Flexible Systems Management giftjourn@l International Journal of Global Business and Competitiveness 2010, Vol. 5, No 1, pp 25-36 Empirical Study Managing Strategic Alliances: Drivers of Success from a Case of Select Industries in India Dinesh Kumar Likhi General Manager (Business Planning) Steel Authority of India Limited Ispat Bhawan New Delhi Email: [email protected] Abstract Strategic alliances can play a critical role in global value creation. Participating organizations or firms can overcome resource and knowledge constraints and achieve superior economic and strategic performance not only by using internal resources and capabilities but also by acquiring resources and capabilities from alliance partners. The paper attempts to identify key success drivers that will guide in developing and institutionalizing organizational-level capabilities (Alliance Capability) in turn to manage alliances, successfully. The study is based on extensive extant literature review and opinion of 139 Alliance Executives of companies in select industries of India. Factor Analysis has been used to identify drivers of success i.e Alliance Performance. The study is concluded with authors own insight for conceptualizing a framework for alliance management with key drivers for further research and managerial implications for Indian companies for attaining international competitiveness. Keywords: Strategic Alliance Management, Alliance Motives, Leadership, Alliance Capabilities, Drivers of Success, Alliance Performance Introduction Traditionally, companies are building capability in their own value chain, the authors are suggesting that in global economy, they need to learn building strategic alliances (Navickas and Mykolaityte, 2010). The firms are in paradox of deciding on exact impact of creation and management of strategic alliances. The failure rates of strategic alliances are well recognized by researchers and managers. The study attempts to identify the factors that can minimize strategic alliances failures. These can be termed as primary drivers of alliance success. Working on these drivers will guide firms in developing and institutionalizing organizational- level capabilities (Alliance Capability). In literature, the concepts alliance, partnership and cooperation are not distinctly defined and are used loosely. According to Merriam-Websters Collegiate Dictionary, alliance has the function of noun, dates from the 13th century and means: 1 a: the state of being allied: the action of allying b: a bond or connection between families, states, parties, or individuals; 2: an association to further the common interests of the members; specifically: a confederation of nations by treaty; 3: union by relationship in qualities: affinity; and 4: a treaty of alliance. Alliance can be any cooperation/partnership between two or more firms. The definitions are broadly describing some form of cooperation between organizational entities. as an agreement (either formal or informal) between two (or more) parties (firms or other organizations), to share resources and cooperate in one or several areas of business designed for a short- or a long-term period. If an alliance meets any one of the following criteria, it is called strategic alliance (Wakeam, 2003): Critical to the success of a core business goal or objective Critical to the development or maintenance of a core competency or other source of competitive advantage Blocks a competitive threat Creates or maintains strategic choices for the firm Mitigates a significant risk to the business 26 giftjourn@l Dinesh Kumar Likhi It is generally seen the most of strategic alliance may be formed to reduce cost, to specialize in competencies, to combat competition, to secure horizontal and vertical links and to glean knowledge. International strategic alliances are formed to gain location-specific assets, overcome legal constraints, to diversify geographically and to minimize exposure in risky environment. Therefore, Strategic alliances play a critical role in global innovation in value creation. Participating Organizations can overcome resource and knowledge constraints and achieve superior economic and strategic performance not only by using internal resources and knowledge but also by acquiring capabilities from alliance partners. It is widely accepted that strategic alliance can produce the effect of synergy (1 + 1 = 11). Most countries that climbed high development levels including Asian giants (e.g. Japan, Korea and now China) have leveraged alliances very effectively. Emerging market like India are now facing facing a spurt in creation and failure of strategic alliance. It is important that managers should learn how to organize themselves for success in strategic alliance for equipping them to play in global landscape. Some of strategic alliances which have been created or failed in recent past will illustrate this argument. It is evident that alliances present a complex paradox for organizations. On the one hand, organizations engage Table 1: Select Examples of Creation or Failure of Strategic Alliances in India in a large number of alliances to secure and extend their competitive advantage and growth; on