AMN Summary
H1
Strategic Alliances are defined as voluntary, long-term, contractual relationships between
two or more autonomous and independent organizations (companies), designed to achieve
mutual and individual goals by sharing and/or creating resources. This includes entities such
as joint ventures and R&D partnerships, but excludes simple market transactions, mergers,
and acquisitions.
Alliance activity has increased significantly over recent decades, making alliances
cornerstones of competitive strategy for many firms. This reflects the shift toward the modern
information economy, where firms must deploy and combine intangible resources (such as
skills and technology) to strengthen their competitive position.
The definition of an alliance implies four key aspects:
1. Alliances are a strategic activity.
2. They provide flexibility, but are relatively unstable organizational arrangements
because firms remain independent.
3. They create mutual dependence, requiring proactive management to resolve the
inherent tension between cooperation (value creation) and competition (value
appropriation).
4. They are transitional entities that are prone to early termination.
Alliance failure
Despite their strategic value, many alliances fail prematurely. Empirical research points to
moderate-to-high failure rates, often around 50%. Failure is attributed to three main reasons:
1. Lack of insight into potential pitfalls associated with different development stages.
2. Unfamiliarity with unique challenges arising from differing alliance objectives,
partner characteristics, or specific alliance contexts.
3. Neglecting the institutionalization of alliance knowledge and expertise, referred to as
alliance capabilities.
H2
Chapter 2 focuses on the Alliance Strategy Formulation phase and the decision of which
governance mode is most suitable to achieve organizational objectives.
Key concepts
The central concept is choosing between three prototypical governance modes which define
the nature of resource exchange:
1. “Make” (internal acquisition / hierarchy): The organization acquires resources
internally via inter-unit exchanges or through mergers and acquisitions (M&A). This
offers full control over resources and property rights, which is beneficial for building
, competitive advantage. Disadvantages include bureaucracy, lack of flexibility, and
substantial required investments.
2. “Buy” (market transactions): The organization acquires resources through discrete
market transactions organized via simple contracts. This is efficient for exchanging
commodities and provides quick access to information. A risk is that conflicting goals
of buyer and seller can lead to opportunistic behavior and market failure due to
uncertainty.
3. “Ally” (alliances / hybrid): The organization forms alliances with external parties,
organized through complex contracts, to access desired resources. This is a hybrid
form that provides control without fully internalizing resources. It offers speed,
flexibility, and shared risks, but also brings the risk of stronger competition and
uncertainty about long-term viability.
Theoretical perspectives: rationales for the choice
1. Transaction Cost Economics (TCE): Emphasizes efficiency and cost minimization.
The governance mode should fit transaction characteristics (e.g., frequency, asset
specificity, uncertainty) to minimize transaction costs (ex-ante and ex-post). TCE
predicts alliances (“ally”) are suitable under mixed asset specificity and recurring
transactions (hybrid governance).
2. Resource-Based View (RBV): Focuses on maximizing value by bundling and
exploiting valuable, scarce, and hard-to-imitate resources. Alliances are a way to
obtain complementary resources without fully acquiring the firm (M&A), especially
for resources with imperfect mobility.
3. Resource Dependence Perspective (RDP): Assumes organizations depend on the
external environment for critical resources. Alliances and M&A are used to reduce
uncertainty and gain control over scarce external resources, reducing dependence on
others or increasing others’ dependence on the organization.
4. Strategic Management Theory (SMT): Views the choice as a trade-off between
strategic motives to maximize competitive position (e.g., increasing market power,
reducing risk, achieving economies of scale, differentiation). Broad and pragmatic, but
lacks specific governance-mode guidelines because many motives apply to multiple
modes.
5. Social Network Theory (SNT): Argues that the social context of prior alliances
influences decision-making. Networks facilitate new alliances by providing valuable
information about where critical resources are and partner reliability, reducing search
costs and opportunism risk.
6. Organizational Learning Perspective (OLP): Emphasizes alliances are primarily
formed to acquire new capabilities or tacit knowledge. Alliances (especially equity-
based) are effective learning vehicles, particularly when knowledge is hard to buy in
markets or develop internally.
7. Institutional Theory (IT): Suggests organizations choose governance modes to gain
legitimacy and social approval, often by copying rivals’ behavior (bandwagon effect).
