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. This case study provides the rare opportunity to explore the social architecture of a working alliance and helps identify the communication patterns that united the participants — and the beliefs that divided them. Rather than restricting attention to a few key informants, we gathered data from the entire network of alliance participants that includes a core team and a cadre of senior executives in each of the partnering firms. To our knowledge, this is the first study to provide a vivid and comprehensive portrait of the intricate web of relationships that forms in a working alliance and to examine the flow of communications within and across the partnering organizations.
Our study consisted of three phases. First, we conducted in-depth interviews with eighteen managers drawn from both firms to identify the alliance goals, the array of participants involved, and the prominent milestones and issues that defined the relationship. Second, forty-two managers, identified as the primary alliance participants, completed a survey; this social network data was instrumental in uncovering the communication and friendship ties that formed the alliance’s underlying structure. Third, we conducted personal interviews with each of these managers to identify the specific beliefs that anchored their evaluation of three prominent dimensions of the relationship: trust, compatibility, and commitment. We chose these relationship characteristics because each has been positively linked to desirable performance outcomes, such as partner satisfaction with the alliance or the perceived effectiveness of the partnership.12 However, our focus was on exploring the meaning of these constructs to the participants in the Alpha-Omega alliance using a fine-grained case-study approach.
To begin, we describe the Alpha-Omega alliance and highlight important milestones in the relationship. Next, we profile the alliance communication network and identify the pattern of relationships that formed as the alliance evolved. Centering on key features of the relationship, we also contrast the divergent beliefs of managers in the partnering firms. Finally, we discuss the implications for managing strategic alliances.
Dancing Elephants
The history of any alliance will reveal periods of optimism and doubt, cooperation and conflict, and a host of forces that advance or threaten the future prospects for one or both partners. While alliances can take many forms, our case study centered on a contractual alliance not involving the sharing or exchange of equity.13 The parties jointly coordinated ongoing activities and negotiated new decisions. To understand the background and the current state of the Alpha-Omega alliance, we conducted in-depth interviews with eighteen managers who were centrally involved in forming and implementing the partnership. Included in this group were the two senior executives who conceived of the idea to join forces.
The relationship began when an executive vice president of Omega (an internationally recognized financial services firm) approached the president of Alpha (a premier telecommunications company of comparable stature) and suggested the two companies target a “cobranded” product at the corporate market — a credit card/calling card. These two executives were acquaintances who had met at an executive roundtable and had remained in contact, so collaboration appeared to be “a natural,” as one Alpha mid-level manager put it. The two companies had been working closely together as customers and suppliers of each other for years: Alpha contracted with Omega for billing its telecommunication services, and Omega handled much of Alpha’s financial and travel arrangements. Alpha also administered Omega’s telecommunications and financial data transmissions. Direct interpersonal contact between the two senior executives at the partnering firms thus created the opportunity for cooperation, and the established business ties between the two firms further supported formation of the alliance. Such relational ties are often critical to alliance formation.14
Omega Financial Services was interested in a more formal partnership with Alpha Communications because its position in the corporate market was eroding. Despite its prestige, Omega was losing market share to new, more competitively priced entrants. Including Alpha’s telecommunication services with its own financial service offering could help Omega retain market share. Ironically, Alpha’s competitive strategy was partly responsible for Omega’s situation; earlier in the year, Alpha began offering its own financial services, aimed largely at its own current telecommunications customers, as a retention device. Alpha’s services were such a success in the consumer market that the company was emerging as a principal player in financial services. As a defensive move, Omega could prevent Alpha from targeting financial services by making Alpha a partner. Together, Alpha and Omega could also launch a powerful cobranded product that could be attractive to corporate customers.
For Alpha, the prospect of an alliance was also attractive, providing immediate access to the corporate market. Although it could use its own financial services unit and make an independent move into the corporate market, Alpha’s key business was really telecommunications. Senior managers were more concerned with developing mechanisms to support this core business than with branching out too aggressively into new areas. Alpha’s senior managers were also concerned that its financial services division, headquartered in another state, was becoming “too independent” and losing sight of its primary mission of supporting the company’s telecommunications interests. Hedging on Omega’s established reputation via a cobranded product, Alpha could expand its telecommunications network usage through increased communications and billing data transmissions. Plus, if Alpha did not embrace Omega’s offer, Omega could pursue the corporate market by allying with one of Alpha’s competitors.
However, a “clash of corporate egos,” as managers from both sides described it, plagued the negotiation process from the start. Both firms were accustomed to “getting their way” with alliance partners, because of their market clout and size; but this situation was different. The partners nicknamed themselves “the Dancing Elephants” to depict the careful movements necessary for the two corporate giants to avoid stepping on each other’s toes. A mid-level Omega manager remarked: “Neither one of us was in a position to push the other around.”
Since both companies rarely compromised, partnership discussions were arduous. At one low point, both sides refused to give in on a particular issue, and one team coldly got up and left. Reflecting on the experience, one Omega executive commented: “What took the most time in the negotiations was deciding ‘what happens when we divorce?’ It took us almost a year to negotiate — 3 months to cut the deal and 9 months to protect each other’s corporate assets.”
The negotiations offered little room for developing a spirit of cooperation, and several new organizational members from both sides were brought aboard to implement the partnership. Animosities, however, lingered.
(Reprint #:4124)
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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.
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22. Ring and Van de Ven (1994), p. 109.
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Parkhe (1993); and see also:
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24. M.Y. Yoshino and U.S. Rangan, Strategic Alliances: An Entrepreneurial Approach to Globalization (Boston: Harvard Business School Press, 1995), p. 128.