the other hand, their alliances exhibit surprisingly low success rates. These reasons have been a major driving factor in generating research interest studying strategic issues in strategic alliance management capabilities in business landscape. This becomes more important for Indian companies who have second largest population of the world but with a insignificantly low value of market share international trade/business. The paper, relevant to current business environment, attempts to answer how Indian alliances can gain for gaining competitive advantage. It is important to know factors why large no of alliance failures are being witnessed. The paper is able to identify many key issues which can play key role in success of business alliances, based on research in select industries of India. Literature Review A Booz-Allen-Hamilton Study shows that there is a need to move from adhoc approach to institutional level approach by upgrading skills of the organization (Harbison and Pekar, 2004). The objective is to facilitate organization towards higher level capability by developing higher-level skills within organizations. The different types of alliance skills have been explained in Figure 1. International strategic alliances are formed to gain location-specific assets, overcome legal constraints, to diversify geographically and to minimize exposure in risky environment. Ashok Leyland and Rs Al Khaimah Investment Authority have formed joint venture in the Gulf Region to produce commercial vehicles. The operations have started in 2010. Honda owns a 26 percent stake in Hero Honda. Joint Venture is at verge of collapse. Hero group will lose out on the design engineering help that it got from its Japanese partner, but it will gain in terms of saving the 3 per cent royalty it has to pay its Japanese partner. Unfortunately, Hero Honda has been relying solely on Hondas R&D for its bikes. The Munjal family and Japans Honda Motor Corp have agreed to end their 26- year alliance due to differences. US $ 20 Billion Indian pharma industry is witnessing domestic and international strategic alliances. NATCO Pharma Limited has signed many contract research and manufacturing agreements with its alliance partners in last few years. Eli Lilly created a Joint Venture with Ranbaxy Laboratories in 2001. With changes in paten regime and FDI policy, joint venture was dissolved in 2007. In Dec10, NMDC and Severstal signed MOU for Joint Venture to set up steel plant in Karnataka. SAIL-US Steel joint venture for IT business was started in 2001 and Joint Venture is non-functional since 2005. In 2009, Bharti-Walmart entered in strategic alliance in India for Retail Sector. RPG-Dairy Farm International Joint venture was created in 1999 and got dissolved in 2005 Automobile Pharma Steel Retail Sector Creation of Strategic Alliance Failure of Strategic Alliance 27 2010, Global Institute of Flexible Systems Management Managing Strategic Alliances: Drivers of Success from a Case of Select Industries in India Institu- tional Lone Ranger Adhoc High Low Pyramid of Capability Alliance Capability Dedicated skill High degrees of sharing Establishment of knowledge repository for future use In-house guru best practice individually based Little knowledge-sharing, limited resources Reinvent each time No knowledge capture No best practices Institu- tional Lone Ranger Adhoc Institu- tional Lone Ranger Adhoc High Low Pyramid of Capability Alliance Capability Dedicated skill High degrees of sharing Establishment of knowledge repository for future use In-house guru best practice individually based Little knowledge-sharing, limited resources Reinvent each time No knowledge capture No best practices Figure 1: Approaches to Alliance Skill-Building (Adapted from Harbison and Pekar, 2004) Existing literature shows that alliances can take a variety of forms. Some of these include joint ventures, R&D contracts, joint R&D, joint production, joint marketing, supplier relationships and distribution agreements (Lorange and Roos, 1990, 1991 a, b; Yoshino and Rangan, 1995, 1996; Todeva and Knoke, 2005). Kogut (1988) suggests that the life cycle of an alliance can be divided into three broad steps, namely: formation, operation and termination. Similarly, Forrest (1992) states that the alliance process should be divided into three stages; the pre-alliance phase, the alliance agreement development and the implementation phase. Spekman et al. (2000) suggest stages as Anticipation, Engagement, Valuation, Coordination, Investment, Stabilization and Decision. Dyer et al. (2001) suggest the following five phases: Alliance Business Case, Partner Assessment and Selection, Alliance Negotiation and Governance, Alliance Management and Assessment and Termination. Different types of theories give different perspectives of management of strategic alliances. Table 2 attempts to summarize prevailing strategy theories and their linkages to strategic alliances. Table 2: Theories related to Strategic Alliances Motives Dynamic Capability View (DCV) Kale and Singh, 1999; Spanos and Lioukas, 2001; Makadok, 2001, Sanchez, 2001 DCV is especially devoted to uncovering the mechanisms that help firms integrate, build