Decision-making steps: alliance strategy formulation
To help managers navigate these complex trade-offs, the chapter proposes a five-step plan to
arrive at a coherent alliance strategy:
, 1. Formulate business strategy: Determine long-term objectives and the required
activities and resources to achieve them.
2. Develop a selection framework: Select and weigh criteria (derived from the
theoretical perspectives, such as transaction costs, strategic motives, and learning
motives) to assess the suitability of governance modes.
3. Gather internal and external information: Collect detailed information about the
activity, required resources (internal), and industry/regulatory developments
(external).
4. Evaluate alternative governance modes: Assess each option (make, buy, ally) using
the criteria and collected information. Alliances are preferred when strategic flexibility
is considered crucial.
5. Formulate alliance strategy (if “ally”): If the ally mode is chosen, formalize the
alliance strategy in a business case, including scope, objectives, contributions, and a
cost–benefit analysis.
H3
Alliance partner selection covers the crucial phase in which an organization chooses a partner
(or group of partners) to realize mutual goals. The central idea is partner fit, which refers to
the degree of alignment between the characteristics of the collaborating organizations.
It is essential to already have knowledge about partner (mis)fit, since a poor match can
endanger the alliance and lead to early termination.
Key concepts: types of partner fit
Partner fit is divided into two related core concepts:
1. Resource complementarity (Type I diversity): The extent to which jointly using
different resources produces a higher total return than using those resources
independently. This forms the economic and strategic rationale for alliance formation.
Four configurations of resource alignment:
o Complementary resource alignment: Partners contribute unequal resources,
creating synergy and joint value creation.
o Supplementary resource alignment: Partners contribute similar resources,
often to gain economies of scale or market power.
o Surplus resource alignment: Partners contribute unequal resources that are
not fully utilized, but may protect against future contingencies.
o Wasteful resource alignment: Similar resources underperform, for example
because managerial know-how cannot be integrated, generating extra costs.
While complementarity increases joint value creation, it also increases the risk of
misappropriation and unwanted knowledge transfer (knowledge spillovers), especially
when partners’ knowledge bases overlap.
2. Compatibility (Type II diversity): The extent to which partner organizations share
similar characteristics. Compatibility strengthens collective power, facilitates alliance
processes, and acts as “lubricant” for collaboration.
, Five types of compatibility:
o Strategic fit: Alignment in business and alliance objectives, strategic missions,
and shared visions. This is a prerequisite; misfit creates strategic conflict.
o Organizational fit: Compatibility in organizational characteristics such as
management styles, procedures, and information systems. Poor fit can hinder
cooperation and collective sense-making.
o Operational fit: Alignment in operational systems and work procedures—
crucial for day-to-day execution and realizing potential benefits.
o Cultural fit: Alignment in ideologies, values, and norms. This supports
collective sense-making and reduces conflict and distrust.
o Human fit: Alignment in backgrounds, experiences, and personalities of
individuals who will collaborate. This supports trust building and inter-partner
learning.
Theoretical perspectives
Although Chapter 3 focuses on practical application of fit, the concepts are grounded in
broader theoretical frameworks:
• RBV: Underlies resource complementarity. Firms bundle and exploit resources to
sustain competitive advantage; partners are selected for valuable complementary
resources.
• SMT: Relevant to strategic fit, aiming for synergy between partners’ business
strategies to support strategic goal achievement.
• Organizational theory / Social exchange theory: Crucial for understanding
compatibility (organizational, cultural, human fit). These aspects determine relational
quality and reduce uncertainty about partner intentions and competencies.
The chapter culminates in a systematic five-step decision-making process for partner
selection: developing a partner profile, creating long and short lists, developing a partner fit
framework, conducting the fit analysis, and performing a risk assessment. This process should
provide clear insight into success likelihood and corrective measures needed to mitigate risks.
H4
Chapter 4, Alliance Negotiation, objective is to reach a workable deal that jointly creates
value while protecting partners’ individual interests.
This chapter focuses on three core areas: negotiation behavior, valuation of contributions, and
decision-making steps to reach a formal agreement.
Key concepts: negotiation behavior and valuation
1. Negotiation behavior
Negotiation behavior includes the strategies and tactics negotiators use to reach an
acceptable outcome.
