Regional Economic Integration and International Strategic Alliances: Evidence from the EU

By Alhorr, Hadi S.; Boal, Kimberly et al. | Multinational Business Review, April 1, 2012 | Go to article overview

Regional Economic Integration and International Strategic Alliances: Evidence from the EU


Alhorr, Hadi S., Boal, Kimberly, Cowden, Birton J., Multinational Business Review


Introduction

A primary argument in the fields of international business and strategic management is that economic stability and growth is central to the success of multinational organizations and their various forms of collaborations worldwide (e.g. [71] Werner et al. , 1996; [1] Agarwal and Ramaswami, 1992; [40] Kim and Hwang, 1992). The link between international strategic alliance (ISA) and the environment has been theoretically and empirically recognized, emphasizing the role of various country and environmental variables on the formation and performance outcomes of such cross-border, collaborative relations (e.g. [4] Barkema and Vermeulen, 1997; [12] Buckley and Casson, 2002; [19] Delois, 2006). Principally, discussion in this area suggests that success of alliance relationships of the multinational enterprise (MNE) is dependent upon the government's efforts to reduce financial constraints and transaction costs on the firm, thus creating increased levels of collaborations ([28] Hennart, 1988). Indeed, the relationship between economic reform and strategic alliance formation, structure, and management continues to evolve and address new dimensions surrounding these cross-border transactions. For example, a growing extension of this research stream has been the application of this relationship to emerging economies that are undertaking major economic moves towards market-driven economies, either through monetary and fiscal reforms or by signing regional trade agreements that foster international business transactions (e.g. [33] Hyder and Abraha, 2006; [53] Rodríguez, 2008; [67] Uhlenbruck et al. , 2006). This study investigates the impact and the implications of regional economic integrations on the patterns and the structures of international strategic alliances.

The existing theory on regional economic integration suggests that economic integration has a positive impact on the overall national economies of member countries (e.g. [44] Krugman and Obstfeld, 2002) and works to stimulate the reinforcing effects of regionalization and the strategic operations within a region ([59] Rugman and Verbeke, 2005). In general, the removal of trade barriers and the formation of a common regional market have been associated with a positive increase in intra-regional trade among member nations (e.g. [54] Rose, 2000; [55] Rose and Van Wincoop, 2001). Additionally, the adoption of a common currency among members of an economically integrated region allows the transfer of economic resources from members with healthy economies to those suffering economic setbacks. Thus, it leads to improving the aggregate economic situation of the overall integrated area in the long run, creating growth opportunities for organizations to grow and expand within the region through various modes of entry, including alliance formations ([44] Krugman and Obstfeld, 2002).

Based on this premise, this study addresses how MNEs choose among a set of alternative strategies to collaborate in the international arena when their nation-states undergo economic and monetary integrations. The impact of common market and common currency policies and the changes that organizations implement to their ISAs are examined. Whether it is the reduction in transactions costs and perceived environmental uncertainty, or the market growth potential resulting from countries' adoption of common market policies, MNCs recognize these opportunities and adjust their collaborative strategies to compete in such integrated markets. It is important to note that while the impact of the environment on the strategic alliance formation and management has predominantly been addressed at the firm level, this study seeks to take the first step towards understanding how specific government trade policies influence strategic alliances throughout a multi-national region. Hence, the major tenet of this study is that ISAs cannot be studied in a vacuum and the changes to the pattern and structure of these alliances should be examined at the country level. …

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