and reconfigure organizational capabilities and it finds a positive relationship between experience and performance. It allows for a more comprehensive understanding of the complex interactions needed between a firms experience, its organizational processes and mechanisms in order to develop alliance capabilities Theory Key Authors Explanation Resource Based View (RBV) Thomke and Kuemmerle, 2002; Vanhaverbeke et al., 2002 Strategic alliances are seen as a vehicle to gain access to certain assets or resources or role of dedicating specific resources to the alliance, which can positively influence alliance success and rent-yielding capacity of the alliance Competencies Based View (CBV) Prahalad and Hamel, 1990, 1993;Appleyard, 2002 It provides a more comprehensive representation of the importance for firms to be able to develop a firms capabilities over time in order to remain competitive in the long run. Obviously, the meta-capability or competence to continuously adapt a firms endowments also holds for the development of alliance capabilities Knowledge Based View (KBV) Grant and Baden-Fuller, 2002 A firms ability to gather and leverage knowledge from prior alliances can be an important driver of its alliance performance and it directs attention to the internal mechanisms that help firms disperse and leverage existing knowledge Evolutionary Economics (EE) Reuer et al., 2002 a, b; Zollo et al., 2002 It draws upon behavioral and economic traditions to explain a firms competence as a consequence of its routines Organizational Learning (OL). Grant and Baden-Fuller, 2002; Zeng and Hennart, 2002; Mowery et al., 2002;Reuer et al., 2002 a, b It underscores the need to understand how firms learn from prior experiences and how they internalize alliance-related knowledge in order to improve alliance performance 28 giftjourn@l Dinesh Kumar Likhi The literature review indicates that there is a research gap in understanding the roles of different capabilities. Though the variables influencing alliance performance are available in the literature, there is lack of comprehensive research on both capabilities like intra depending on whether they are internally created or inter depending upon its creation with the focus on external interface. Additionally, in order to ensure stability of alliances, revitalization capability needs to be studied. The variables such as role of leadership and internal context also need to be taken up for further study. As a result of an extensive literature review, it is evident that internal context of organizations and leadership support and commitment are key drivers for building alliance capabilities that have influencing power on strategic alliance performance, which is measured in multi- dimensional perspective. The summary of key variables, as evident in the literature is shown in Table 3. Survey Design During literature review, it became evident that there is wide variance in dentitions of variables. With interviews of select experts in the field, an attempt was made to define working definitions of each of macro variables, as outlined in Appendix-1. Many other macro and micro variables could have been taken for consideration for the study. For example, industry external context, partners country context, leadership style, and so on. The mind set in choosing six macro variables and sixteen micro variables was to keep those variables that would be directly related to strategic alliance performance; to make the study more manageable. The research uses a cross-sectional design to analyze a phenomenon around these variables by considering a cross- section of the population of alliance executives at one point in time. This study employed the survey method, which made use of a questionnaire. As defined by Kothari (2004), the questionnaire has helped in defining a collection of questions that fit the research topic and its objectives. The questions of the research study were formulated, only after clear definition of research topic, issue identification and understanding of key variables. The questionnaire was developed in English. A cover letter was used introducing the objectives of the research and the importance of the survey and was addressed to the names and position of the key informants, who were in charge of companies (e.g Chairman, Managing Director) for advising concerned strategic alliance executive to respond to the questionnaire. It consisted of 106 questions. The questionnaire also used affirmation structure where respondents were asked to grade at which level they agreed with the statement in the specific organization, based on experience of any one strategic alliance on a scale of seven: 1 for strongly agree and 7 for strongly disagree. (Later, after collecting the data, order was reversed to bring commonality in the descriptive statistics of existing literature and for higher face validity. The measures used in this study were developed either in previous studies or through literature gap analysis. The behavioral measurement scales used to measure attitudes of respondents were treated as interval scales, with an assumption that the difference between two successive numerical measures