Patterns in Domestic vs. International Strategic Alliances: An Investigation of U.S. Multinational Firms

By Murray, Janet Y. | Multinational Business Review, Fall 1995 | Go to article overview

Patterns in Domestic vs. International Strategic Alliances: An Investigation of U.S. Multinational Firms


Murray, Janet Y., Multinational Business Review


INTRODUCTION

In an era of globalization, the nature and the intensity of competition among companies has changed drastically; companies must now compete against domestic as well as foreign counterparts. This intense global competition has shaped the way businesses proact or react to the following challenges: maintaining a shorter lead time for new product development, recovering huge R&D investments quicker due to product obsolescence, reducing risks of product failure, and obtaining easier access to foreign markets (Harrigan 1987). Therefore, we have been witnessing a surge in strategic alliances among competing companies located in the same country or among those across national boundaries.

Strategic alliances often represent a variety of collaborative agreements among competing firms, which are in nature more than a standard customer-supplier relationship or venture capital investment but falling short of an outright acquisition (Business International 1987; Terpstra and Simonin 1993). The reasons for strategic alliances range from resource seeking and technology development to market access and capital formation, with the primary objectives being to reduce business risks and utilize resources efficiently. We have also observed that a substantial amount of strategic alliances are formed by companies in developed countries with those from developing/ underdeveloped countries.

LITERATURE REVIEW

Adler, in his seminal paper entitled "Symbiotic Marketing," was the first to recognize the possibilities of forming strategic alliances to take advantage of the "harmonious living together of dissimilar organisms in a mutually beneficial relationship" (Adler 1966, p. 59). Since then, we have witnessed an explosion in domestic and international strategic alliances formed by non-service and service industries, especially in the last decade. Furthermore, there have been a multitude of studies, mainly conceptual in nature (Crouse 1991; Harrigan 1987; Jain 1987; Lorange and Roos 1991; Ohmae 1989, among others), investigating the role of strategic alliances, their potential costs and benefits, and factors influencing their success or failure.

Recognizing the importance of strategic alliances, several studies utilized secondary data in examining the patterns/trends of these relationships. The patterns of strategic alliances were first examined by Ghemawat, Porter and Rawlinson (1986), using secondary data published in the Wall Street Journal for the period 1970 - 1982. Their study identified the following characteristics of international strategic alliances (ISAs): (1) country/region: the parent companies of ISAs formed were overwhelmingly concentrated in developed countries (87%), (2) company size and experience: U.S. companies that formed ISAs tended to be larger and more experienced internationally than those that did not, (3) company market position: U.S. companies tended to form ISAs in industries in which they held relatively strong domestic positions, (4) industry: the percentage of ISAs in chemicals, computers, and other electronic products (all of which are very R&D intensive) had drifted upward during 1970 - 1982, (5) form: 57 percent of all ISAs in the sample were either joint ventures or licenses, (6) purpose: ISAs located in LDCs overwhelmingly involved upstream value activities, whereas those in DCs were more heavily slanted toward the downstream value activities of marketing, sales, and service; ISAs in Eastern Europe predominantly involved operations and logistics.

Another study that investigated the trends in international strategic alliances was performed by Morris and Hergert (1987), using a similar data collection procedure with The Economist and the Financial Times from 1975 - 1986. The results yielded conclusions concerning: (1) company size: strategic alliances were most likely formed between large corporations that were already multinational in nature, (2) country/region: a majority of the strategic alliances were formed between partners within the European Community or between U. …

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