directly affects collective strengths and inter-firm Conflicts in alliances which contribute in the alliance performance. When different resources are not compatible or not used fully, called wasteful resource alignment. And it result incompatibility.

(Das, T.,  &   Teng, B. (2000). A resource-based theory of strategic alliances. Journal of Management, 26(1), 31-61.)

Cullen and Sakano(2000) says that Development and management of relationship capital in the alliance, Relationship capital consists of the socio-psychological aspects of the alliance that are positive and beneficial to the alliance. Two important areas of relationship capital are mutual trust and commitment. Author developed a dynamic model of trust and Commitment based on mutual adjustments of alliance partners. Creditable trusts attitude commitment, benevolent trust is important to calculative commitment. And in the results the author explains various suggestions for trusts and commitment. It include, 1. Alliance partners must believe that they can trust each other and they must believe that mutual commitment is possible, 2. Seek a level of trust and commitment that is appropriate for your strategic goals for the alliance, 3. Behaviors and interactions in the relationship serve as trust or commitment signals to the partner, 4. Reveal your long and short term goals for the alliance in concert with your partner doing the same, 5. Mutual revelations of goals for the alliance is a crucial step in the trust cycle, To achieve and maintain mutual commitment and trust in an alliance, each side must gain something of importance from the relationship, 6. Invest in cross-cultural training. As with all international ventures, managers with cross-cultural sensitivity and language competence will likely have more success in understanding partner needs and interests.

(Cullen, J. B., Johnson, J. L.,  &  Sakano, T. (2000). Success through commitment and trust: the soft side of strategic alliance management. Journal of World Business, 35(3), 223-240.)

Sambasivan and Ching Yen (2010) in this paper is establish and test the relationship between organizational culture and strategic alliances in a manufacturing supply chain that consists of alliance companies (manufacturers) and alliance partners (suppliers and customers). The relationships have been analyzed from the manufacturer’s perspective. and this paper explain first The relationship between the culture type of Alliance Company and the degree of integration (trust, communication, and commitment) between the alliance companies and partners; second the relationship between the culture type of alliance company and value creation in the alliance company; third the relationship between the degree of integration and value creation in the alliance company The author explains the culture type of the alliance company has a significant effect on the degree of integration and value creation, the degree of integration has a significant relationship with value creation. ad hocracy culture favors a higher level of communication and commitment with the suppliers; hierarchy culture favors a higher level of commitment with suppliers and helps build a higher level of trust with customers and suppliers; clan and ad hocracy cultures help in achieving a higher degree of value creation. Originality and value are identifying the link between the culture and strategic alliances in a supply chain can help decision makers choose the right kind of alliance partners and decide appropriate strategies that need to be adopted to form and maintain alliances. The paper explains the effect of organizational culture on the degree of integration between the alliance partners and value creation in the alliance company. Paper also explains the relationship between degree of integration and value creation. And culture type of the alliance company has a strong impact on the degree of integration between alliance partners and value creation; and degree of integration has a positive relationship with value creation

(Sambasivan, M., &   Yen, N. (2010). Strategic alliances in a manufacturing supply chain: Influence of organizational culture from the manufacturer’s perspective)

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