is fixed. The research was conducted on population of Indian companies, those who met criteria of (a) business operation for more than five years, and (b) operating with some experience of strategic alliances. The data analysis of the questionnaire began with the testing of validity and reliability of the measures. Cronbachs alpha for all variables were calculated found to be in acceptable rage. Although, the Cronbachs alpha for micro variables of context was calculated for all five micro variables, factor analysis facilitated reduction to three micro variables; Cronbachs alpha for reduced factors (three micro variables) was also found more than cut-off level. Pre-testing was also carried out through a small group of experienced executives, associated with strategic alliances. The objective of pre-testing was to ensure that the questionnaire was easy to understand to the respondents and to eliminate the possibilities of misunderstanding, confusion, bias and lack of commitment with accrued responses. Subsequently, the questionnaire was improved to ensure that content; form, sequence of questions; spacing arrangement and physical appearance of questionnaire were checked for getting the desired response from persons filling the questionnaire. In the final version, the questions were also organized in groups and subgroups to be further compared with the results of four identified sectors in India. The performance of the alliance was found to be improving with timely leadership-support and commitment, long-term orientation and different dimensions of alliance capabilities. Table 3: Literature Review Based Macro and Micro Variables Alliance Management Areas Key Author(s) Context Leadership Inter Alliance Capability Intra Alliance Capability Alliance Revitalization Capability Alliance Performance Spekman et al. (2000) Spekman et al. (2000); Lajara et al. (2002) Spekman et al. (2000); Denison et al. (2004); Zaheer and Harris (2006); Leung and White (2006) Simonin (1999); Spekman et al. (2000); Dyer et al. (2001) Sushil (2003) Kaplan and Norton (1996); Nielsen (2007) 29 2010, Global Institute of Flexible Systems Management Managing Strategic Alliances: Drivers of Success from a Case of Select Industries in India To make predictions about concepts and phenomena, research was carried out to perform detailed objective analysis of Alliance Executives regarding their opinion about alliance performance. Theoretically, inclusion of all Alliance Executives in Indian Industry i.e census of population for study seemed impractical. Accordingly, research was carried out using a sampling technique. A sample size of about 150 executives was targeted with snowball sampling technique. This technique was used for seeking some of hidden populations which were? difficult for researcher to access. As sampling having being applied as a formal methodology for making inferences about a population of individuals who have been difficult to enumerate through the use of descending methods such as household surveys (Snijders, 1992; Faugier and Sergeant, 1997), the data were statistically analyzed with conventional statistical analysis. With an estimate of population of more 1500 alliance executives, and sample size of 129, error rate is expected to decrease significantly. Non-sampling errors were also attempted to be minimized by careful examination and treatment of data. Respondents profile of Alliance Executives to is given in Table 4. Table 4: Brief Respondent Profile: Industry-wise Break-up M a n a g e m e n t
L e v e l Senior Middle Junior Total Oil 16 9 6 31 (24.0%) Power 10 5 16 31 (24.0%) Steel 14 8 10 32 (24.8%) Engineering 20 10 5 35 (27.1%) Total 60 (46.5%) 32 (24.8%) 37 (28.7%) 129 As respondents were explained objectives of the research in an introductory letter along with risk, right and confidentiality of researchers and data, it is expected that the questionnaire has sought unbiased and representative response from the respondents. Data were collected through the use of the structured questionnaire. The sample consisted under Indian industry in four major sectors, viz. Oil, Power, Steel and Engineering. Data Analysis Data preparation was divided into two stages. First, the raw data was edited, coded and converted into the actual variables of interest. The coded database was analyzed using SPSS 15 package. Secondly, the variables were checked for outliers, normality and linearity. Data are assumed to be normally distributed. We applied Factor Analysis for each of macro and micro variables to examine Factor Loadings and Eign Values for both macro and micro variables. One macro variable, i.e Context was found to have three factors, explaining 75% variance. Therefore, factors were reduced to three with a focus on Fair Interaction, Communication & Decision and Long-Term Orientation. The factor analysis was done for other macro and micro variables. The summary of factor analysis of macro variables (Inter Alliance Capability, Intra Alliance Capability and Revitalization Capability) is given in Appendix-2. Managerial Insight to Factors for Conceptual Framework for Alliances The factors were analyzed in context of experiences of Indian companies to