Development of an Integrated Model of Strategic Alliance.
| Author | Bhattacharyya, Som Sekhar |
Introduction
Strategic management is conceptually laden with the notion of wining (Hoskisson, Wan, Yiu & Hitt, 1999). Firms are required to be a winner by securing Sustainable Competitive Advantage (SCA) (Reed & DeFillippi, 1990). To secure SCA firms need to develop superior resources, capabilities, competencies and core competencies with respect to competitors from a Resource Based View (RBV) perspective (Helfat & Peteraf, 2003; Barney, 2001). Firms can also exploit environmental opportunities (which exist in industry or broad environment) better than the competitors from an Industrial Organizational Theory (IOT) perspective (Conner, 1991). The notion of Dynamic Capabilities View (DCV) required firms to constantly upgrade capabilities such that it is at a superior state than that of the competitors (Wang & Ahmed, 2007; Teece, 2007). This would help the firm fetch better returns (Teece, 2007; Winter, 2003; Wang & Ahmed, 2007). In the classical way of thinking, firms attempted to secure SCA with the firm itself as the unit of analysis and boundary of thinking. The dominant way of thinking was that firms should attempt to secure SCA on its own (Aaker, 1989). In this line of thought firm managers invariably thought of other firms as competitors only.
The post Second World War ushered in a lot of significant changes in business landscape (Porter, 1986; Dicken, 1992). Firstly, there was a lot of technological progress and firms often found it challenging from this time onwards to individually alone prudently develop and manage all these technological progresses (Dicken, 1992). Even firms like Bell labs countered difficulties to harness all the innovations coming up (Gertner, 2013). Firms during these times got inkling that they individually can't be the master of all technologies (Mowery, Oxley& Silverman, 1996;Kotabe& Scott Swan, 1995). Some sets of firms would lead in one set of technologies while another set would lead a separate stream of technological progress (Lambe & Spekman, 1997). Given this context it became evident for firms to collaborate with each other so that they win in market successfully together (Chan & Heide, 1993; Hagedoorn & Schakenraad, 1994). Thus, the rapid progress of technology and its specialization indicated to firms that collaboration was just not a choice but a necessity (Yasuda, 2005).
Post WW II, business also blossomed internationally (Dicken, 1992). A large part of the global economy flourished especially post 1960s (this included Western European countries like Germany, France, UK, Belgium, Italy, Netherlands, Japan and others). Suddenly firms were chasing a fast expanding market with global reach (Li & Guisinger, 1992). However the market was highly dispersed. Substantial opportunities were coming up for firms from USA to enter Japan, Japanese firms to enter Western Europe and Western European firms to enter into USA (Dicken, 1992). The promise of growing market was big. However, there were challenges of effectively and efficiently expanding and managing these dispersed markets (Petrella, 1996; Hill, 2008). The traditional way of strategic thinking that one single firm would manage all these markets was looking impossible (Rugman, 2003; Das & Teng, 2000). This was because firms had to stretch its resources and capabilities and management bandwidth to attain and then sustain in all these markets (Choi, Hilton & Millar, 2004). Again such a stretch was difficult in a quick time for a single firm to achieve (Hill, 2008; Bank, 2018). This also altered the mind set of firms (Narulav & Hagedoorn, 1999). Rather than thinking as an individual firm competing with other firms to secure benefits, they absorbed the new realities (Kauser& Shaw, 2004). This ushered in to the need to collaborate in foreign countries (Simonin, 1999). Thus, European firms had to collaborate with firms in USA to exploit US markets and vice-versa (Dicken, 1992).
Further, with bigger sizes of markets there were increased stakes (Dicken, 1992). Increased stakes entailed increased business risks (Das & Teng, 2001). These risks often sprouted from the rising and variant stakeholder expectations from various foreign countries (Carroll, 2004). Firms had insufficient knowledge about foreign markets (Simonin, 1999). Firms also often did not possess the requisite distribution network to compete in foreign marketplace (Dyer & Singh, 1998; Vidal & Goetschalckx, 1997). Often in less developed countries the governments were interested that the local national government firms or national private firms played a role in economic building (Hill, 2008). Economies like India in such cases were not only pursuing nationalization but also made it mandatory as a regulation for a foreign firm to form an alliance with a local player (private or public firm) to be allowed to do business in the domestic market (Bhattacharyya & Shaik, 2009; Bhargava, 2010). Thus, for Multi-National Corporations (MNCs) it became a necessity that they formed alliance with local players (Mathews, 2006).
