COOPERATING FOR INNOVATION
1_GULATI (1998)
ALLIANCES AND NETWORKS
Introduces social network perspective to the study of strategic alliances
5 key issues for the study of alliances
1. Formation of alliances For each of these, study outlines
2. Choice of governance structure current research + debates at
3. Dynamic evolution of alliances firm/ dyadic level & then dis-
4. Performance of alliances cusses some of the new & im-
5. Performance consequences for firms entering alliances portant insights
INTRODCUTION
Strategic alliances = voluntary arrangements between firms involving exchange, sharing, or co-de-
velopment of products, technologies, or services
RQs to key events in alliances
1. Which firms enter alliances and whom do they choose as partners?
2. What types of contracts do firms use to formalize the alliance?
3. How do the alliance and the partners’ participation evolve over time?
RQs to the performance consequences of alliances
1. What factors influence the success of alliances?
2. What is the effect of alliances on the performance of firms entering them?
SOCIAL STRUCTURE AND THE EMBEDDEDNESS OF FIRM BEHAVIOR
Network perspectives build on the general notion that economic actions are influenced by the social
context in which they are embedded and that actions can be influenced by the position of actors in
social networks
4 foci of the influence of social networks:
1. Inequality: how network connections can explain differences in the resources available to in-
dividuals, groups, or organizations
2. Embedding: describes the institutions and identities resulting from networks and how they en-
able difficult transactions
3. Contagion: how networks can promote behavioral conformity by serving as conduits for both
technological and social information about organizational activities, which in turn can influence
the extent to which they adopt new innovations
4. Contingency: how social networks can moderate key organizational processes
Two broad analytical approaches:
1. Relational embeddedness/ cohesion perspective: emphasize the role of direct cohesive
ties as a mechanism for gaining free-grained info
2. Structural embeddedness/ positional perspective: emphasize the informational value of
the structural position these partners occupy in the network
1
,KEY ISSUES IN ALLIANCES
THE FORMATION OF ALLIANCES
3 MAIN MOTIVATIONS FOR JVS:
1. Transaction costs resulting from small numbers bargaining
2. Strategic behavior that leads firms to try to enhance their competitive positioning or market
power
3. Quest for organizational knowledge or learning that results when one or both partners want
to acquire some critical knowledge from the other or one partner wants to maintain its capabil-
ity while seeking another firm’s knowledge.
DIFFERENT VIEWS:
Firm-specific imperatives focused on identifying some of the inducements likely to lead firms
to enter alliances
which types of firms in which industries enter what types of alliances for what reasons
With whom do firms partner
o Strategic interdependence perspective = firms ally with those with whom they
share the greatest inter- dependence
Role of embeddedness that can restrict/ enable the alliances a firm enters
o Social
o Structural
Vertical alliances between buyers & suppliers
GOVERNANCE STRUCTURE OF ALLIANCES
Shortcomings of TCE: static approach = treating each alliance as independent & considering the
activities it includes at the time of its formation as singularly reflecting the TCs associated with it
Underexplored in research: role of the multiplicity of social and economic contexts in which firms are
embedded on their choice of alliances
DYNAMIC EVOLUTION OF ALLIANCES AND NETWORKS
Studied the role of initial conditions under which alliances are formed in their subsequent de-
velopment
Focus primarily on dyadic level of exchange BUT primary emphasis on uncovering some of
the important interpartner dynamic
Dynamics of behaviour over time
Questions about growth & development of interorganizational alliance networks remain
Influence of networks on firms may also change over time if the content of information flowing
through those networks changes
PERFORMANCE OF ALLIANCES
looks at the performance of alliances themselves
Obstacles:
measuring alliance performance BECAUSE
o sometimes it’s asymmetric (benefitting one company more than another)
logistical challenges of collecting rich data necessary to assess these issues in greater detail
Primary approach: examine the termination of an alliance BUT it’s limited by
1. fails to distinguish between natural and untimely deaths
2. implicitly consider performance as an either/ or condition
2
,Ties: Differences in the ties (embedded vs. other) + little knowledge about consequences of structural
embeddedness
ALLIANCES AND PERFORMANCE CONSEQUENCES FOR FIRMS
looks at the performance consequences of alliances for the firms entering them
Ways:
looked at performance consequences for firms from their social network of cumulative alli-
ances
examine the relationship between the extent to which firms are embedded in alliances and the
likelihood of their survival = survival of firms as proxy for performance
BUT this paid scant attention to the overarching networks in which firms may be embedded
Extensions:
1. not only at the network characteristics but also the position of individual organizations within
the network in which they are placed
2. assess performance effects across the multiplicity of networks in which firms are embedded
DYADIC & NETWORK PERSPECT. ON KEY ISSUES FOR STRA T. ALLIANCES
3
, CONCLUSION
By channeling info, social networks enable firms to discover new alliance opportunities and can thus
influence how often and with whom those firms enter into alliances
MANAGERIAL IMPLICATIONS
understanding of the network dynamics that influence the formation of new alliances can provide in-
sights for managers on the path-dependent processes that may lock them into certain courses of ac-
tion as a result of constraints from their current ties become more proactive
Selectively position themselves in networks to derive possible control benefits as well
4
1_GULATI (1998)
ALLIANCES AND NETWORKS
Introduces social network perspective to the study of strategic alliances
5 key issues for the study of alliances
1. Formation of alliances For each of these, study outlines
2. Choice of governance structure current research + debates at
3. Dynamic evolution of alliances firm/ dyadic level & then dis-
4. Performance of alliances cusses some of the new & im-
5. Performance consequences for firms entering alliances portant insights
INTRODCUTION
Strategic alliances = voluntary arrangements between firms involving exchange, sharing, or co-de-
