Partner analysis and alliance performance

Abstract

The determinants of strategic alliance performance have not been explored adequately in the literature. Empirical studies abound with numerous kinds of performance measures but, thus far, there is no coherent theoretical basis for the determinants of alliance performance. In this article we present a theoretical framework for understanding alliance performance in terms of its key antecedents. We submit that alliance performance is strongly influenced by particular characteristics of the partner firms as mediated by alliance conditions. We use the term “partner analysis” to denote the integrated approach comprising market analysis and resource analysis of partner firms. Alliance conditions are composed of collective strengths, interpartner conflicts, and interdependencies. We discuss the various linkages between the components of partner analysis, alliance conditions, and alliance performance. Finally, we develop a number of propositions to facilitate empirical testing of our partner analysis framework, and indicate its key implications for future research and managerial practice.

Introduction

Strategic alliances are an increasingly popular strategy in an era characterized by blurring industry boundaries, fast-changing technologies, and global integration. We define strategic alliances as interfirm cooperative arrangements aimed at pursuing mutual strategic objectives. Examples of alliances include joint ventures, joint production, joint R&D, joint bidding, contracted R&D, co-marketing, product bundling, licensing, code-sharing, and so on. It is common knowledge now that the rate of alliance formation has been dramatic in recent years, and increasing research attention is being focused on how alliances can be managed to gain competitive advantage (Ireland, Hitt, & Vaidyanath, 2002).

Whereas some well-known alliances—for example, Toshiba and Timer Warner, and Merck and AB Astra—have clearly benefited the partner firms, many other alliances have been plagued by unsatisfactory cooperation and poor performance in the marketplace. According to some researchers, about 60 percent of alliances can be considered as failures (Beamish, 1985; Das & Teng, 2000b). Also, alliances are found to have a lower success rate than formal or single organizations (Bleeke & Ernst, 1991; Kent, 1991). Given these developments, practitioners and researchers alike are intrigued by the question of alliance performance.

Our purpose here, therefore, is to propose an integrated framework that evaluates prospective alliance performance through an analysis of the partner firms and the alliance conditions, drawing upon and integrating the two main approaches in the strategy literature—competitor analysis and the resource-based view of the firm. We call this examination of the overall match between the partner firms as “partner analysis”, which covers partners’ market commonality, resource characteristics, and resource alignments. These three components of partner analysis affect the alliance conditions, which are composed of collective strengths, interpartner conflicts, and interdependencies. We propose that alliance condition variables are directly responsible for alliance performance. By introducing partner analysis and integrating its three components with the three aspects of alliance conditions, we seek to achieve a systematic appreciation of the determinants of alliance performance. Instead of covering a large number of factors, the proposed model calls attention to the most important determinants of alliance performance. Such a focused approach should facilitate both theory building and practical guidance. Fig. 1 depicts the major relationships among the variables of partner analysis, alliance conditions, and alliance performance in our proposed theoretical framework.