INTERORGANIZATIONAL RELATIONS: STRATEGIC ALLIANCES

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INTERORGANIZATIONAL RELATIONS STRATEGIC ALLIANCES
At the organizational level of analysis, network
theories examine interorganizational relations
(IOR). Emergent properties arise when orgs
interact, exchange, bargain, compete,
collaborate, ...

• Network theorists try to explain origins and
  consequences of IOR ties.
• Requires new theoretical concepts (e.g.,
  governance forms)?
• Are IORs simply the aggregation of individuals
  relations?
• Do organizations have motives emotions,
  interests goals? Can orgs trust one another,
  or is trust only among people?
• How do persons occupying role of organizational
  agent behave differently than when acting as
  self-interest individuals?
• What cross-level person-organization relations
  are important?
• Orgs ties to employees, shareholders,
  customers/clients

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Varieties of Interorgl Networks
Interorgl interactions involve many
communication exchange relations, creating
various types of interorganizational networks
? Spot market transactions ? Relational
contracting ? Mergers acquisitions ?
Interlocking board directorates ? Joint ventures
IJVs ? Strategic alliances

• Network analysts examine relational contents
  structural forms among interconnected
  organizations. They seek to explain
• Which orgs decide to form interorgl relations
  what types of ties?
• What are the patterns of interorgl communication
  resource exchanges in those networks? What
  density, centralization, etc.?
• How do networks shape orgl behaviors
  performance outcomes?

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Where Do IOR Come From?
IOR originate in combinations of environmental
constraints and endogenous network structures
that generate new social-economic relations
intended to acquire control of resources
maximize orgl performances (profit, RD
innovation, sales,regulatory autonomy)
Gulati Gargiulo dynamic model with endogenous
feedback loop from present network structure
(past alliances, common 3rd parties, joint
centralities) to transform future alliances
Relational Embeddedness
Structural Embeddedness
Positional Embeddedness
NETWORKFORMATION
Structural Differentiation
Strategic Interdependence
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Optimizing IOR Benefits
Orgs often cooperate as well as compete with the
same orgs. Which network forms optimize an orgs
IOR benefits, such as profits, market share,
growth, legitimacy, political support? Network
closure Closely knit ties among orgl set
facilitates trust, cooperative exchanges,
collective action safeguards against information
asymmetries opportunism (deception
self-interest with guile - Williamson) Network
diversity Sparse ties to orgs not linked to
current partners span structural holes to gain
brokerage benefits, access diverse resources, and
learn innovative ideas
Contingency H Alternative forms of IOR networks
are better suit to achieving different
organizational objectives (1) Close-knit
networks optimize benefits from collaboration
(2) Diverse networks optimize gains from
competitive benefits
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An Org-Field Theory
IOR analyses also focus on explaining relational
structures at the complete network level,
disregarding individual persons or orgs.
Kenis Knoke (2002) combined organizational
field with network properties to develop a
field-net explanation of aggregate change

• Communication ties (info exchanges) are the
  primary IOR, a necessary prerequisite to future
  interfirm collaborations
• Changes in the communication networks formal
  properties (density, centralization) alter
  opportunities for firms to find available
  partners
• Rates of change vary nonlinearly, initially
  accelerating with changes in communication
  network structures, then slowing with saturation
  or ceiling effects
• But, given its heavy longitudinal data demands,
  how testable is this so-called theory?

