Non-Cooperation — The Dark Side of Strategic Alliances

In the dark ages of computing, computer-makers were vertically integrated: a hardware firm, such as IBM, developed proprietary OSs and applications software, and sold it to the corporate customer. Since then, the computer industry has undergone two paradigm shifts — to personal computing, then networked computing — and is now transitioning to a third, based on devices that send and receive data.

The multi-billion dollar commercial potential of fuel cell technology has generated much excitement in the investment community over the past decade, an enthusiasm shared by those in energy and environment circles. Fuel cells have no moving parts, and generate electricity from an electrochemical reaction between hydrogen and an oxidant, such as oxygen: the only by-products are water and heat, making it the ultimate clean technology. Although there are many potential markets, from electric generation to power for mobile phones, the idea of fuel cell vehicles has captured the public’s imagination. Its champions speak of the dawning of a ‘hydrogen age’ and the beginning of the end of the internal combustion engine (ICE).

The rise of strategic alliances has been associated with technology industries, but aviation has been a leader in adopting cooperative competition, and continues to pioneer new approaches to alliance structure and governance. Although passenger alliances are the most high profile, airlines cooperate on a range of activities along the value chain, and many partners in one venture compete in another. Airline alliances also have a significant history of non-cooperation, and importantly for this book, non-cooperation is relatively transparent compared to other industries.

The formal study of alliances has struggled to catch up with developments in the practice of alliance management. Even though competition is almost solely between groups in some industries, we do not fully understand how alliances compete, or how to measure whether or not they are successful. In other areas, despite the fact that increasing numbers of partnerships involve multiple firms, much of the research focus remains on bilateral ties. But, because multiparty alliances have more complex relationships, we cannot simply extrapolate from the existing findings and apply it to the new setting. Management research has yet to come to grips with the fact that multiparty alliances have evolved to the point of creating institutions with permanent staff. The lessons of bureaucratic politics, from political science, suggest that there is a danger that bureaucracies will end up pursuing objectives which perpetuate the organization or lose sight of the fact that the firm’s first loyalty is to its shareholders, creating larger fissures between alliance- and firm-level interests. These types of developments have ramifications for intra-alliance dynamics, and may threaten the stability of some groups.