An Empirical Study of the Formation of Strategic Alliances between Small Businesses in the United States and Mexico

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ABSTRACT

This study investigated how strategic alliances or coalitions between small businesses located in the United States and Mexico were formed. Specifically, the investigation is concerned with the process of how small business owners went about forming alliances with the assistance of a U. S.-based regional economic development agency.

THE RESEARCH PROBLEM

Increased competition, both domestic and international, and the globalization of the marketplace suggest that firms, both large and small, need to develop new approaches fo; adjust to changing conditions (Forrest, 1990). Traditional approaches to international competition by U. S.-based firms have been exporting and foreign domestic investment. More recently, however, many firms have reacted to the strategic problems of globalization by developing strategic alliances or coalitions, formal or informal long-term alliances that link-businesses, but fall short of ownership or merger (Porter & Fuller, 1986; Koepfler, 1989; Lorinc, 1990; Henricks, 1991; Stevens, 1992). This study uses the definition of a strategic alliance as presented by Baranson (1990).

Strategic alliances are more in the nature of memoranda of understanding which both set forth basic business objectives to co-market, co-develop, and/or co-produce products and services and outline decision making mechanisms on business agendas, resource commitment and distribution of returns. TSAS contain statements of interest on procedures to work out business plans and operational procedures, and therefore are more flexible and opeivended than joint ventures.

Considerable research has been conducted on the behavior of U. S. firms in international business, especially exporting (Walters & Samiee, 1990). On the other hand, the study of joint ventures, strategic alliances and other cooperative forms of business activities have yet to be explored in depth (Buckley, 1991). Past research on cooperative efforts has included the classification of cooperative ventures, the motivation of strategic alliance participation, creation of joint venture efforts, the performance of strategic alliances according to similarities of the cooperative firms, multinational and local firms, and licensing (Harrigan, 1986; Porter & Fuller, 1986; Hakansson & Johanson, 1986; Buckley, 1991). Little attention has been paid to the dynamics of cooperation, in particular, the formation of the alliance. Several authors suggest procedures and techniques on how a firm should search for a partner, yet evidence on what firms actually do is lacking (Baranson, 1990; Henricks, 1991; Hoffman, Rowley, Dalpour, & Viswanathan, 1993). State government economic development agencies provide much assistance to small businesses in exporting. On the other hand, no research has been reported on their role in establishing strategic alliances between U. S. and foreign-based small businesses (Bacas, 1989; Wilson, 1990; Cook, 1992; Moskowitz, 1992).

The purpose of this study is to analyze the formation of strategic alliances between small businesses located in different countries. A process model or a series of steps developed by a regional economic development agency was used as a framework or guide to action. The role of this agency in bringing about an alliance is examined. Implications to U. S. small businesses and state and regional economic development agencies in developing alliances with foreign-based small businesses are presented as well as suggestions for future research.

RESEARCH METHODOLOGY

The formation of strategic alliances between a firm located in suburban New Orleans, Louisiana and three cooperative groups of farmers located in the States of Yucatan, Campeche, and Quintana Roo in Southeast Mexico is the subject of this paper. The alliances were initiated under the Jefferson Parish Economic Development Commission's (JEDCO) Latin American Initiative (LAI) program. JEDCO is a regional economic development agency located in Jefferson Parish, Louisiana, in suburban New Orleans. …