Embedded patterns of international alliance formation

Organization Studies, Fall, 1998 by Richard N. Osborn, John Hagedoorn, Johannes G. Denekamp, Geert Duysters, C. Christopher Baughn

Most importantly, the dominant rule of relationship linking an entity to its setting is an interesting mix of determinism and choice. Some institutional theorists stress that the conformity of the entity to its setting should be from the individual to the firm, the firm to its immediate environment or firms to their socioeconomic settings (see Baum and Dutton 1996). Some of the arguments here are often consistent with those found in contingency theory (e.g. Donaldson 1985) or population ecology (Freeman and Hannan 1989). For instance, firms may conform in order to boost their legitimacy because legitimacy may increase their chances of survival. Of course, the trigger for change in most contingency analyses is a firm's performance that threatens its survival (e.g. Bluedorn 1993), while institutional theorists are more likely to stress responses to broader factors potentially influencing a whole series of firms (see Powell 1996).

A counter theme in many institutional analyses stresses choice, particularly when the forces facing the entity are either ambiguous or conflicting (see Miller 1996; Powell 1996). Consistent with Simon's model of bounded rationality, these choices do not occur in either a vacuum of information or with complete rationality. Thus, individuals may imitate to conform to broad institutional forces and still negotiate their social construction of reality within the framework of their existing knowledge. Thus, firms are not expected to be identical to one another, even though many may share many similar characteristics.

Imitation and Embeddedness

Whitley (1994), among others, has noted that when organizations attempt to expand beyond their national boundaries they implicitly take with them their nation's history of socioeconomic choices. On the international scene, they become representatives of their home nation. When firms form an international alliance, of course, each may represent its own host socioeconomic system. Without a commonly shared socioeconomic history, one firm may attempt to impose its system on the other. Such was apparently the case for many alliances involving large multinationals from developed countries and smaller firms from less developed nations (see Franko 1971). However, recent reports suggest that alliances among comparable firms from economically developed nations are increasingly popular (see Hagedoorn 1993a). Here, sponsors may be generally blocked from merely replicating the nationally preferred cooperative structures they may have used in their home country. To form an international alliance, sponsors from developed nations often need to overcome these historic contextual differences.

All sponsors do, however, share one larger institutional setting, that being the industry of the alliance itself. To the degree institutionalization processes hold, sponsors may copy popular formation features for new alliances from within the alliances' industry, as the industry represents the common institutional environment (cf. DiMaggio and Powell 1983). This general emphasis on the industrial setting as a focus for imitation is consistent with numerous institutional studies (e.g. Leblebici et al. 1991; Baum and Oliver 1991). To the degree that institutionalization holds, the internal characteristics of the alliance should be embedded in this larger industrial mass.