The Impact of Horizontal Strategic Alliances on the U.S. Steel Industry

By Ojode, Lucy | Journal of Business Strategies, Fall 2004 | Go to article overview

The Impact of Horizontal Strategic Alliances on the U.S. Steel Industry


Ojode, Lucy, Journal of Business Strategies


Abstract

Despite the popularity of strategic alliances among firms, the public is ambivalent about the industry impact of horizontal alliances. It is not apparent that the benefits of alliances to the firm also accrue to the industry. This paper examined the U.S. steel industry data from 1977 to 1997 to determine the potential impacts of capability horizontal alliances on industry competitive structure. The results are indicative of positive impacts on industry competitiveness (profitability and productivity) and competitive structure (price competition and declining industry concentration). A capability hypothesis is offered that posit that horizontal alliances that enhance partner firms 'capabilities may diffuse critical capabilities or 'best practices' within an industry thereby raising the average level of competitiveness in the industry and inducing competitive pressures that can result in price competition and erode industry concentration.

**********

Strategic alliances are the "relatively enduring inter-firm cooperative arrangements that involve flows and linkages that utilize resources and/or governance structures from autonomous organizations, for the joint accomplishment of individual goals linked to the corporate mission of each sponsoring firm" (Parkhe, 1991: 581). Investors generally view alliance announcements favorably (Das, Sen, and Sengupta, 1998) since alliances enable firms to share resources, manage risk, and create value (Chart et al., 1997). However, consumers are wary of horizontal alliances or cooperative arrangements between competing firms that could result in anti-competitive maneuvers as partner firms seek to manage industry-induced uncertainties (Burgers, Hill, and Kim, 1993). Yet, horizontal alliances also provide proximity to competitor capabilities and expose these capabilities as 'templates' that partners could use in 'learning-by-doing' in developing new capabilities while leveraging current stock of capabilities (Hamel, 1991). Therefore, horizontal alliances that enhance capabilities such as process technologies (Mueiler and Herstatt, 2000) could diffuse best practices or innovation and induce competitive rivalry within an industry. While economic literature is elaborate on the anti-competitive consequences of horizontal alliances, competitive consequences have been confined to scale economies (e.g., Williamson, 1968). The potential to diffuse capabilities and induce industry competition is relatively unexplored, a lack this paper addresses by examining the potential impact of horizontal alliances on industry competitive (pricing and concentration) structure.

Horizontal Alliances and Organizational Capabilities

Capabilities are routines or repeated complex organizational patterns of resource and activity coordination that enables efficient functioning (Nelson and Winters, 1982). Capabilities are embedded in organizational factors such as physical characteristics of production capacity that symbolize the potential economies of scale and scope determined by throughput. "Such economies depend on knowledge, skill, experience, and teamwork-on the organized human capabilities essential to exploit the potential of technological processes" (Chandler, 1990:24). Firms focus on capabilities embedded in intangible or information resources such as, technology, consumer trust, brand image, control of distribution, corporate culture and management skills that have a significant potential for sustaining competitive advantage (Barney, 1991). However, such intangible resource based or 'strategic' capabilities are costly to assemble and maintain (Chi, 1994; Teece and Pisano, 1994). Firms generally lack ancillary capabilities necessary for all activities in the production chain mandating outsourcing of some capabilities. Although such capability outsourcing can be consummated in arms-length market transactions, collaborative modes or hybrid organizational forms such as horizontal strategic alliances often economize on transaction costs (Chi, 1994; Dyer, 1997). …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

The Impact of Horizontal Strategic Alliances on the U.S. Steel Industry
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.