Academic journal article Management International Review

The Multiple Roles of Alliances in Competency-Based Multinational Strategies

Academic journal article Management International Review

The Multiple Roles of Alliances in Competency-Based Multinational Strategies

Article excerpt

Alliances and joint ventures are widely used in international markets, and appear to be increasing in numbers rapidly. A variety of reasons for this have been proposed from a variety of perspectives and under a wide variety of conditions. The earliest approaches to International Joint Ventures (IJVs) focused on their application in foreign host markets, either in response to governmental requirements or to correct the limited knowledge of the local environment on the part of the multinational firm. More recently, international strategic alliances (ISAs), alliances of two or more multinational firms for the purpose of combining research, manufacturing, marketing, distribution, or other corporate skills, have been recognized. Kogut's (1988) discussion of three models for IJV formation still covers the major theoretical perspectives on ISAs/IJVs. He suggests that a "strategic behavior" perspective treats alliances as means of increasing market power, co-opting potential competitors, or bypassing government restrictions. An "internalization" perspective, one developed in greater detail by Hennart (1988, 1991), sees IJVs as structural responses to situations in which partners need to share assets, cannot or do not desire a full acquisition, and fear opportunism in the absence of equity involvement. Finally, Kogut suggests an "organizational learning" model of alliance for the purpose of acquiring the tacit skills of the partner through the joint venture organization, a perspective also addressed by Hamel (1991). In addition to these frameworks, more recent theory-based approaches have extended the internalization approach to alliances in the absence (or dramatic reduction) of opportunism through network forms of organization in which joint action persists without equity hostages (Powell 1990), and have looked at joint ventures as real options on future commitments in uncertain markets (Kogut 1991), organizational learning in which partnership is unrelated to the partner - also perhaps an extreme instance of strategic behavior.

One aspect of these models is that they tend to treat the strategic decision to use an alliance or joint venture as just that - a decision to use an alliance. Kogut's three traditional models present these decisions as single transactions, related only to the circumstances of the partnering firms in a specific context. Network models embed the individual decision in a larger context of multiple players and multiple transactions, so that each choice effects others, but do not address issues of contextual change. Options models anticipate contextual change, but only in the sense that an uncertain but ultimately resolvable future favors a player with a larger set of choices for future action. This paper is intended to address two unique issues. First, it takes a competency-based perspective on both international strategy and international alliance strategies. From this, it suggests that the different strategic configurations which arise from such a perspective provide a contingency model of alliance strategies for multinational firms, recognizing that strategic evolution in the face of increasing market demands suggests that the purposes and forms of alliances will change over time and circumstances. The paper takes a first step toward defining a researchable model of strategic contingency and the purposes and forms of alliance organizations.

Competency-based Models of Alliances and Joint Ventures

A resource or competency-based perspective is not totally new as a perspective on alliances. Zajac and Olsen (1993) introduce a "transactional value" approach which models the synergistic benefits of alliance together with their transactional costs, a concept further developed by Madhok (1996) and Madhok/Tallman (1998). Indeed, the basic concept of a resource-based model, that alliances exist to combine the complementary resources of partner firms in ways which cannot be managed by pure markets or pure hierarchies, has been presented implicitly for some time in the international management literature (Contractor/Lorange 1988, Parkhe 1991). …

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