Academic journal article Journal of Management and Organization

The Impact of Prestigious Top Management Team on International Alliance Formation: Evidence from Taiwanese Electronics Firms

Academic journal article Journal of Management and Organization

The Impact of Prestigious Top Management Team on International Alliance Formation: Evidence from Taiwanese Electronics Firms

Article excerpt

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Forming strategic alliances is a critical strategic action for firms because it generates potential benefits, such as providing access to complementary knowledge or resources, risk sharing, and increased speed of market entry (Gulati, 1998). In today's environment, with its high levels of international competition, firms are therefore more actively seeking to form international strategic alliances as these facilitate the firms' engagement in value-added activities globally (Bartlett & Ghoshal, 1989). This has led to the phenomenon of international strategic alliances to become an important research topic to be explored (Dunning, 1995; Dacin, Hitt, & Levitas, 1997; Dunning & Lundan, 2008). Extant research has examined the impact of organizational characteristics, such as organizational structure and strategy, on the formation of international strategic alliances (e.g., Doz & Hamel, 1998). However, the drivers of group-level factors, such as the characteristics of the top management team (TMT), have received less attention (Lee & Park, 2008).

Although Lee and Park (2008) examined the effect of TMT international exposure on international alliance formation, their work focused on the impact of substantive characteristics of TMTs, i.e., TMTs' abilities and social ties related to international environments. However, their work did not address the issues of asymmetric information or information disadvantages and how these impact international alliance formation, despite them being critical in cross-border alliances (Reuer & Ragozzino, 2014). To fill this gap, this study bases its argument on signaling theory (Spence, 1974), positing that prestige characteristics of TMTs signal the quality of firms and therefore lessen the problem of asymmetric information. This study thus examines how TMTs' prestige characteristics impact the formation of international strategic alliances.

Strategic alliances are voluntary arrangements that involve collaborative activities among firms, including sharing, exchanging, or co-developing resources or capabilities to achieve common goals (Harrigan, 1986; Contractor & Lorange, 1988). When these collaborative arrangements are among partners from different countries, international strategic alliances are formed (Inkpen, 2001). Such alliances are a type of international value-added activity for the strategic partners because their resources and capabilities are pooled across national borders and their interactions generate synergies. Consequently, international strategic alliances, a type of hybrid governance, can enhance the survival rate of firms and lay the foundation on which a firm can build its sustained competitive advantage (Dunning, 1995; Dyer & Singh, 1998; Stettner & Lavie, 2014). Despite the important role, international strategic alliances can have for a firm's sustained success, they have received less attention in comparison with domestic alliances.

The benefits that international strategic alliances may provide a firm are clear. However, not all firms are willing to seek potential alliance partners internationally. One of the major challenges for the formation of international strategic alliances is unfamiliarity between potential partner firms. This holds particularly true when the focal firms are located in an emerging economy. This is because the market information mechanism in such economies is often imperfect (Hoskisson, Eden, Lau, & Wright, 2000), which can lead potential foreign alliance partners to lack information about the quality of the firms, and thus cause them to hesitate to choose these firms as their alliance partners.

When firms lack international legitimacy, their quality may not be represented by firm-level characteristics. It is therefore necessary to determine which other characteristics adequately reflect their quality. …

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