Magazine article Journal of Services Research

A Holistic Perspective on Strategic Alliances for Indian Managers

Magazine article Journal of Services Research

A Holistic Perspective on Strategic Alliances for Indian Managers

Article excerpt

INTRODUCTION

In the classical business landscape, the scope, scale and technology base of business firms used to be limited opined Ghemawat (2002). Firms were attuned to thinking in terms of what a firm could do by itself stated Das &Teng(2000); and Colombo (2003). Thus firms thought strictly in terms of what raw materials the firm could fetch from suppliers, and how the firm could better serve customers by itself according to Grant (1991). Thus, a firm and only a firm was the unit of analysis observed Barney (2001). Jensen (1993) traced the fact that, with the advent of the industrial revolution, the scale, scope and technology base of firms increased. Given this scenario it became slowly evident for firms, that a firm alone doesn't have the bandwidth of resources and capabilities to cater to the growing market, pointed out by authors such asSørensen, & Reve (1998). Thus, from both a Resource Based View (RBV) propagated by Wemerfelt (1984) & Mahoney & Pandian (1992), and Industrial Organizational Theory (IOT) expounded by Willig & Salop & Scherer, (1991) perspective; it made sense for firms to join in efforts with other firms to create value for customers, as well as for the firm. Thus, it was the beginning of a shared view of firms towards increased collaboration observed Evans (2001). Given this development, firms were interested towards joining hands for mutual cooperation and gain stated Artz & Brush (2000). This over a period of time led to the genesis of increased focus of firms towards, the formation of strategic alliances stated authors such as Dacin, Oliver & Roy (2007).

In the present day context, large firms generate a substantial part of revenue and profits through SAs observed Jiang, Tao & Santoro (2010); and Schaan and Kelly (2006). Some of the large firms managed hundreds of alliances stated Badaracco (1991). However, it has also become evident through observations of Elmuti & Kathawala (2001); and Hamel (1991); that the failure rate of alliances is also very high Thus one can clearly understand that SAs are good for value creation, but it is also accompanied by a high probability of failure opined Koza& Lewin (2000). The debate on SA now globally is, that SA strategy is a central thesis of the firm's strategy, and not a peripheral or luxury strategy item shared Cravens·, Shipp & Cravens, (1993); Hamel (1991); and Ernst (1993).Presently having an SA perspective for firms is existential stated Tsang (1998). The question before firm strategists is not so much on whether to do SA or not, but rather on how to plan and execute SA opined Hamel (1991); Ernst (1993); and Parise & Casher (2003). In this review work, the author attempts to present a holistic perspective on SA based on extant literature. In this process, the author attempts to help Indian alliance managers get a holistic understanding on SA, with an adaptation to account for the Indian business landscape.

Strategic alliances are mainly of three types namely non-equity, equity and joint venture (JV) explained Dhanaraj & Beamish (2004); Lui & Ngo (2004); and Schaan and Kelly (2006). Non-equity alliances are one in which the alliance partners form a contractual agreement for collaborative efforts towards value creation as expounded by Lui& Ngo (2004). According to Bierly III & Coombs (2004), equity alliances are one in which one firm takes partial equity position in another firm. Thus, equity stake comes with ownership partial in nature, and so does partial control stated Reuer & Tong (2010). It is important to note that an extreme form of ownership could be acquisition, again partial or full carried out by all cash, all stock or a mix of cash and stock, stated Allen & Phillips, (2000).A third form of SA is a Joint Venture (JV) as described by Schaan and Kelly(2006). In a JV two or more partners come together as parents and form a new entity, referred to as the child observed Park & Russo (1996); and Yiu & Makino (2002). …

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