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Łukasz Jarocki*
Strategic alliances as means to increase competitiveness
Introduction
Since the mid-1980s we could observe an unprecedented growth of competitiveness in the capital economy [Kale, Singh, 2009, p. 45]. According to
some experts, the rate of creation of new strategic alliances oscillated around
20% annually in 1990s [Brown, 1999]. However, other research indicates between 1994 and 1997 the number of alliances created between companies
throughout the world could be equal to 32,000 [Harbison and Parkar 1998;
Kelly, Schaan and Joncas, 2002, p.11] These vast alliances show that this is the
most common trend around the world to search for new way to find competitive
advantage over other competitors. In order to survive and maintain further
growth companies are forced to find partners to increase possibilities of becoming the leader or have dominant position on the market [Kogut, 1991]. Firms’
motivation to augment income and expand their activities to other markets or
sectors has caused increased necessity to create strategic alliances, especially
when particular firm could not have enough resources or capital in-home. This
article investigates whether the creation of new strategic alliances produces additional value and therefore increases competitiveness both of company and the
market.
Published literature puts forward two approaches to investigate the concept
of strategic alliances. First, is based on a collection of data from statistical resources, especially when firms spread its activities to other countries [Tidd,
Bessant, 2010, p.486]. Second, when data is collected from the case studies,
what may give essential insights according to problems experienced by companies during practical implementation of strategic alliance strategy [Tidd, Bessant, 2010, p.486]. In this article most of the data comes from investigation
based on a statistical approach to the subject and information collected from
secondary resources, however some examples of case studies appear, in order to
show a deeper sense and the role of particular alliance and its influence on
competition.
1. How do we define the concept of strategic alliance?
Acclaimed literature gives a number of definitions used by scholars in order to define and clarify the concept of strategic alliance. However, for the purpose of this article only a few will be presented. I incline to analyse strategic
alliance in broader meaning but some characteristics included in definitions of
other scholars are essential. Therefore, strategic alliance can be presented as
cooperation between companies with separated form for governing business
*
Mgr, Katedra Prawa Gospodarczego Publicznego, Wydział Prawa, UwB,
[email protected]
234
Strategic alliance as means to increase competitiveness
activities, especially those involved with organization and management. It almost always includes making decisions and the transfer of information between
entities involved in such form of cooperation [Dyer, Nobeoka, 2000; Reuer,
Zollo and Singh, 2002; Silverman and Baum, 2002; Singh and Mitchell, 2005;
Zaheer and Bell, 2005]. However, this definition should also include organizations or institutions which are not companies, but fulfill all criteria to be treated
as a strategic partner. The second approach to defined this concept was determined by Gualati. He stated that strategic alliance is a deliberate activity more
than one company, which coordination is based either on trade, sharing information, and distribution resources among partners or cooperation to achieve
mutual aim or provision [Gualati, 1995 & Kale, Singh, 2009]. These two definitions give essential insight into what strategic alliance can be, however do not
cover the whole substance of the concept. Other researchers argue that the biggest challenge and also a goal of alliances is transformation cooperative agreement into effective and productive collaboration in order to achieve before stated aim [Child and Faulkner, 1998; Parkhe,1998]; [Yoshino and Rangan, 1995];
[Kelly, Schaan and Joncas, 2002, p.12]. In reality there is a whole net of different types of relations and cooperation between companies. Therefore, one firm
may belong to more than one alliance and be only a link in a whole chain of
collaboration. For example extracted joint venture company – Symbian, is a
clear example of alliance set up by Psion, Nokia, Ericsson and Motorola according to development of operating system to cell phones and other electrical
equipment [Tidd, Bessant, 2010, p. 493]. However, from the other side not all
forms of collaboration can be treated as strategic alliance because it would be
over-interpretation. Therefore, the definition of the concept is not easy to portray.
2. Do firms collaborate only with other firms?
So far strategic alliances have been discussed as a collaboration between
companies from the private sector. However, some scholars present an alternative, which is based on the collaboration based on connection between companies and scientific institutions such as universities. There are a number of such
partnerships between companies and universities; however few questions concerning this concept arise. For example, what are the benefits of such type of
collaboration? Or how can both partners benefit?
