Defining the Social Network of a Strategic Alliance

Strategic alliances are assuming an increasingly prominent role in the strategy of leading firms, large and small. Such cooperative relationships can help firms gain new competencies, conserve resources and share risks, move more quickly into new markets, and create attractive options for future investments.1 Yet, despite their promise, many alliances fail to meet expectations because little attention is given to nurturing the close working relationships and interpersonal connections that unite the partnering organizations. While these personal relationships between “boundary spanning” members, who work closely together, serve to shape and modify the evolving partnership, economic theories of exchange virtually ignore the role of people and their importance in the management of interorganizational relations.2 Surprisingly, “human or people factors appear to have remained unconsidered or, at worst, dismissed” in the alliance research tradition.3 Communication and the proactive exchange of information can strengthen cooperative relationships in several ways. First, effective collaboration requires connections at three levels across partnering organizations, represented by continuing contact among (1) top management to develop broad goals and monitor progress, (2) middle managers to develop plans for joint activities, and (3) operational personnel, who carry out the day-to-day work of the alliance.4 Second, “trust plays an important (often dominant) role in successful alliances,”5 and communication and information processing are instrumental to building trust between partners.6 We define trust as “a psychological state comprising the intention to accept vulnerability based upon positive expectations of the intentions or behavior (of a partner).”7 A defining characteristic of trusting relationships is open and prompt communication among partnering firms.8 Likewise, frequent interactions, the timely exchange of information, and accurate feedback on each partner’s actions will minimize misperceptions and strengthen cooperation in the alliance.9 Third, communication among boundary-spanning personnel produces a shared interpretation of goals and common agreement on norms, work roles, and the nature of social relationships.10 In turn, as a strategic alliance evolves, “(1) personal relationships increasingly supplement formal role relationships and (2) informal psychological contracts increasingly substitute for formal legal contracts.”11 We studied a strategic alliance between two Fortune 500 firms (referred to as Alpha Communications and Omega Financial Services) that developed a cobranded product for the business market.

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References

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J. Hagedoorn, “Understanding the Rationale of Strategic Technology Partnering: Interorganizational Modes of Cooperation and Sectoral Differences,” Strategic Management Journal, volume 14, July 1993, pp. 371–385;

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K. Ohmae, “The Global Logic of Strategic Alliances,” Harvard Business Review, volume 67, March–April 1989, pp. 143–154;

Y. Doz, “The Evolution of Cooperation in Strategic Alliances: Initial Conditions or Learning Processes,” Strategic Management Journal, volume 17, Summer 1996, pp. 55–83; and

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2. B.A. Weitz and S.D. Jap, “Relationship Marketing and Distribution Channels,” Journal of the Academy of Marketing Science, volume 33, Fall 1995, pp. 305–320; and

R. Osborn and J. Hagedoorn, “The Institutionalization and Evolutionary Dynamics of Interpersonal Alliances and Networks,” Academy of Management Journal, volume 40, April 1997, pp. 261–278.

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4. R.M. Kanter, “Collaborative Advantage,” Harvard Business Review, volume 72, July–August 1994, pp. 96–108.

5. A. Parkhe, “Understanding Trust in International Alliances,” Journal of World Business, volume 33, Fall 1998, p. 243. See also:

A. Parkhe, “Building Trust in International Alliances,” Journal of World Business, volume 33, Winter 1998, pp. 417–437.

6. T.K. Das and Bing-Sheng Teng, “Between Trust and Control: Developing Confidence in Partner Cooperation in Alliances,” Academy of Management Review, volume 23, July 1998, pp. 491–512; and

E. Whitener, S. Brodt, M. Korsgaard, and J. Werner, “Managers as Initiators of Trust: An Exchange Relationship Framework for Understanding Managerial Trustworthy Behavior,” Academy of Management Review, volume 23, July 1998, pp. 513–530.