Thus, after WW II, it became evident to firms that business success was not just about competition but also about collaboration (O'Dwyer & O'Flynn, 2005). Collaboration was creating value for firms quickly across geographies and across industries (Lundan & Hagedoorn, 2001). There was a rush for forming strategic alliances and SA formation became a dominant way of strategic thinking not just within national boundaries but also internationally (Taylor, Zou & Osland, 2000). Research flourished emphasizing why firms should carry out SA (Dyer, Kale & Singh, 2004).
Strategic Alliances & Challenges
Strategic alliances thus became a dominant way of thinking in strategic management theory and practice (James, 1985). However from the 1970s, the imminent dark clouds in the world of strategic alliance became a reality (Ernst, 1993). A substantial number of SAs were failing and were failing quickly (Judge& Dooley, 2006). The expectations from SA were far higher than the realities (Cullen, Johnson & Sakano, 2000). Many SAs that were supposed to be collaborations for decades were not able to last even a few years (Kale & Anand, 2006). A host of reasons were cited for the failure of SAs (Zineldin & Bredenlow, 2003). A new school of research emerged that deliberated upon the causes of SA failure (Das & Teng, 1998).
Cultural mismatch between SA partners were seen as a major reason for post alliance conflict and its subsequent failure (Cullen, Johnson & Sakano, 2000). Some researchers found that even partnering firms' top business leaders' ego was a reason for disharmony in the alliance management (Gancel, Rodgers & Raynaud, 2002). Opportunist behavior was also cited as a reason for snapping of SAs unilaterally by partners (Zineldin & Bredenlow, 2003). Learning race was also cited as another reason for SA failures (Inkpen, 2002). A case in reflection is those between Japanese and Western firms (including European, US and Canadian) (Hamel, Doz & Prahalad, 1989; Hamel, 1991). It was found that firms (especially Japanese firms) after forming a SA started systematically and aggressively learning technological know how or superior business process from the Western firms and then upon successfully learning it terminated the relationship with the Western firms (Ernst, 1993; Hamel,1991; Hamel, Doz & Prahalad, 1989). It was also reported by researchers that many firms entered into SAs with partners that were not possessing any beneficial, value adding or complimentary capabilities, a case reflecting lack of proper due diligence (Rosenbloom, 2010). This reduced the value proposition of SAs (Jiang, Tao & Santoro, 2010). Research indicated that this occurred especially before formation of an alliance there was lack of due diligence (Marks & Mirvis, 2001). Given all these findings it was advised to strategy manages that SAs were not a potent panacea just out there. Researchers advocated that strategy managers when forming SAs needed to envisage and outline the challenges that they would confront in managing the SA and creating value from SA (Carleton & Lineberry, 2004). It was advocated that there was need for an integrated thinking on SA for Top Management Team (TMT) members of firms (Gulati & Singh, 1998). Having an integrated thinking would help TMT managers to avoid failures from SA (Kale & Singh, 2009). The author in this review article conceptualizes an integrated framework for SA with application of logical arguments based upon various strategic management theories. The author builds up this integrated SA model with inputs from Resource Based View (RBV) (Park, Mezias & Song, 2004), Industrial Organization Theory (IOT) (Burgers, Hill & Kim, 1993), Knowledge Based View (KBV) (Mowery, Oxley & Silverman, 1996), Dynamic Capabilities View (DCV) (Helfat, Finkelstein, Mitchell, Peteraf, Singh, Teece & Winter, 2009), Agency Theory (AT) (Borys & Jemison, 1989), Transaction Cost Economics (TCE) (Parkhe, 1993) and Stakeholders Theory (ST) (Carroll, 2004).
Integrated Model Development
Advocates of Industrial Organization Theory (IOT) perspective argue that environment matters for a firm (Hoskisson, Wan, Yiu & Hitt, 1999; Porter, 1981). The tenets of IOT emphasize that firm business environmental conditions are one of the decisive factors in determining competitive success or failure of firms (Walsh, 2005; Porter,1980; Porter, 1981). In essence IOT theorists emphasize that because environment matters, firms have to develop strategies to manage the environment (Porter, 1981). One must note that there are three types of environments namely Broad Environment (BE) (Hitt, Ireland, Hoskisson & Manikutty, 2016; Johnson, 2016; Walsh, 2005), Industry Environment (IE) and Competitive Environment (CE) (Porter, 1980). BE consisted of a larger gamut of environmental factors namely political, social and natural...
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