Academic journal article Advances in Competitiveness Research

Competitive Success in an Age of Alliance Capitalism: How Do Firm-Specific Factors Affect Behavior in Strategic Alliances?

Academic journal article Advances in Competitiveness Research

Competitive Success in an Age of Alliance Capitalism: How Do Firm-Specific Factors Affect Behavior in Strategic Alliances?

Article excerpt


This paper suggests that alliances may not necessarily be the first cut strategy for all firms. It explores the theoretical proposition that while partnerships can be beneficial, some firms may simply fail to generate relational rent or supernormal profits from alliances, not so much because of what happens as a partnership gets underway but primarily because they may have some internal rigidities that adversely affect their ability to engage in partnership building behaviors. This may be one cause of the high failure rate of alliances. The presumption is that partner-specific orientations often serve as blueprints for behavior. Such orientations may become "habits" over time. We can presume that as habit-driven actors, the assemblage of behaviors that firms exhibit during an alliance may largely be a reflection of their existing orientations. Proposed outcomes of existing orientations include difficulties of building trust and cooperation with a counterpart; a tendency to be secretive instead of open; a difficulty with securing internal cooperation and building a collective orientation. A number of policy recommendations are offered. (1) Firms may opt to make or buy, instead of using an alliance. (2) First develop their internal competencies before using alliances in spite of any strategic attraction. (3) The choice of organizing form for an alliance should be based partly on the firm's orientations and abilities to engage in alliance building behaviors. Specifically, firms who rank low on preparedness should opt for integrated, stand-alone equity joint ventures instead of non-equity and other trust-based forms. (4) Appoint dedicated alliance managers and give them visibility. An important theoretical outcome is the need to pay greater attention to actor-specific factors in addition to systemic issues for a solid understanding of alliance performance.


The past decade has witnessed an explosive growth of corporate interfirm alliances. Estimates are that the top 500 global businesses have an average of 60 major strategic alliances each (Dyer, Kale & Singh, 2001). Alliances have been described as the key to competitive success (Ohmae, 1986; Saxenian, 1994). For example, Dyer & Singh (1998) propose that alliances can be a source of relational rent or supernormal profits for firms. Dunning (1995) observes that alliances have ushered in "a new trajectory of market capitalism." Interest in alliances has generated a sustained amount of research (Harrigan, 1986; Parkhe, 1993; Ring & Van de Ven, 1994; Das & Teng, 1998).

Considering their importance, a critical question is: Are all firms capable of using strategic alliances as a strategy for growth? Answering this question is important for at least two reasons. First, the existing evidence points to a high failure rate of alliances. The preliminary evidence suggests that most of the hypothesized gains of partnerships may go unrealized. Current estimates are that about half of all alliances fail (Dyer et al., 2001). Second, if alliances have become a key to competitive success, then it is important that firms develop the competences that are required for managing successful alliances. However, despite the explosion of research on alliances in the last decade, gaps exist in our understanding. For example, our understanding of the reasons why alliances fail may be lagging behind our appreciation of their potential benefits.

This paper attempts to fill some of the gaps. It explores the theoretical proposition that some firms may simply be ill-prepared to have successful relationships and that may be one of the causes of the high failure rate of alliances. In such cases, when the choice is between "make," "buy," or "ally," perhaps allying should not be a first cut strategy. At the very least, such firms should be more cautious in their use of alliances. This paper focuses on key pre-existing factors in firms to predict behavior and, by extension, performance in strategic alliances. …

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