Antecedents and consequence of alliance formation.

• Author: Tuntrabundit, Khwanruedee
• Position: Report

1. INTRODUCTION

   In May 2001, Matt Schifrin, the editor of Forbes.com, wrote in a Forbes special issue on alliances: "Alliances may be the most powerful trend that has swept (global) business in the past 100 years. Strategic alliances are hot ..." (Pekar and Margulis, 2003). Schifrin is not alone. In February 2009, on the website of garminasus.com, Garmin, a global leader in satellite navigation and ASUS and a technology leader in the IT industry, announced that a strategic alliance would leverage the companies' navigation and mobile telephony expertise to design, manufacture, and distribute co-branded location-centric mobile phones. Several other people were found to agree with the concept of alliances. Dr. Min Kao, the chairman and CEO of Garmin Ltd, stated that "We believe that converged devices are an emerging opportunity. This alliance is advantageous to both companies because it allows us to combine our resources and establish a strong foundation from which we will innovate and introduce the world to the benefits of LBS-centric mobile phones ...". Johnny Shih, CEO of ASUSTeK Computer Inc, said that "This alliance allows ASUS and Garmin to seamlessly combine the strengths of both companies to offer market leading mobile phone solutions that are of the best design and highest quality. ASUS and Garmin both believe strongly in the continuous investment of RandD resources to unfailingly provide leading-edge innovations to people and businesses," "Through this alliance, our companies will continue to develop innovations that simplify life. Our technologies should accommodate our customers, not the other way around ..." According to Pekar and Margulis (2003), this evidence is one of occurrences that leads Peter Drucker, the father of modern management, to believe that "not only a surge in alliances, but a worldwide restructuring for major corporations is occurring in the shape of alliances and partnerships." Therefore, it is interesting to see what has happened in the last eight years for global business alliances. The phenomenon shows the importance of cooperation and trend to form international alliance. International alliances do not only help establish a strong foundation of partners, but also provide emerging opportunities. Therefore, the number of interfirm collaborative arrangement (i.e. alliance) is increasing. Consequently, researchers need to understand the depth of behavioral partners and are able to handle intangible relationships in international alliances. In a study of Hitt et al. (2000), they mentioned that international alliances have received much attention from both academic researchers and business practitioners. Similarly, Nielson (2007) states that international alliances are a rapidly growing organizational form attesting to the growing importance in conducting business across institutional and national borders. However, to be successful in management, international collaborative arrangements are very complex and it is difficult to match the goals of two or more countries together. This is due to the fact that international alliances are not common exchange resources, and they have complex exchange relationships (Perks and Easton, 2000). Therefore, the fit of cooperation between partners has received a lot of interest in the field of international business. Furthermore, interfirm cooperation is a source of competitive advantage. Hence, to ensure firm survival and to generate profits for their firms, firm acquire new resources and develop new competencies (Solesvik and Encheva (2010). However, there are only a handful of previous studies related to this issue. Among a few of them, Rousseau et al. (1998), Rindfleisch (2000), Nielsen (2007), and Walter et al. (2007) examined antecedents of international alliances, the overall view of alliance formation, and the effectiveness of the international alliance model. However, this is little research on pre-alliance formation and the success of post-alliance formation. To address these limitations, this paper attempts to extend the current understanding by developing a model of important factors leading to partner's goals in the international alliance formation that reflect essential elements of the conceptualization of international alliance formation and effectiveness post-alliance.

   To address the mentioned issues, this paper is organized as follows. The first section reviews literature related to the formation of international alliance, linking network theory and resource based view, followed by a proposed model constructed based on the reviewed literature and a set of propositions. Next, conclusion is presented. Finally, the contribution of the model to the field and future research directions are given at the end of the paper.

2. THEORETICAL FOUNDATION

   This study incorporated two theories related to alliance formation and effectiveness, resource-based view and network theory. Because alliances are used to combine heterogeneous resources held by multiple firms, study on alliance formation can be grounded on these two theories. Among the well-known theories are resource-based view (Barney, 1991; Grant, 1991), and network theory (Hatch and Cunfiffe, 2006; Gulati, et al., 2000) as the theoretical lens explain the conceptual model in the followings.

   Firstly, resource-based view provides a theoretical foundation to explain the effectiveness is a result of the capability and resource (Barney, 1991). Resource-based view can be viewed as a theory about the nature of firms (Lockett, Thompson and Morgenstern, 2009). Barney (1991) argues that sustained competitive advantage derives from the resources and capabilities a firm controls that are valuable, rare, imperfectly imitable, and not substitutable. These resources and capabilities can be viewed as bundles of tangible and intangible assets, including a firm's management skills, its organizational processes and routines, and the information and knowledge it controls (Barney, Wrightb and Ketchen, 2001). According to this view, firms are heterogeneous in terms of their resources and capabilities (Barney, 1991; Wernerfelt, 1984) which emphasize on the role of strategic management in appropriately adapting, integrating, and reconfiguring internal and external organizational resources and competencies to match the requirements of the changing environment (Teece, Pisano and Shuen, 1997). In other words, capabilities are not specific inputs like tangible or intangible assets. They refer to the skills (i.e. the ability and ways of combining assets, people and processes) that a firm uses to transform inputs into outputs. In this study, the resource-based view is applied to firm's alliance formation. Firm's resources and capabilities are considered a key element to formulate alliance formation and alliance effectiveness. This study believes that unique resources (e.g., partnership experience) exist at the alliance formation, and that can be inimitable competitive weapon. Moreover, firms in repeat alliances also develop routines to facilitate the collaborative process (Eisnehardt and Martin, 2000). Consequently, the firm with attitude toward alliance, partner selection, and partnership experience tends to achieve alliance formation and lead to access alliance effectiveness.

   Next, Network theory was chosen, since this study has attempted to focus on alliance formation. This theory describes, explains, and predicts relations among interacting firms (Wilkinson and Young, 2002). Network theory suggests that knowledge is a social product, created in a network that orders and translates various interacting materials to firms in the network (Hatch, 2006). Furthermore, network is...