Academic journal article Journal of Global Business and Technology

Alliance Performance: Autonomous and Cooperative Instruments of Control

Academic journal article Journal of Global Business and Technology

Alliance Performance: Autonomous and Cooperative Instruments of Control

Article excerpt

INTRODUCTION

Control is a fundamental issue in alliance relationships, which are usually described as risky, dangerous and unstable (Das & Teng, 1996). More specifically, appropriability and leakage risk mitigation is important in any collaborative activity and particularly in the context of R&D alliances (Henttonen et al., 2015; Kale et al., 2000). Control is defined as a set of formal and informal mechanisms that partners can use to favour alliance performance (Kumar & Seth, 1998). Alliance control can apply at the alliance level, but it also depends on firms' alliance management capabilities (Schreiner et al., 2009).

At the alliance level, formal control is based on contractual governance, which helps mitigate potential opportunism (Poppo & Zenger, 2002). In contrast, informal control relies on informal processes that are socio-psychological in origin: relational exchange is based on a social component largely analyzed as trust (e.g., Granovetter, 1985; Kale et al., 2000).

In addition, an alliance is embedded in each partner's particular management context. Alliances enable firms to access complementary resources and know-how and their performance may depend on the firms' specific endogenous capabilities (Schreiner et al., 2009), like appropriability capabilities. Appropriability capabilities are the mechanisms that firms implement to appropriate their return on investment. These mechanisms are classified in two groups: legal protection measures (e.g., patents) and strategic mechanisms (e.g., lead time and secrecy) (Laursen & Salter, 2005), also referred to as informal or alternative mechanisms (Nieto & Perez-Cano, 2004). The choice of mechanism is a complex process that leads to positive alliance outcomes (Huang et al. 2013). For example, effective protection through intellectual property rights like patents encourages firms, especially small ones, to collaborate through alliances (Colombo et al., 2006). First, a patent plays a key role in signaling the firm's quality to potential partners (Levitas & McFaden, 2009; Somaya, 2012); however, it is also an appropriability mechanism with safeguards that make it easier to exploit inventions through alliances (Oxley, 1999). The perceived potential for appropriability may motivate firms to commit to and invest in the alliance relationship. The purpose of this paper is to explore how autonomous instruments of control, like appropriability mechanisms, and alliance control mechanisms, like contract and trust, combine to foster alliance performance.

THE COMPLEX LINK BETWEEN CONTROL & PERFORMANCE

Managers can use several instruments of control they can combine in various ways. Some instruments of control result from an entrepreneurial logic and from an autonomous decision. Others are the result of a cooperative behaviour (Delerue, 2005).

Cooperative Control Mechanisms: Contract and Trust

In the context of contractual alliances, two control mechanisms help firms to mitigate opportunism and achieve coordination for improved performance: a formal contract and/or trust. A contract is usually considered the central element of formal control processes in contractual alliances (Poppo & Zenger, 2002; Zollo et al., 2002) because its execution is guaranteed by competent legislation outside the alliance (Lumineau & Malhotra, 2011). A contract is the outcome of a combination of clauses (Delerue et al., 2016) that specify promises, obligations, and processes for dispute resolution (Poppo & Zenger, 2002; Lumineau & Malhotra, 2011). A formal contract is designed to control behavior in order to minimize the costs and performance losses that arise from hazards (e.g., Kalnins & Mayer, 2004; Adler et al., 2016). Control clauses are the more stringent clauses (Parkhe, 1993), exact penalties for noncooperative behavior and reduce opportunism (Deeds & Hill, 1998; Williamson, 1991). These clauses usually deal with audit, confidential information, proprietary technology, alliance termination, and the adjudication of disputes by third parties (Lumineau & Malhotra, 2011; Reuer & Ariño, 2007). …

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