Summary Tjemkes, Vos & Burgers, Strategic alliance management
Contents
Summary Tjemkes, Vos & Burgers, Strategic alliance management ....................................................... 1
Lecture 1................................................................................................................................................... 2
Chapter 1 Strategic alliance management ........................................................................................ 2
Chapter 2 Alliance strategy formulation........................................................................................... 3
Lecture 2................................................................................................................................................... 8
Chapter 3 Alliance partner selection ................................................................................................ 8
Chapter 4 Alliance negotiation ....................................................................................................... 10
Chapter 5 Alliance design................................................................................................................ 12
Chapter 6 Alliance management .................................................................................................... 17
Chapter 7 Alliance evaluation ......................................................................................................... 19
Chapter 8 Alliance termination ....................................................................................................... 21
Lecture 3................................................................................................................................................. 24
Chapter 10 Learning alliances ....................................................................................................... 24
Chapter 12 International alliances ................................................................................................ 25
Chapter 14 Cross-sector alliances ................................................................................................. 27
Chapter 19 Alliance capabilities .................................................................................................... 29
Lecture 6................................................................................................................................................. 31
Chapter 16 Alliance portfolios ...................................................................................................... 31
Chapter 17 Alliance networks ....................................................................................................... 33
,Lecture 1
Chapter 1 Strategic alliance management
Firms turn increasingly to alliances to develop and maintain competitive advantage, instead of just
acquiring resources. For example, alliances provide firms with an opportunity to increase their
innovative capacity, improve their market response, achieve efficiency and share investment risks
with partner firms. Yet empirical research indicates moderate to high alliance failure rates.
Therefore, the objective of this book is to connect existing theoretical and practical insights and
thereby present a framework of strategic alliance management.
Meaning of an alliance: a voluntary, long-term, contractual relationship between two or more
autonomous and independent organizations, designed to achieve mutual and individual objectives
by sharing and/or creating resources (for examples, table 1, p 3). There are four implications:
1. An alliance is an instrument to develop competitive advantage, and therefore constitutes a
strategic activity within firms
2. Alliances represent relatively unstable organizational arrangements, because of absence of
hierarchical governance
3. Increasing dependency calls for proactive management in order to resolve tensions
4. The threat of premature termination requires systematic management attention to resolve
any emerging adversities
Alliance development
- 1970: product performance and access to new technology and markets
- 1980: obtaining flexible market positions
- 1990: learning and capability development
Advantages and disadvantages of alliances (table 2, p 5)
Advantages Disadvantages
Access to resources Loss of proprietary information
Economies of scale Management complexities
Risk and cost sharing Financial and organizational risk
Access to a (foreign) market Risk of becoming dependent
Learning Loss of decision autonomy
Speed to market Loss of flexibility (in choosing other partners)
Reputation Antitrust implications
Neutralizing or blocking competitors Learning barriers
Assessing acquisition partner Long-term viability (premature termination)
Flexibility (more than hierarchies, less
regulation)
Alliance failure
- Failure rates between 24 and 70 per cent
- Lack of understanding of the potential pitfalls and hazards (focus on day-to-day operations
instead of business propositions and appropriate governance modes)
, - Unawareness of the unique challenges (diverging firm characteristics and unique alliance
contexts such as learning alliances)
- Neglect of alliance capability creation
- Firms should deal systematically with these issues
Framework (fig 1.2, p 11)
- Alliance development stages (fig 1.1, p 9, cyclical approach such that the seven stages remain
interlinked through learning and adaptation)
o Alliance strategy formulation
o Alliance partner selection
o Alliance negotiation
o Alliance design
o Alliance management
o Alliance evaluation
o Alliance termination
- Unique decision-making situations
o Alliance objectives and management challenges
Supplier alliances
Learning alliances
Co-branding alliances
o Partner characteristics
International alliances
Asymmetrical alliances
Cross-sector alliances
Multi-partner alliances
o Alliance context
Alliance portfolios
Alliance networks
Alliance co-evolution
- Alliance capabilities
- Strategic alliance management: science and art (experience, expertise, and creativity are
critical to resolve the tensions)
o Cooperative versus competitive
o Economic versus social
o Deliberate versus emergent
Chapter 2 Alliance strategy formulation
During the alliance strategy formulation stage, a firm decides which governance mode is appropriate
for realizing its objectives, that is, how it will organize the procurement of its desired resources.