According to available literature firms started to value knowledge accumulated during scientific trials at universities. In particular, engineering faculties
were a subject of exploration by companies. Without doubt the meaning of
competitiveness in the technology field is one of the most important factors
which influence a firm’s decision regarding the risk to try and collaborate with
external institutions or not. Strategy of new technology adaptation from any
possible sources increased the number of collaboration with universities. Firms
such as Kodak or AEA Technology spot the necessity to grow technologically
and considered collaboration with universities or joint ventures as a more effec-
Strategic alliance as means to improve competitiveness
235
tive way to achieve their goals. Therefore, a number of companies started to
sponsor a large number of research conducted on prime universities throughout
the world an even established joint ventures programs. For example Guinness is
in talks to collaborate with universities especially in the field of genetic engineering. The outcome of such strategic alliance usually relies on a confidential
agreement between the research institution (usually universities) and firms. The
collaboration with universities however has few advantages over the in-house
R&D. For example, the high risk projects can be undertaken by universities and
supported by companies what shares the risk of failure. Also the base of laboratories and other resources necessary to achieve advanced technology may not be
sufficient at home but complemented by partner institution. Therefore firms
have begun to analyse and try to understand how to use science to back their
products or services.
3. Creation of alliances
Before investigating the role strategic alliance1 plays in relation to competitiveness, first it seems important to ask the question of what are the motivations
forcing companies to collaborate with each others? Or even, why companies
have started to cooperate with partners instead of going alone?
Since the end of nineteenth century, the progress of technology and communication has exploded on unprecedented scale. Every region of the world has
begun to be interconnected economically with others, like never before. Socalled concepts of globalization and international economy have started to
sprout and be the subject of further investigation. But, how has it influenced the
companies? Or what impact it had on decisions taken by firms, especially those
related with cooperation and finding partners?
The ease of technology and information transfer affected the growth of cooperation, often between companies from different regions or sectors. It seems
that the main aim of such alliance creation was improvement of ones ability to
withstand growing competitiveness on the market and increase effectiveness
including cost reduction. Therefore, possibilities of the creation of partnerships
with other companies, more frequently started to become a subject of discussion
during a process of planning firms’ strategies. [Kale, Singh, 2009, p. 46]
Some companies, because of increased competition, were forced to create
alliance networks in order survive or maintain dominant position on the market
[Kogut, 1991]. The trend to collaborate seemed inevitable, however recently it
has started to slow. The notion of the possible benefits from collaboration
changed slightly. Now, firms are truly keen to perceive strategic alliance as
a means to improve efficiency rather than maintenance of once growth and survival [Ahuja, 2000]. This improvement would be reached inter alia by economies of scale in the production process [Tidd, Bessant, 2010, p.479], access to
new sources e.g. technologies or rough materials [Rothaermel & Boeker, 2008],
1
For the purpose of this research the term – ‘strategic alliance’ is used interchangeably with:
collaboration, partnership, alliance, relation.
236
or possibility to conduct further exploration, especially new market entrance
e.g. when it is restricted [Gracia-Canal, Duarte, Criado, Llaneza, 2002]. Other
motivations to cooperate may involve cost reduction especially connected with
new technology development, risk reduction (e.g. according to new market expansion), or time reduction (e.g. necessary to launch new product) [Tidd, Bessant, 2010 p.479]. Another factor mentioned by scholars occurred during the socalled Schumpeter’s creative destruction process and can be simply named as
the willingness to survive [Duysters, de Man, 2003 p. 49]. However, this example will be discussed later.
4. Does collaboration always create economic value?
Even when clear motives exist for collaboration the global trend to work
with partners slows. At this point we can raise the question: Why are firms not
keen on working together and forming strategic alliances as they did before? If
the general motive for such collaboration was the creation of value, does it
mean partners are not able to produce additional value anymore? Even an answer on such simple questions like “does it pay?” or “how much does it cost?”
may give us essential insight.
According to research conducted during the last two decades, firms have
spent about 20% of their assets and over 30% of their general expenses on strategic alliances, more specifically on maintenance and development [Ernst,
2004]. However, around 50% of firms did not achieve their goal and terminated
the relation ahead of time [Kale, Dyer i Singh, 2002]. Moreover, the growth of
successful alliance did not reflect success of companies which were a part of
such cooperation [Kelly, Schaan and Joncas, 2002, p.11]. Other research shows
between 30 and 70% of such corporations do not meet prerequisites of strategic
alliance maintenance, especially according to dominant partner perception
[Bamford, Gomes-Casseres, & Robinson, 2004]. Such vast divergence can be
reduced by another study which shows that around 50-60% of strategic alliances
is a subject of failure [Spekman et al., 1996; Dacin et al., 1997; Frerichs, 1999;
Duysters et al., 1999]. However, the alliances which withstand failure and persist also encounter a number of problems involving this concept. Further investigations found around 66% of international cooperation experience fundamental problems during the lifespan of such alliances, especially in the first two
years of its existence [Bleeke and Ernst, 1993]. However from the opposing
side, 26% of firms’ total income in 2007-08 came from strategic alliances
[Kale, Singh & Bell, 2009]. This data give a general notion that firms’ cooperation in strategic alliance is not easy and not always profitable. However, further
investigation to determine precisely why so many alliances fail and what circumstances favour the growth of collaboration is desirable.
