The Role of Strategic Alliances in Complementing Firm Capabilities

By Rice, John; Liao, Tung-Shan et al. | Journal of Management and Organization, November 2012 | Go to article overview

The Role of Strategic Alliances in Complementing Firm Capabilities


Rice, John, Liao, Tung-Shan, Martin, Nigel, Galvin, Peter, Journal of Management and Organization


ABSTRACT: Strategic alliance research emerged to explain alliance formation based upon transaction cost minimisation and opportunism reduction. Later research, and early research from Japan, emphasised the role of alliances in facilitating the transfer of knowledge between organisations. Most recently, alliance research has focussed on the development of shared, potentially idiosyncratic, resource stocks. This paper builds on this recent research, testing the proposition that alliances are important vehicles allowing firms to access or acquire external resources, hence shoring up capability gaps and building new capabilities as required during firm, product and industry life cycles. Using a sample from Australian manufacturing small-and-medium-sized enterprises, the paper reveals that alliances employed by firms can be viewed as initiatives to either fill a gap in the firm's resource stock or to exploit a perceived opportunity in its operational and strategic environment.

KEYWORDS: strategic alliances, resource based view, contingency, knowledge search, risk aversion, efficiency seeking

As a subset of the strategic management literature, strategic alliance research has developed from an analysis of transaction-cost and opportunism reduction to a more complex analysis of the exchange of resources (both tangible and intangible) between firms (Nahapiet & Ghoshal, 1998; Teng, 2007). The resource based view (RBV) of strategy emerged, in part, due to the inability of other approaches (notably IO economic and industrial ecology approaches) to provide a capabilities- based rationale for the persistent economic profits (or above average returns) achieved by certain firms in certain industries (Barney, 1991), and also the rapid emergence of innovative firms in some industry sectors (Cho, Park, & Choi, 2011; Eisenhardt & Martin, 2000; Hu & Hsu, 2008; Roper & Hewitt-Dundas, 2008; Schleimer & Shulman, 2011a). Within this context, strategic alliances were seen to provide (potential) the basis for enduring, heterogeneous and boundary-spanning resource bundles for adopter firms.

The strategic management literature also had to deal with the emergence and persistence of inter-organisational alliances as a preferred method of enhancing firm scale and scope (Faems, Van Looy, & Debackere, 2005; Khanna, Gulati, & Nohria, 1998; Nohria & García-Pont, 1991). This was in contrast to the more formalistic methods of direct ownership of resources through vertical and horizontal expansion (Balakrishnan & Wernerfelt, 1986; Harrigan, 1988) or contractual arrangements between firms (Williamson, 1985) that were more common in previous iterations of strategic management research reflecting common business practices.

Strategic alliances, which might be broadly defined as social and relational arrangements of exchange between economic agents, are by their nature elusive to identify, and hence empirically research. The unit of analysis adopted within strategic alliance research has increasingly emerged to be multilateral arrangements and alliance networks (between firms) and alliance portfolios (within firms), with a concomitant lessening of the focus on bilateral, transactional arrangements between pairs of firms (Agarwal, Croson, & Mahoney, 2010; Lavie, 2007; Puranam, Singh, & Chaudhuri, 2009).

In terms of the exploration versus exploitation trade-off(Gupta, Smith, & Shalley, 2006; March, 1991), alliances can clearly allow for both the acquisition of new competencies and the better use of existing competencies (Flatten, Greve, & Brettel, 2011; Rothaermel & Deeds, 2004; Vermeulen & Barkema, 2001). Alliances can also allow for a reduction of systemic risk, especially early in an industry life cycle (Glaister & Buckley, 1996; Hynes & Wilson, 2012; Rice & Galvin, 2006).

In many respects, these search and risk- mitigation rationales are complementary - especially when firms are involved in standardsbased endeavours where decisions taken early in a product life cycle establish future path dependencies with regards to emerging standards and interoperability of firm products and services (Aldrich & Fiol, 1994). …

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