Inter-Firm Alliances: Analysis and Design. . - Other Reviews - book review

Administrative Science Quarterly, Sept, 2001 by Tarun Khanna

Inter-Firm Alliances: Analysis and Design. Bart Nooteboom. New York: Routledge, 1999. 239 pp. $90.00, cloth; $29.99, paper.

Inter-Firm Alliances: Analysis and Design undertakes the heroic task of using a multidisciplinary perspective, drawing from economics, sociology, and cognitive science, to study alliances. The author integrates a range of theoretical constructs--resource based theory (also referred to as capabilities or competencies), social exchange theory, transaction cost economics, innovation, learning, trust and opportunism--to present ideas related to the "analysis, diagnosis and (re)design" of alliances (p. 1) in a way that is intended to resonate with academics and practitioners. This is a laudable exercise, but an ambitious and daunting one. The book is a challenging read, even for someone who follows and contributes to the alliance literature. Part of this is undoubtedly due to the nature of the challenge that Nooteboom has set himself. Perhaps the most constructive thing that I can do as a reviewer is to point out the gems that lurk beneath the surface and suggest some modifications that can inform future integrati ve exercises of this sort, of which I hope there will be many.

What I most liked about the book is the broad view it takes of alliances. The author does not restrict himself primarily to joint ventures, the focus of much traditional work on alliances, but includes an eclectic range of organizational forms not often emphasized in syntheses on alliances, including consortia, holding companies, licensing agreements, franchises, and industrial districts. The comparative analysis that is sometimes explicit in the book, and often implicit, is a nice contribution. Perhaps equally significant, though confined to a small part of the book (beginning of chapter 3 and Appendix 3.1), is the attempt to create a precise taxonomy of the different kinds of alliances. It is easy to quibble with the details of the methodology but profoundly important not to lose sight of the fact that there is, in fact, a methodology that is used to describe how the various kinds of alliances relate to one another. Scholars of alliances, inspired by this effort, should seek to build formal models that dete rmine the choice between different kinds of collaborative agreements.

I also like what the author describes early on as a dynamic perspective. In particular, the book appropriately suggests that the structure of an alliance needs to be revisited and redesigned as circumstances, both internal to the alliance and external to it, change. This exhortation toward redesign is, I believe, critical to understanding how alliances evolve. This part of the book would have been even more success successful had the author linked his insights to numerous case studies of evolving alliances in the literature. The second part of the dynamic perspective that is important is a forward-looking understanding of how a particular alliance shapes industry structure, or, more generally, has ramifications for economic actors other than those involved in the alliance. The emphasis on this issue is indeed warranted, but the author does not develop this angle as much as I had hoped.

There are specific analyses throughout the book that are very useful. For example, a nice contribution is a framework for analyzing relational risk (chap. 4) that is central to the book. The framework spells out the extent to which an alliance participant is beholden to its partners, the sources of switching costs, and the likely dynamics that ensue. There is a brief description of a partial empirical test of the framework (though its appearance in a separate chapter detracts from its utility). As part of the discussion of this framework, the author begins to discuss propensities to engage in opportunistic behavior, driven by habits and emotions, among other factors. Here, the author is on the verge of a nice interdisciplinary extension to what is essentially a simple economic model. For my taste, the synthesis with insights from other fields did not go far enough in this instance. Deeper analysis of trust, habits, and perceptions, drawing from cognitive science and from behavioral economics, would certainly have been possible. This example is not atypical. Insights abound but the most cogent examples seem to apply rudimentary, powerful, economic reasoning rather than interdisciplinary synthesis of the sort that is claimed as a particular strength of the book. Other examples of specific insights are the analysis of the optimal number of partners in an alliance and a game-theoretic analysis of U.S. and Japanese alliance form as a function of contextual variation.

Some simple organizational changes might have made the book easier to read. First, material that ought to have been found in one place in the book is sometimes spread quite widely. For instance, on the central question of why firms enter alliances, there is some information toward the end of chapter 2 and further information in the middle of chapter 3. Similarly, chapter 4 is devoted to governance, but there is a long subsection with this title in the previous chapter. Second, there is some material whose connection to the study of alliances is not clarified. For example, chapter 2 is intended as a discussion of the context in which alliances occur, but this is not, to my mind, what it delivered. The contextual features considered--scale and scope, differentiation, cooperation, spillover control, integration and disintegration, location, globalization, and internationalization--seem to be a set of constructs that would be equally applicable for many issues that social scientists study. The chapter does not ma ke the case for how these are particularly relevant to the study of alliances, nor does it explain why this particular list of constructs is chosen for discussion. Third, the author employs a device of "shaded inserts" in the text. These inserts are sometimes used to provide real-world illustrations of concepts, presumably intended especially to reach the practitioner audience that the author had in mind, but I think these would have been more compelling had they offered greater detail. Sometimes the inserts are also used to highlight conceptual ideas, though it was not apparent to me why some ideas were chosen for highlighting but others were not.