5. Competitiveness, alliance and radical technology change
All kinds of strategic alliances are created in order to improve a firms
competitiveness. There are different factors which have an impact on motiva-
237
tion to collaborate, however all of them are directly or indirectly connected with
competitive behaviour of companies. Therefore, it could be argued that successful alliances improve competitiveness of companies which are involved in such
type of partnership. Also external knowledge adopted from universities can
have positive impact on new technology creation, and be important aspect of
rivalry and competition. However, all above refers to the competitiveness of
company or collection of companies (institutions) involved in strategic alliance.
Nevertheless, another important question arises on this subject, namely, how the
creation of strategic alliances may influence the competitiveness of the industries or industry as a whole? In order to answer this question at least two sectors
of industry should be analyzed and compared. At first, it seemed impossible to
measure, however the concept of Schumpeter radical innovation may give essential insight to undertake further investigation.
Schumpeter argues that the force which makes firms or whole sectors may
fall or decrease sharply, not because the industries are not innovative but because there appear new technology which enabled to produce new product or
service in a more effective or cheaper way [Schumpeter, 1942].
In 1873, Carl von Linde patented new technology which enabled the production of refrigerators. This example clearly presents radical innovation which
destroyed a previously existing sector of ice shipping. Beforehand, the ice sector was very well developed and innovative, with large fleet of ships to
transport an ice from north America to almost any place in the world. However,
since the first refrigerators appeared on the market, ice industry started to melting [Tidd, Bessant, 2010, p. 29-30]. This example clearly contrast two industries, emerging (refrigerators) and melting (ice industry). They both compete
with each other which means that flourish of one industry is related with decrease of another. However, this situation had occurred before trend of establishing strategic alliances.
Another example of Schumpeter’s radical change can be music industry.
The factor which changed the rules of the game was an invention of algorithm
according to digital format which enabled to compress songs, and therefore
transmit them easily. Normal audio files had been started to be replaced by new
format, namely MP3. Firms such as Sony found it difficult to compete with new
entrances which have started to use economics of internet. As a result there appeared new programmes such as P2P, Gnutella, Kazaa and Limewire which
enabled to exchange music collections between users. However, other competitors started to launch new products on the market which were based on MP3
format. One of them was Apple with new iPod player and iTunes web site
which offered huge number of songs to download at reasonable price (99 cents
each song). In 2005 more songs was bought through internet than as CDs [Tidd,
Bessant, 2010, p. 7-10]. Therefore, it is clear that innovation can reshape the
whole industry. But, is it possible to faster such kinds of innovations? Or, can
strategic alliances influence their creations?
238
One of the field where strategic alliances appear quite often is carmaker
industry. For example, “GM was forming a long-term and broad-scale global
strategic alliance with Peugeot-Citroën of France”. The companies have started
to work together in order to reduce costs by buying together materials from mutual suppliers. Also manufacturing small-to-medium-sized cars on common
“platforms” may have positive impact on further cost reduction. There are more
cases of such cooperation, however in many of them significant problems occurred. For example, alliance between Suzuki and Volkswagen now has its
final in arbitration. Also strategic alliance between Daimler and Chrysler or
between BMW and Rover were unsuccessful [The Economist, 2009].
Nowadays, there are many sectors of industries which compete each, with
more advanced technology and strong strategic collaboration. For example the
whole energy segment is constructed from competitive industries such as: oil
and gas industry, renewable energy, coal and atom energy etc. The companies
which operate on the energy sector often collaborate in order to achieve technological advantage over others. Even though, national governments support
changes and competition between industries or favour one of them. Example of
such cooperation is Boeing and Siemens which formed strategic alliance in order to develop “technologies to improve energy access and security for the U.S.
Department of Defence, the largest energy consumer in the federal government”
[Siemens’ official web site]. However, the importance of strategic alliance in
value creation and its impact on competition between different entities should
be a subject of further investigation.