H1
Strategic Alliances are defined as voluntary, long-term, contractual relationships between
two or more autonomous and independent organizations (companies), designed to achieve
mutual and individual goals by sharing and/or creating resources. This includes entities such
as joint ventures and R&D partnerships, but excludes simple market transactions, mergers,
and acquisitions.
Alliance activity has increased significantly over recent decades, making alliances
cornerstones of competitive strategy for many firms. This reflects the shift toward the modern
information economy, where firms must deploy and combine intangible resources (such as
skills and technology) to strengthen their competitive position.
The definition of an alliance implies four key aspects:
1. Alliances are a strategic activity.
2. They provide flexibility, but are relatively unstable organizational arrangements
because firms remain independent.
3. They create mutual dependence, requiring proactive management to resolve the
inherent tension between cooperation (value creation) and competition (value
appropriation).
4. They are transitional entities that are prone to early termination.
Alliance failure
Despite their strategic value, many alliances fail prematurely. Empirical research points to
moderate-to-high failure rates, often around 50%. Failure is attributed to three main reasons:
1. Lack of insight into potential pitfalls associated with different development stages.
2. Unfamiliarity with unique challenges arising from differing alliance objectives,
partner characteristics, or specific alliance contexts.
3. Neglecting the institutionalization of alliance knowledge and expertise, referred to as
alliance capabilities.
H2
Chapter 2 focuses on the Alliance Strategy Formulation phase and the decision of which
governance mode is most suitable to achieve organizational objectives.
Key concepts
The central concept is choosing between three prototypical governance modes which define
the nature of resource exchange:
1. “Make” (internal acquisition / hierarchy): The organization acquires resources
internally via inter-unit exchanges or through mergers and acquisitions (M&A). This
offers full control over resources and property rights, which is beneficial for building
, competitive advantage. Disadvantages include bureaucracy, lack of flexibility, and
substantial required investments.
2. “Buy” (market transactions): The organization acquires resources through discrete
market transactions organized via simple contracts. This is efficient for exchanging
commodities and provides quick access to information. A risk is that conflicting goals
of buyer and seller can lead to opportunistic behavior and market failure due to
uncertainty.
3. “Ally” (alliances / hybrid): The organization forms alliances with external parties,
organized through complex contracts, to access desired resources. This is a hybrid
form that provides control without fully internalizing resources. It offers speed,
flexibility, and shared risks, but also brings the risk of stronger competition and
uncertainty about long-term viability.
Theoretical perspectives: rationales for the choice
1. Transaction Cost Economics (TCE): Emphasizes efficiency and cost minimization.
The governance mode should fit transaction characteristics (e.g., frequency, asset
specificity, uncertainty) to minimize transaction costs (ex-ante and ex-post). TCE
predicts alliances (“ally”) are suitable under mixed asset specificity and recurring
transactions (hybrid governance).
2. Resource-Based View (RBV): Focuses on maximizing value by bundling and
exploiting valuable, scarce, and hard-to-imitate resources. Alliances are a way to
obtain complementary resources without fully acquiring the firm (M&A), especially
for resources with imperfect mobility.
3. Resource Dependence Perspective (RDP): Assumes organizations depend on the
external environment for critical resources. Alliances and M&A are used to reduce
uncertainty and gain control over scarce external resources, reducing dependence on
others or increasing others’ dependence on the organization.
4. Strategic Management Theory (SMT): Views the choice as a trade-off between
strategic motives to maximize competitive position (e.g., increasing market power,
reducing risk, achieving economies of scale, differentiation). Broad and pragmatic, but
lacks specific governance-mode guidelines because many motives apply to multiple
modes.
5. Social Network Theory (SNT): Argues that the social context of prior alliances
influences decision-making. Networks facilitate new alliances by providing valuable
information about where critical resources are and partner reliability, reducing search
costs and opportunism risk.
6. Organizational Learning Perspective (OLP): Emphasizes alliances are primarily
formed to acquire new capabilities or tacit knowledge. Alliances (especially equity-
based) are effective learning vehicles, particularly when knowledge is hard to buy in
markets or develop internally.
7. Institutional Theory (IT): Suggests organizations choose governance modes to gain
legitimacy and social approval, often by copying rivals’ behavior (bandwagon effect).