velopment of products, technologies, or services
RQs to key events in alliances
1. Which firms enter alliances and whom do they choose as partners?
2. What types of contracts do firms use to formalize the alliance?
3. How do the alliance and the partners’ participation evolve over time?
RQs to the performance consequences of alliances
1. What factors influence the success of alliances?
2. What is the effect of alliances on the performance of firms entering them?
SOCIAL STRUCTURE AND THE EMBEDDEDNESS OF FIRM BEHAVIOR
Network perspectives build on the general notion that economic actions are influenced by the social
context in which they are embedded and that actions can be influenced by the position of actors in
social networks
4 foci of the influence of social networks:
1. Inequality: how network connections can explain differences in the resources available to in-
dividuals, groups, or organizations
2. Embedding: describes the institutions and identities resulting from networks and how they en-
able difficult transactions
3. Contagion: how networks can promote behavioral conformity by serving as conduits for both
technological and social information about organizational activities, which in turn can influence
the extent to which they adopt new innovations
4. Contingency: how social networks can moderate key organizational processes
Two broad analytical approaches:
1. Relational embeddedness/ cohesion perspective: emphasize the role of direct cohesive
ties as a mechanism for gaining free-grained info
2. Structural embeddedness/ positional perspective: emphasize the informational value of
the structural position these partners occupy in the network
1
,KEY ISSUES IN ALLIANCES
THE FORMATION OF ALLIANCES
3 MAIN MOTIVATIONS FOR JVS:
1. Transaction costs resulting from small numbers bargaining
2. Strategic behavior that leads firms to try to enhance their competitive positioning or market
power
3. Quest for organizational knowledge or learning that results when one or both partners want
to acquire some critical knowledge from the other or one partner wants to maintain its capabil-
ity while seeking another firm’s knowledge.
DIFFERENT VIEWS:
Firm-specific imperatives focused on identifying some of the inducements likely to lead firms
to enter alliances
which types of firms in which industries enter what types of alliances for what reasons
With whom do firms partner
o Strategic interdependence perspective = firms ally with those with whom they
share the greatest inter- dependence
Role of embeddedness that can restrict/ enable the alliances a firm enters
o Social
o Structural
Vertical alliances between buyers & suppliers
GOVERNANCE STRUCTURE OF ALLIANCES
Shortcomings of TCE: static approach = treating each alliance as independent & considering the
activities it includes at the time of its formation as singularly reflecting the TCs associated with it
Underexplored in research: role of the multiplicity of social and economic contexts in which firms are
embedded on their choice of alliances
DYNAMIC EVOLUTION OF ALLIANCES AND NETWORKS
Studied the role of initial conditions under which alliances are formed in their subsequent de-
velopment
Focus primarily on dyadic level of exchange BUT primary emphasis on uncovering some of
the important interpartner dynamic
Dynamics of behaviour over time
Questions about growth & development of interorganizational alliance networks remain
Influence of networks on firms may also change over time if the content of information flowing
through those networks changes
PERFORMANCE OF ALLIANCES
looks at the performance of alliances themselves
Obstacles:
measuring alliance performance BECAUSE
o sometimes it’s asymmetric (benefitting one company more than another)
logistical challenges of collecting rich data necessary to assess these issues in greater detail
Primary approach: examine the termination of an alliance BUT it’s limited by
1. fails to distinguish between natural and untimely deaths
2. implicitly consider performance as an either/ or condition
2
,Ties: Differences in the ties (embedded vs. other) + little knowledge about consequences of structural
embeddedness
ALLIANCES AND PERFORMANCE CONSEQUENCES FOR FIRMS
looks at the performance consequences of alliances for the firms entering them
Ways:
looked at performance consequences for firms from their social network of cumulative alli-
ances
examine the relationship between the extent to which firms are embedded in alliances and the
likelihood of their survival = survival of firms as proxy for performance
BUT this paid scant attention to the overarching networks in which firms may be embedded
Extensions:
1. not only at the network characteristics but also the position of individual organizations within
the network in which they are placed
2. assess performance effects across the multiplicity of networks in which firms are embedded
DYADIC & NETWORK PERSPECT. ON KEY ISSUES FOR STRA T. ALLIANCES
3
, CONCLUSION
By channeling info, social networks enable firms to discover new alliance opportunities and can thus
influence how often and with whom those firms enter into alliances
MANAGERIAL IMPLICATIONS
understanding of the network dynamics that influence the formation of new alliances can provide in-
sights for managers on the path-dependent processes that may lock them into certain courses of ac-
tion as a result of constraints from their current ties become more proactive
Selectively position themselves in networks to derive possible control benefits as well
4