6. Enhance cooperation
Most of the companies perceive strategic alliance as a possibility to adopt
new skills or discover new technology from external resources. In particular,
this perception refers to the notion that every partner of such relation may benefit from it. However, technology transfer from one company to the other must
be carefully planned, especially when there is possibility to disclose some of the
so-called ‘core technologies’. It is related with the high risk of lost technological advantage and, therefore position on the market. From the other side, firms
which complement mutual core competencies may benefit from such collaboration together. Thus, selection of a partner is very important and it influences
strategic alliances during its lifespan. Good example of partner selection and
acquisition of new core competencies is Kodak. The company was aware that
the lack of technology in-home may cause drastic decrease in sales. Therefore,
the company acquired number of firms which had technology necessary to supplement Kodak’s core competencies (e.g. Imation Corporation). The company
also suffered organizational problems because of company’s routine. In 199798, Kodak formed another alliance with Intel in order to work together on ‘Picture CD’ project. This strategy enabled to release new products on the market
which increased company’s market shares by 20% in 2004 [Tidd, Bessant,
2010, p. 501]
239
Cooperation between companies also impact on the everyday behaviour of
the employees. Some companies, especially those which business activity is
repetitive are exposed to routine in conducting its activities. Therefore, collaboration and flow of new ideas from outside the company may give a fresh
glimpse on previously adopted patterns of conduct. The most common examples of external patterns are the introductions involved with testing new technology, analysis and computing services and other technical services [Tidd,
Bessant, 2010, p. 491]. According to the study conducted by Libecap (1989)
strategic alliance may achieve greater rate of success when the economic incentive is combined with good communication between companies. The researcher
suggest that CEOs should pay careful attention in partner choice. The study also
suggest that the similarity in perception of benefits between two companies is
high, then the rate of success increase too [Libecap, 1989]. According to Khanna, Gulati and Hohria (1998) this rule works also the other way round. That
means, if there is an asymmetry in alliances’ perception of common goal, there
is a higher rate of failure or problems emerging. There are several reasons to
claim that lack of homogeneity may cause decrease in rate of success in partnership. First, demand on coordination is greater when homogeneity of partners
does not meet the basic criteria. From the other side, necessity of management
is greater when there are optimal allocation of efforts. Secondly, homogeneity
among partners usually increase the rate of opportunistic perception of partners’
behaviour [Goerzen, 2007; Goerzen and Beamish, 2005].
Conclusion
Strategic alliances as a form of collaboration between different entities
play very important role in the economically developed world. There is no
doubt that such kind of cooperation can be essential to create economic value or
produce new technological growth. However, creation of alliance does pave the
way or success. There are many factors which may influence the outcome of
this type of partnership. Starting from partner election, management and homogeneity, strategic alliance is not an easy task to undertake. Many of them fail,
but those which succeed can shape the whole industry. In the modern world,
companies have to be more efficient and competitive. Therefore, seeking new
external resources leads to collaborate with each other and also with universities
is the key to success. By this type of partnership every member of such collaboration can benefit from it. It means that mutual collaboration can improve ones
ability to perform business, and thus stimulate growth of competitiveness. Also
strategic alliances are a very important link to break the technological barrier,
and therefore even provoke radical change of industries. But in order to be sure
how it works further exploration is required.
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Summary
During the last three decades, it was possible to observe a significant growth of
creation of strategic alliances between companies. Firms have been inclined to cooper-
242
ate in order to survive or maintain their growth. Such kind of partnership directly or
indirectly influenced the increase of competitiveness of the companies involved in such
form of cooperation. However, during the last few years, this tendency has decreased.
Therefore, few questions arise, namely: does the creation of alliances still have positive
impact on competitiveness? How high is the risk to cooperate in such form. Does a strategic alliance have impact on creation of so-called Schumpeter’s radical technology
change? This article aims to answer above mentioned questions and investigate the concept of strategic alliance and its influence on competitiveness.
Key words
strategic alliance, technology change, Schumpeter, innovation
Strategiczne alianse jako metody podniesienia konkurencyjności
(Streszczenie)
W ciągu ostatnich trzech dekad można było zaobserwować znaczący wzrost zawierania strategicznych aliansów pomiędzy firmami. Był to swojego rodzaju trend, aby
zawiązywać współpracę w celu przetrwania lub utrzymania dotychczasowego rozwoju
firm. Takie partnerstwa często wpływały pośrednio lub bezpośrednio na podniesienie
konkurencyjności firm związanych taką formą współpracy, jak i całej gałęzi przemysłu.
Jednak w ciągu ostatnich kilku lat tendencja działania w grupie zaczęła słabnąć. W ten
sposób nasuwa się pytanie, czy zawieranie aliansów w dalszym ciągu wpływa na podniesienie konkurencyjności partnerów, jak i rynku? Jakie jest ryzyko niepowodzenia
działalności firm w formie strategicznych aliansów oraz jak je można ograniczyć? Czy
współpraca firm w zakresie strategicznych aliansów może wpłynąć na wprowadzenie
tzw. radykalnej zmiany technologicznej według koncepcji Schumpeter’a? Artykuł ten
ma na celu udzielenia odpowiedzi na powyższe pytania oraz przybliżenie koncepcji
strategicznych aliansów oraz ich wpływu na konkurencyjność.
Słowa kluczowe
alianse strategiczne, zmiany technologiczne, innowacje

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