Investigation into the Increasing Importance of Competence

Investigation into the increasing importance of Competence

In the success of Strategic Alliances

Introduction

Spekman & Isabella (2000) offers a definition of an alliance as “ a close, collaborative relationship between two, or more, firms with the intent of accomplishing mutually compatible goals that would be difficult for each to accomplish alone”. A key aspect that can be taken from this definition that will be explored is the relational issue surrounding this topic.

Tsang (1997) offers a definition for a strategic alliance as “a long-term cooperative arrangement between two or more independent firms that engage in business activities for mutual economic gain.” (Tsang1997)

Tsang goes on to explore the importance of resources in this ‘economic gain’, and this represents another key area in this discussion.

Much research has been undertaken exploring the competitive advantage strategic alliances can provide for a business. Spekman & Isabella (2000) explain that alliances “enable firms to develop competitive advantage by leveraging the skills and capabilities of its partners to improve the performance of its value chain”. This highlights the importance of internal resources and capabilities which is what most of the literature written on this subject suggests is at the heart of this discussion.

The reason for this explorative study is due to the fact most alliance end in failure. “Alliance success remains elusive. Studies find that as many as 70 percent of alliances are not successful” (Day1995, cited in Spekman et al, 2002). This is worrying from a strategic viewpoint, as there is a definite sense that competitive advantage can be gained from these alliances, but if they are not successful then this will not to be possible.

This piece of work will explore the classic theories and principles relating to strategic alliances, and the past explanations of reasons for success. The first section looks at reasons for the formation of alliances, then how alliances are managed are explored and finally an explanation of the truth behind the subject is suggested.

Motives for Alliance Formation

Resource Based View (RBV)

RBV is a traditional explanation is one resource-based theory that has been used to explain alliance performance. Tsang (1997) explains firm’s resources “consist of all its assets, knowledge, organizational structure, procedures, and so forth that are controlled by the firm.” He goes on to explain that “the capability of a firm is its capacity to perform an activity as a result of organizing and coordinating the productive services of a group of resources.” This helps to highlight the importance of resources, and why they have been traditionally used as a tool to decide potential partners for alliances. If gaps in a firm’s resources can be matched with firms that have those resources, and vice versa, then strategic alliances represent a compatible partnership from which both companies will benefit. This would mean that much of the reason for deciding to begin an alliance with a company would revolve around the resources that a company has.

The logic is that there will be value created through alliances, which should help a company gain competitive advantage by use of those resources. Doz & Hamel (1998) represent this in a model (Fig.1.) highlighting three main areas, which have been numbered.

Fig.1. The logic’s of Alliance Value Creation. Doz & Hamel (1998)

In relation to this model the main area for discussion is ‘Gaining Competence through Internalised Learning’, as this discussion is focused

towards the importance of competence.

The concept of value creation is a subject that has also been explored by Sarkar et al (2001). They explain that “Value creation through alliances requires the simultaneous pursuit of partners with similar characteristics on certain dimensions and different characteristics on other dimensions”. Again, this idea of matching the correct gaps in resources with other companies who have those capabilities is suggested. Having undertaken research in construction industry alliances, they concluded, “organizational routines aimed at partner