Decision-making steps: alliance strategy formulation
To help managers navigate these complex trade-offs, the chapter proposes a five-step plan to
arrive at a coherent alliance strategy:
, 1. Formulate business strategy: Determine long-term objectives and the required
activities and resources to achieve them.
2. Develop a selection framework: Select and weigh criteria (derived from the
theoretical perspectives, such as transaction costs, strategic motives, and learning
motives) to assess the suitability of governance modes.
3. Gather internal and external information: Collect detailed information about the
activity, required resources (internal), and industry/regulatory developments
(external).
4. Evaluate alternative governance modes: Assess each option (make, buy, ally) using
the criteria and collected information. Alliances are preferred when strategic flexibility
is considered crucial.
5. Formulate alliance strategy (if “ally”): If the ally mode is chosen, formalize the
alliance strategy in a business case, including scope, objectives, contributions, and a
cost–benefit analysis.
H3
Alliance partner selection covers the crucial phase in which an organization chooses a partner
(or group of partners) to realize mutual goals. The central idea is partner fit, which refers to
the degree of alignment between the characteristics of the collaborating organizations.
It is essential to already have knowledge about partner (mis)fit, since a poor match can
endanger the alliance and lead to early termination.
Key concepts: types of partner fit
Partner fit is divided into two related core concepts:
1. Resource complementarity (Type I diversity): The extent to which jointly using
different resources produces a higher total return than using those resources
independently. This forms the economic and strategic rationale for alliance formation.
Four configurations of resource alignment:
o Complementary resource alignment: Partners contribute unequal resources,
creating synergy and joint value creation.
o Supplementary resource alignment: Partners contribute similar resources,
often to gain economies of scale or market power.
o Surplus resource alignment: Partners contribute unequal resources that are
not fully utilized, but may protect against future contingencies.
o Wasteful resource alignment: Similar resources underperform, for example
because managerial know-how cannot be integrated, generating extra costs.
While complementarity increases joint value creation, it also increases the risk of
misappropriation and unwanted knowledge transfer (knowledge spillovers), especially
when partners’ knowledge bases overlap.
2. Compatibility (Type II diversity): The extent to which partner organizations share
similar characteristics. Compatibility strengthens collective power, facilitates alliance
processes, and acts as “lubricant” for collaboration.
, Five types of compatibility:
o Strategic fit: Alignment in business and alliance objectives, strategic missions,
and shared visions. This is a prerequisite; misfit creates strategic conflict.
o Organizational fit: Compatibility in organizational characteristics such as
management styles, procedures, and information systems. Poor fit can hinder
cooperation and collective sense-making.
o Operational fit: Alignment in operational systems and work procedures—
crucial for day-to-day execution and realizing potential benefits.
o Cultural fit: Alignment in ideologies, values, and norms. This supports
collective sense-making and reduces conflict and distrust.
o Human fit: Alignment in backgrounds, experiences, and personalities of
individuals who will collaborate. This supports trust building and inter-partner
learning.
Theoretical perspectives
Although Chapter 3 focuses on practical application of fit, the concepts are grounded in
broader theoretical frameworks:
• RBV: Underlies resource complementarity. Firms bundle and exploit resources to
sustain competitive advantage; partners are selected for valuable complementary
resources.
• SMT: Relevant to strategic fit, aiming for synergy between partners’ business
strategies to support strategic goal achievement.
• Organizational theory / Social exchange theory: Crucial for understanding
compatibility (organizational, cultural, human fit). These aspects determine relational
quality and reduce uncertainty about partner intentions and competencies.
The chapter culminates in a systematic five-step decision-making process for partner
selection: developing a partner profile, creating long and short lists, developing a partner fit
framework, conducting the fit analysis, and performing a risk assessment. This process should
provide clear insight into success likelihood and corrective measures needed to mitigate risks.
H4
Chapter 4, Alliance Negotiation, objective is to reach a workable deal that jointly creates
value while protecting partners’ individual interests.
This chapter focuses on three core areas: negotiation behavior, valuation of contributions, and
decision-making steps to reach a formal agreement.
Key concepts: negotiation behavior and valuation
1. Negotiation behavior
Negotiation behavior includes the strategies and tactics negotiators use to reach an
acceptable outcome.