Governance mode decisions (table 2.1, p 14)
- Make (hierarchy)
o Internalize previously external activities
o Create synergies through integrating operations
o However, this increases the level of bureaucracy and reduced flexibility
, - Buy (market)
o Market transactions, no need for integration
o However, potential for opportunistic behavior
o Markets may fail in response to the uncertainty surrounding the supply of resources
o Information asymmetry may increase prices
o Supplier may use market power to increase margins
- Ally (hybrid)
o Some degree of control, but no internalization
o Access to complementary resources, without obtaining proprietary rights
o Speed and flexibility in obtaining access and exploiting resources
o Shared investments, thus reduced risk
o However, risk of increased competition
o Difficult to integrate learning
o Long-term viability is questionable
- Joint ventures, license agreements, etc.
Governance mode rationales (theoretical perspectives, table 2.2, p 24)
- Transaction costs economics (TCE)
o Ex-ante (drafting, negotiating, and safeguarding a contractual agreement
o Ex-post (repairing misalignments and bonding)
o Two assumptions that drive TC higher
Opportunism
Bounded rationality (unpredictability)
o Three exchange conditions that drive TC higher
Frequency (number of exchanges)
Asset specificity (value is lost when relationship ends)
Uncertainty
o Low TC calls for market exchange (external governance)
o High TC calls for hierarchical (internal) governance
o Mixed TC calls for a hybrid mode (alliance)
o Criticism
Some contradicting findings
Too much emphasis on opportunistic behavior
Limited support for outperformance of TCE-embracing firms
- Resource based view (RBV)
o VRIN resources
o Market exchange cannot provide these resources
o Appropriate for alliances, acquisitions, and mergers because of inimitability
o Appropriate for alliances when not all resources of the target firm are valuable and
when resources are inseparable
o Alliances enable firms to protect their own valuable resources
o Criticism
Systematic empirical testing of resources that contribute to a firm’s
competitive advantage is scarce
Does not focus on costs of resource deployment
Contents
Summary Tjemkes, Vos & Burgers, Strategic alliance management ....................................................... 1
Lecture 1................................................................................................................................................... 2
Chapter 1 Strategic alliance management ........................................................................................ 2
Chapter 2 Alliance strategy formulation........................................................................................... 3
Lecture 2................................................................................................................................................... 8
Chapter 3 Alliance partner selection ................................................................................................ 8
Chapter 4 Alliance negotiation ....................................................................................................... 10
Chapter 5 Alliance design................................................................................................................ 12
Chapter 6 Alliance management .................................................................................................... 17
Chapter 7 Alliance evaluation ......................................................................................................... 19
Chapter 8 Alliance termination ....................................................................................................... 21
Lecture 3................................................................................................................................................. 24
Chapter 10 Learning alliances ....................................................................................................... 24
Chapter 12 International alliances ................................................................................................ 25
Chapter 14 Cross-sector alliances ................................................................................................. 27
Chapter 19 Alliance capabilities .................................................................................................... 29
Lecture 6................................................................................................................................................. 31
Chapter 16 Alliance portfolios ...................................................................................................... 31
Chapter 17 Alliance networks ....................................................................................................... 33
,Lecture 1
Chapter 1 Strategic alliance management
Firms turn increasingly to alliances to develop and maintain competitive advantage, instead of just
acquiring resources. For example, alliances provide firms with an opportunity to increase their
innovative capacity, improve their market response, achieve efficiency and share investment risks
with partner firms. Yet empirical research indicates moderate to high alliance failure rates.
Therefore, the objective of this book is to connect existing theoretical and practical insights and
thereby present a framework of strategic alliance management.
