strategic alliances and strategic change Flashcards
strategic alliances
voluntary collaboration agreements between two or more organizations to achieve a business purpose
strategic alliances enable companies to access:
new resources
new learning opportunities
governance of strategic alliances
contract
joint venture
contract strategic alliances
a contract specifies how the alliance will work and the roles and responsibilities of partners
pros and cons of contracts
relatively easy to set up
not all future situations can be foreseen at the time of contract
joint venture
partners form a separate company that they jointly own to carry out the purpose of the alliance
pros and cons of a joint venture
create incentives to collaborate and to work for the success of the alliance
costly to set up and dissolve
benefits of strategic alliances
access to VRIN resources without having to own them
exploiting complementarities
accessing outside knowledge and ideas
network resources
external resources embedded in the firm’s alliance network that provide strategic opportunities and affect firm behavior and value
two different degrees of alliances according to the convergence of resources
pooling alliances (partners pool their resources to achieve a greater scale and enhance competitive position in their industry)
complementary alliance (firms seek to achieve synergies by employing distinct resources that are difficult to accumulate in combination by any given firm)
exploiting complementarities
alliances can quickly, but temporarily, expand a firm’s resource base to include new and complementary resources
accessing outside knowledge and ideas
Alliances can provide new perspectives to how to reconfigure resources differently as a response to external developments
Alliances can also enable firms to internalize their partners knowledge through organizational learning
four types of rent in alliances
internal rents
relational rents
inbound spillover rents
outbound spillover rents
internal rents
gains that a firm generates based on its own resources, private benefits enjoyed exclusively by the focal firm
factor affecting internal rents
complementary resources increases internal rents as they make the firms own resources more valuable
relational rents
Gains that a firm generates based on its relationship-specific assets with its alliance partners
ways to increase relational rents
investing in developing knowledge-sharing routines and trust (thus developing partner-specific absorptive capacity)
having complementary resources (greater incentives to cooperate), and compatible organizational structures and cultures
repeated collaborations with the same partner
factors influencing relational rents
(1) relative absorptive capacity (high relative absorptive capacity -> high appropriation of relational rents)
(2) relative scale and scope of resources (small relative scale and scope of focal firm’s shared resources -> high appropriation of relational rents)
(3) contractual agreement (favorable contract -> high appropriation of relational rents)
(4) relative opportunistic behavior (relative opportunistic behavior of partner -> low appropriation of relational rents)
(5) relative bargaining power (strong relative bargaining power of partner -> low appropriation of relational rents)
inbound spillover rents
gains from resources that the partner did not intend to share
ways to limit knowledge leakages
coevolving trust and conflict resolution mechanisms
factors affecting the ability to extract spillover rents from the partner’s resources
opportunistic behavior
bargaining power
absorptive capacity
learning races
when both firms pursue the objective of internalizing the resources to improve their competitive position
acting opportunistically
when one firm pursues the objective of internalizing the resources to improve their competitive position
effect of learning races and acting opportunistically
result in unintended leakage of rents, with no synergetic value creation
outbound spillover rents
gains by the partner (losses for a focal firm) from resources that a focal firm did not intend to share
effect of opportunistic behavior
greater inbound spillover rents but perceived as opportunistic behavior leading to the partner raising its barriers to protect its resources, damage of trust, and reduced relational rents in the focal and future alliances
the relational view
Alliances contribute to a firm’s competitive advantage because they enable firms to build and exploit relationship-specific assets
relationship specific assets
assets that are valuable only within a specific relationship’s context
types of relationship specific assets
partner specific absorptive capacity
knowledge-sharing routines
trust
partner specific absorptive capacity
the ability to understand and evaluate, and learn the knowledge of a specific partner
absorptive capacity
the ability to locate valuable external knowledge, evaluate its usefulness, and utilize it for commercial purposes
partner specific absorptive capacity in alliances
through informal interfirm interactions, individuals within the alliance get to know each other well enough to know who knows what, and where critical expertise resides within each firm
knowledge sharing routines
a regular pattern of interfirm interactions that permits the transfer, recombination, or creation of specialized assets
knowledge sharing routines in an alliance
knowledge-sharing routines facilitate observation and joint application of know-how
information
easily codifiable knowledge that can be transmitted without loss
know-how
knowledge that is tacit, sticky, complex, and difficult to codify
why would a firm with valuable know-how allow the development of knowledge-sharing routines and share its know-how?
sharing know-how may mean erosion of competitive advantage
it is a big incentive for potential partners to collaborate
trust
Trust in the partner that the partner will not engage in opportunistic behaviour by abusing its access to focal firm resources and know-how
trust in alliances
Is earned over time within a single relationship or over repeated relationships
Reduces the need for costly knowledge protection mechanisms
Encourages the sharing of valuable knowledge
categories of alliance success factors
partner selection
alliance management
partner selection
partner complementarity
partner compatibility
partner commitment
partner complementarity
the extent to which a partner’s resources will increase the value of the company’s resources
partner resources should be:
similar enough to make sense of each other’s resources and their value, but different enough to facilitate unique resource combinations and valuable learning opportunities
partner compatibility
the level of similarity between alliance partners in terms of organizational structures (hierarchical versus fluid), the way people interact with one another (formal versus informal), and the way decisions are made (slow and firm versus quick and dirty) (big differences lead to frustration, increased coordination challenges, and reduced knowledge exchange)
partner commitment
the degree to which the partner will carry out its task and actually work for the alliance
aspects of alliance management
coordination mechanisms
knowledge exchange mechanisms
trust
coordination mechanisms
used to coordinate the execution of alliance tasks between partners
(should be clear and explicit)
trust help
knowledge exchange mechanisms
to coordinate and set rules on how and how much partners will share with each other
knowledge exchange mechanisms implication
newly learned knowledge should be codified and diffused within the company
Changes to the traditional RBV in networked environments
(1) weakened resource heterogeneity assumption (alliances facilitate asset flows among interconnected firms)
(2) weakened imperfect mobility assumption (alliances can serve as the means for mobilizing resources that have traditionally been considered immobile)
effect of strong isolating mechanisms of focal firm
higher internal rent and lower outbound spillover rents, thus enhanced competitive advantage
effect of strong isolating mechanisms of alliance partners
lower internal rent and lower inbound spillover rent, reduced competitive advantage
effect of relational rents
higher relational rents shared by focal firm and partners –> higher potential for accrual of inbound and outbound spillover rents