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Networks Change Alliances
Changes in the formal properties of an
organizational fields communication network
generate nonlinear rates of change in
interorganizational tie-formation rates (e.g.,
strategic alliances)
DENSITY
RECIPROCITY
TIE CONFIRMATION
CONNECTIVTY
RATE OF STRATEGIC ALLIANCE FORMATION
CENTRALIZATION
MULTIPLEXITY
SUBGROUP COHESION
HIERARCHY
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Strategic Alliances
Between market relations orgl hierarchies
reside several short-lived, hybrid forms of
interorganizational relationships
Strategic alliance at least two partner firms
that (1) remain legally independent (2) share
benefits, managerial control over performance of
assigned tasks (3) make contributions in
strategic areas, e.g., technology or products
(Yoshino Rangan 1995)
Hierarchical Relations ---------------------------
------------------------------ JOINT VENTURES
COOPERATIVES EQUITY INVESTMENTS RD
CONSORTIA STRATEGIC COOP. AGREEMENTS CARTELS FRANC
HISING LICENSING SUBCONTRACTOR NETWORKS INDUSTRY
STANDARDS GROUPS ACTION SETS ---------------------
------------------------------------ Market
Relations
SA governance forms vary in the types of legal
and social mechanisms that coordinate and
safeguard the alliance partners resource
contributions, allocate their joint
administrative responsibilities, divide the
rewards from their collaboration
(Todeva and Knoke 2003)
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Micro-Managing Alliances
Evolutionary processes induce IOR as repeated
experiences raise partners familiarity. Growing
trust among org agents? lowers transaction
costs by eliminating the need for written
contracts as safeguards against opportunism (Ring
Van de Ven 1994 Gulati 1995)
Communication networks can facilitate flows of
information among potential partners about
alliance opportunities. CEO friendships, board
interlocks, professional ties can all serve as
intelligence-gathering channels. Because trust
among partners is so crucial for success,
communicating with partners-of-partners can help
to verify past performance or misconduct.

• NYC dress firms used embedded social ties to
  conduct business transactions requiring
  coordinated, nonmarket problem-solving (Uzzi
  1997)
• Cellular firms found potential new partners
  through interpersonal contacts of their managers
  participating in technical committees (Rosenkopf
  et al. 2001)
• In alliance implementation, institutionalized
  procedures build trust and mutual obligations
  vital for success of projects governed jointly by
  autonomous firms (Larson 1982)

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Strategic Alliance Networks
Repeated alliances among orgs create strategic
alliance networks
Strategic alliance network set of orgs connected
through their overlapping partnerships in
different strategic alliances (Knoke 2001128
Todeva Knoke 2002). Firms are closely tied to
one another through many direct alliances or many
indirect ties through third firms (i.e.,
partners-of-partners).
A firms strategic alliance network ties
increases probability of accessing and using
valuable resources held by the firms partners,
including their

• Financial resources, credit extensions
• Knowledge, information, technologies and patents
• Marketing expertise, country/culture penetration
• Organizational status, corporate, brand
  reputations
• Trustworthiness lower risk (but also moral
  hazards)

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Global Information Sector
Basic CSC concepts could help to explain the
evolution of the strategic alliance network in
the Global Information Sector (GIS). This sector
increased collaborative agreements exponentially
1990-2000, creating a complex web of overlapping
partnerships.

• Five NAICS info subsectors (publishing motion
  pictures sound recording broadcasting
  telecomms info services data processing) plus
  computer, telecomm, semiconductor manufacturing
  industries
• 145 multinational corporations 66 USA, 16
  Europe, 15 Asia
• Alliance venture announcements in news media,
  1989 to 2000
• Total of 3,569 alliances involving two or more
  GIS organizations

Next two figures show mean strategic alliances
among 30 most-active firms MDS
distances/clusters on dyads of annual
partnerships. Altho Japanese firms have higher
probability of mobilizing resources from
compatriots, what difficulties may they be
creating for themselves by concentrating their
strategic alliances so heavily among other
Japanese firm partners?
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SAMSUNG
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References
Gulati, Ranjay and Martin Gargiulo. 1999. Where
Do Networks Come From? American Journal of
Sociology 1041439-1493. Kenis, Patrick and
David Knoke. 2002. How Organizational Field
Networks Shape Interorganizational Tie-Formation
Rates. Academy of Management Review
27275-293. Knoke, David. 2001. Changing
Organizations Business Networks in the New
Political Economy. Boulder, CO
Westview. Todeva, Emanuela and David Knoke.
2002. Strategische Allianzen und Sozialkapital
von Unternehmen. (Strategic Alliances and
Corporate Social Capital) Kölner Zeitschrift für
Sociologie und Sozialpsychologie. Sonderheft
42345-380. Yoshino, Michael Y. and U. Srinivasa
Rangan. 1995. Strategic Alliances An
Entrepreneurial Approach to Globalization.
Cambridge, MA Harvard University Press.