Meaning of an alliance: a voluntary, long-term, contractual relationship between two or more
autonomous and independent organizations, designed to achieve mutual and individual objectives
by sharing and/or creating resources (for examples, table 1, p 3). There are four implications:
1. An alliance is an instrument to develop competitive advantage, and therefore constitutes a
strategic activity within firms
2. Alliances represent relatively unstable organizational arrangements, because of absence of
hierarchical governance
3. Increasing dependency calls for proactive management in order to resolve tensions
4. The threat of premature termination requires systematic management attention to resolve
any emerging adversities
Alliance development
- 1970: product performance and access to new technology and markets
- 1980: obtaining flexible market positions
- 1990: learning and capability development
Advantages and disadvantages of alliances (table 2, p 5)
Advantages Disadvantages
Access to resources Loss of proprietary information
Economies of scale Management complexities
Risk and cost sharing Financial and organizational risk
Access to a (foreign) market Risk of becoming dependent
Learning Loss of decision autonomy
Speed to market Loss of flexibility (in choosing other partners)
Reputation Antitrust implications
Neutralizing or blocking competitors Learning barriers
Assessing acquisition partner Long-term viability (premature termination)
Flexibility (more than hierarchies, less
regulation)
Alliance failure
- Failure rates between 24 and 70 per cent
- Lack of understanding of the potential pitfalls and hazards (focus on day-to-day operations
instead of business propositions and appropriate governance modes)
, - Unawareness of the unique challenges (diverging firm characteristics and unique alliance
contexts such as learning alliances)
- Neglect of alliance capability creation
- Firms should deal systematically with these issues
Framework (fig 1.2, p 11)
- Alliance development stages (fig 1.1, p 9, cyclical approach such that the seven stages remain
interlinked through learning and adaptation)
o Alliance strategy formulation
o Alliance partner selection
o Alliance negotiation
o Alliance design
o Alliance management
o Alliance evaluation
o Alliance termination
- Unique decision-making situations
o Alliance objectives and management challenges
Supplier alliances
Learning alliances
Co-branding alliances
o Partner characteristics
International alliances
Asymmetrical alliances
Cross-sector alliances
Multi-partner alliances
o Alliance context
Alliance portfolios
Alliance networks
Alliance co-evolution
- Alliance capabilities
- Strategic alliance management: science and art (experience, expertise, and creativity are
critical to resolve the tensions)
o Cooperative versus competitive
o Economic versus social
o Deliberate versus emergent
Chapter 2 Alliance strategy formulation
During the alliance strategy formulation stage, a firm decides which governance mode is appropriate
for realizing its objectives, that is, how it will organize the procurement of its desired resources.
Governance mode decisions (table 2.1, p 14)
- Make (hierarchy)
o Internalize previously external activities
o Create synergies through integrating operations
o However, this increases the level of bureaucracy and reduced flexibility
, - Buy (market)
o Market transactions, no need for integration
o However, potential for opportunistic behavior
o Markets may fail in response to the uncertainty surrounding the supply of resources
o Information asymmetry may increase prices
o Supplier may use market power to increase margins
- Ally (hybrid)
o Some degree of control, but no internalization
o Access to complementary resources, without obtaining proprietary rights
o Speed and flexibility in obtaining access and exploiting resources
o Shared investments, thus reduced risk
o However, risk of increased competition
o Difficult to integrate learning
o Long-term viability is questionable
- Joint ventures, license agreements, etc.
Governance mode rationales (theoretical perspectives, table 2.2, p 24)
- Transaction costs economics (TCE)
o Ex-ante (drafting, negotiating, and safeguarding a contractual agreement
o Ex-post (repairing misalignments and bonding)
o Two assumptions that drive TC higher
Opportunism
Bounded rationality (unpredictability)
o Three exchange conditions that drive TC higher
Frequency (number of exchanges)
Asset specificity (value is lost when relationship ends)
Uncertainty
o Low TC calls for market exchange (external governance)
o High TC calls for hierarchical (internal) governance
o Mixed TC calls for a hybrid mode (alliance)
o Criticism
Some contradicting findings
Too much emphasis on opportunistic behavior
Limited support for outperformance of TCE-embracing firms
- Resource based view (RBV)
o VRIN resources
o Market exchange cannot provide these resources
o Appropriate for alliances, acquisitions, and mergers because of inimitability
o Appropriate for alliances when not all resources of the target firm are valuable and
when resources are inseparable
o Alliances enable firms to protect their own valuable resources
o Criticism
Systematic empirical testing of resources that contribute to a firm’s
competitive advantage is scarce
Does not focus on costs of resource deployment