7. D. Rousseau, S. Sitkin, R. Burt, and C. Camerer, “Not So Different After All: A Cross-Discipline View of Trust,” Academy of Management Review, volume 23, July 1998, p. 395. See also:

A. Zaheer, B. McEvily, and V. Perrone, “Does Trust Matter? Exploring the Effects of Interorganizational and Interpersonal Trust on Performance,” Organization Science, volume 9, March–April 1998, pp. 141–159; and

A.R. Gulati, “Does Familiarity Breed Trust? The Implications of Repeated Ties for Contractual Choice in Alliances,” Academy of Management Journal, volume 38, February 1995, pp. 85–112.

8. A. Larson, “Network Dyads in Entrepreneurial Settings: A Study of the Governance of Exchange Relationships,” Administrative Science Quarterly, volume 37, March 1992, pp. 76–104.

9. A. Parkhe, “Strategic Alliance Structuring: A Game Theoretic and Transaction Cost Examination of Interfirm Cooperation,” Academy of Management Journal, volume 36, August 1993, pp. 794–829.

10. P. S. Ring and A. H. Van de Ven, “Developmental Processes of Interorganizational Relationships,” Academy of Management Review, volume 19, January 1994, pp. 90–118.

11. Ibid. (1994), p. 103.

12. J. Mohr and R. Spekman, “Characteristics of Partnership Success: Partnership Attributes, Communication Behavior, and Conflict Resolution Techniques,” Strategic Management Journal, volume 15, February 1994, pp. 135–152;

L. P. Bucklin and S. Sengupta, “Organizing Successful Co-Marketing Alliances,” Journal of Marketing, volume 57, April 1993, pp. 32–46;

T. Saxton, “The Effects of Partner and Relationship Characteristics on Alliance Outcomes,” Academy of Management Journal, volume 40, April 1997, pp. 443–461; and

R. Morgan and S. Hunt, “The Commitment — Trust Theory of Relationship Marketing,” Journal of Marketing, volume 58, July 1994, pp. 20–38.

13. R. Gulati and H. Singh, “The Architecture of Cooperation: Managing Coordination Costs and Appropriation Concerns in Strategic Alliances,” Administrative Science Quarterly, volume 43, December 1998, pp. 781–814; and

R. Osborn and C. Baughn, “Forms of Interorganizational Governance for Multinational Alliances,” Academy of Management Journal, volume 33, September 1990, pp. 503–519.

14. R. Gulati, “Alliances and Networks,” Strategic Management Journal, volume 19, April 1998, pp. 293–317; and

A. Larson (1992).

15. Mohr and Spekman (1994);

Bucklin and Sengupta (1993);

Saxton (1997); and

Morgan and Hunt (1994).

16. Rousseau et al. (1998).

17. Morgan and Hunt (1994);

Mohr and Spekman (1994); and

K. Cook and R. Emerson, “Power, Equity and Commitment in Exchange Networks,” American Sociological Review, volume 43, October 1978, pp. 721–739.

18. Bucklin and Sengupta (1993); and

K. Harrigan, “Strategic Alliances and Partner Asymmetrics,” in F. Contractor and P. Lorange, eds., Cooperative Strategies in International Business (Lexington, Massachusetts: Lexington Books, 1988), pp. 205–226.

19. The judges also coded each thought as positive or negative. Intercoder agreement was .85. To highlight the emotional issues that were particularly divisive, the judges also identified the thoughts that ascribed blame or praise. For this task, inter-coder agreement was .91. Throughout the coding process, the judges resolved coding disagreements by discussion.

20. Kanter (1994), p. 106.

21. P.S. Ring and G. Rands, “Sensemaking, Understanding, and Committing: Emergent Transaction Processes in the Evolution of 3M’s Microgravity Research Program,” in A.H. Van de Ven, H. Angle, and M.S. Poole, eds., Research on the Management of Innovation: The Minnesota Studies (New York: Ballinger/Harper & Row, 1989), pp. 337–366.

22. Ring and Van de Ven (1994), p. 109.

23. Das and Teng (1998);

Parkhe (1993); and see also:

J.C. Henderson, “Plugging into Strategic Partnerships: The Critical IS Connection,” Sloan Management Review, volume 31, Spring 1990, pp. 7–18.

24. M.Y. Yoshino and U.S. Rangan, Strategic Alliances: An Entrepreneurial Approach to Globalization (Boston: Harvard Business School Press, 1995), p. 128.