Embedded patterns of international alliance formation

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

One central contrast is the contractual emphasis on the value of ownership versus an association emphasis on the attentiveness to long-term interests and the structure of authority. Contracts for supply involve discrete negotiation over specific provisions (duration, price, quantity, quality, and the like) and expected adjustments to recognized, foreseeable contingencies. In contrast, so-called technical agreements to share, exchange and/or develop knowledge or technology rest on an association logic (cf. Hagedoorn 1993a). Technical agreements represent an understanding of a cooperative relationship between parties for their long-term interests. Consistent with Holm (1995), this is a logic of association more than a specific promise to deliver, for consideration, according to a contract. Thus, while individually based values such as compliance, trust and forbearance may underlie contracts (cf. Parkhe 1993), the associative framework for action is supported by the expectation of reciprocity in order to sustain the relational entity.

The contract and association logics also appear quite different from an administrative logic, such as found in joint ventures. In a joint venture, the sponsors have specified an administrative mechanism to conduct operations within a separate hierarchy (Williamson 1991). Here, the logic of administration rather than contract would seem to dictate. Thus, it is little wonder that analyses of joint ventures often emphasize the more standard administrative issues of control (Geringer and Hebert 1989), the selection and actions of the general manager of the joint venture (e.g. Geringer 1991) as well as the division of ownership shares (e.g. Killing 1982).

Product/Knowledge Flows and Interdependence

Part of Thompson's (1967), now classic, contingency analyses stressed the importance of different forms of interdependence in the flow of work among the parties to an administrative entity. For successful operations, sequential and pooled interdependence called for less elaborate, expensive and responsive forms of integration than reciprocal interdependence. It called for mutual adjustment. Mutual adjustment called for more flexible, responsive and idiosyncratic forms of integration.

Descriptions of the product/knowledge flows in most alliance studies have implicitly emphasized sequential interdependence. Whether based on the early trade theories of comparative advantage (see Deardorff 1979 for a review), the eclectic theory (Dunning 1979), the internalization approach (Rugman and Verbeke 1992), or the literature on entry mode choice (e.g. Agarwal and Ramaswami 1992; Hennart 1988; Hill et al. 1990), international alliances have been seen as mechanisms for the unidirectional outward expansion of products and knowledge or as (e.g. Smith and Ziethaml 1993) exploiting some comparative national or firm advantage (e.g. Hennart 1988).

However, more recent work suggests that alliances are expected to be popular in technologically intensive industries because they are flexible mechanisms that firms can use simultaneously and cooperatively to develop new products and processes and jointly build reciprocal value-added networks (e.g. Auster 1992; Contractor and Lorange 1988; Hagedoorn 1993a). The work flow patterns in these alliances appear to emphasize mutual adjustment through reciprocal exchanges of products and knowledge. Here, the implicit assumption is that both sponsors have important and necessary competencies to contribute to a synergistic effort. Thus, the interdependence should be reciprocal, not unidirectional.