suggest a conceptual framework for further study and managerial focus. In the Indian context, it is experienced that external environment does not change rapidly due to socio-political compulsions and firms are finding it difficult to influence the external context with a speed that is essence for global competitiveness. Companies are finding uniform policy constraints in Indian industries and have little outward engagement in making external environment a differentiated one. The companies are seen influencing internal context and leadership that will influence appropriate decisions and actions in the areas of strategic alliances to build the desired processes enabling building of alliance capabilities and strategic alliance performance. Indian Managers are seen using internal context and leadership commitment to help alliances in their life cycle. These two key drivers are found to be improving alliance management capabilities (inter and intra) and consequently alliance performance. The conceptual framework, developed with managerial insight is expected to meet the goal of better understanding of research variables and their relationships. This framework can be used by researchers for further studies, Managers may use it for focusing on key drivers of context and leadership to build capability and improve performance. The framework evolved on the basis of identified factors and seems to be working in Indian Context is given below: Managerial Learning and Implications from Data Analysis and Examples Literature review, Factor Analysis and authors experience in the field for more than 15 years indicate that organizations need to draw an action plan for Alliance Capability building to reduce failure rates. The drivers of success are building internal context and leadership and the same are explained below, with some examples. In Joint venture between Steel Authority of India Limited and NTPC, it was found that leadership supports and commitment of both management was greatly The practical model, which can be applied to understand related issues, is expected to fill the need of Indian managers. 30 giftjourn@l Dinesh Kumar Likhi influenced by their respective internal context of fair interaction, communication and long-term orientation. The performance of the alliance was found to be improving with timely leadership-support and commitment, long-term orientation and different dimensions of alliance capabilities. In case of Elli-Lilly Ranbaxy Joint venture, a high degree of compatibility, flexibility and avoidance of conflicts with partnering organization require building relationship management capability-operational. The same joint venture saw success in initial period for Quality of participation, communication and cooperation, degree of coordination, commitment, and ethical conduct, shared belief, feedback and flexibility. Their executives managed their interaction with partner firm in an adaptable manner requires building cultural management capabilities-adaptability. In case of Hero-Honda managing interaction with partner firm with high degree of appreciation of partners mission requires building cultural management capabilities- mission, helped in developing competent alliance people, cross- functional perspective, dedicated department and alliance know-how and supportive processes and structure. NATCO Pharma company feels that better transfer of knowledge requires reduction in the extent of ambiguity, tacit ness, complexity, and specificity. This can be facilitated by knowledge management capability- characteristics of partnering organization. It is pragmatic to assume that managers may enhance alliance performance improvements by working with flexibility that will require increase in inter-capability. Similarly, alliance performance can further be increased by building resources, knowledge and capability through structure capability. While the framework will require further empirical validation and select case studies. The current research has limitation in terms of scope and validation but is able to bring out clarity on key drivers of strategic alliances. Major difficulties are encountered by the managers in mitigating strategic risk issues in alliance management like role of internal context, leadership, intra-capability, inter-capability and revitalization capability on the alliance performance and also lack of understanding constrains in enhancing comparative efficiency of alliance management. The practical model, which can be applied to understand related issues, is expected to fill the need of Indian managers. Some of Practical implications for practice by Indian companies can be explored by analyzing key questions and preparing actions based on possible action plans relevant to the company and sector : Is extent of support and commitment of leadership, internal cooperation and capabilities quite high in Indian firms? If not, how can they be enhancing urgently and nurture the same? Strategic alliances were used effectively for accelerated internationalization by many (e.g. Japanese-even with competitors (Hamel and Prahalad, 1989). Many Indian firms are also at cusp of internationalization and many larger ones (incl. PSU, particularly Maharatna, Navratnas) need to internationalize rapidly. Can they use Strategic alliances for that? How? Many researchers have mentioned about role of learning capability for alliance performance. How are learning capabilities of Indian firms? Can they be build and enhance rapidly? How? Based on learning in research and authors experiences, key implications for practice can be drawn. Building desirable context with long-term orientation, fair interaction and communication and decision have direct and indirect influence leadership to a large extent. The three issues that are very important and should follow logical steps, are briefly given below: Formulation of Alliance Strategy There is a clear need for Indian companies to chalk out strategic alliance capability to build strategy. As factors underlying alliance capability are internal context, leadership, alliance capability and performance, alliance capability strategy implementations should be pursued with focus on these variables. Precise statement of alliance capability building strategy and policy may help organizations in better management of strategic alliances. Assessment of Current Situation One should carry out periodic audit of the organization to identify gap between paradigm of short-term orientation and long-term orientation. Quality of communication, decision and fair interaction needs to be improved, after analyzing the need and reality. Motives of forming an alliance need to be articulated across concerned executives, as this helps driving internal context dimensions in building leadership support, capability and performance. Assessment of Leadership Issue Leadership-support and commitment will require identification of top executives, who are conversant with the different phases of strategic alliance, complexity and key success factors and constraints in managing strategic alliances. They should provide support and commitment towards alliance management capability. Drive and determination help leadership-support and commitment in building capability and performance. Action Plan for Alliance Capability building Building leadership supports and commitment requires building an internal context of fair interaction, Leadership-support and commitment will require identification of top executives, who are conversant with the different phases of strategic alliance, complexity and key success factors and constraints in managing strategic alliances. 31 2010, Global Institute of Flexible Systems Management Managing Strategic Alliances: Drivers of Success from a Case of Select Industries in India communication and long-term orientation. Alliance performance improvements will need leadership-support and commitment, long-term orientation, different dimensions of alliance capabilities. High degree of compatibility, flexibility and avoidance of conflicts with partnering organization require building relationship management capability- operational. Quality of participation, communication and cooperation, degree of coordination, commitment, and ethical conduct, shared belief, feedback and flexibility require that relationship management capability-strategic is built thoroughly. Managing interaction with partner firm in an adaptable manner requires building cultural management capabilities-adaptability. Managing interaction with partner firm with high degree of appreciation of partners mission requires building cultural management capabilities-mission. Developed competent alliance people, cross-functional perspective, dedicated department and alliance know-how and supportive processes and structure, require that organizations should focus on structural capability. Better transfer of knowledge requires reduction in the extent of ambiguity, tacit ness, complexity, and specificity. This can be facilitated by knowledge management capability- characteristics. Alliance performance improvements also require working with flexibility. This will require increase in inter-capability. Alliance performance can further be increased by building resources, knowledge and capability through structure capability. Concluding Remarks The development trends of global economy determine the need for efficient business organizational structures and new way of business collaboration. If properly managed, management of internal context and leadership commitment and support will help to build alliance capabilities in long run, which in turn will help in improving alliance performance. Thus alliance capability plays a meditating role in alliance performance. Similarly context and leadership commitment and support will facilitate increase alliance capability level by leveraging stock of experience, skill, knowledge and processes. This will help in creating moderating role of alliance capability for alliance performance. Acknowledgements The author is thankful to contributions of survey respondents, anonymous reviewers, organizations that supported the research. Rich guidance by Professor Sushil, Department of Management Studies, IIT Delhi and other faculty on the research committee is gratefully acknowledged. References Appleyard M.M. (2002) Cooperative Knowledge Creation: The Case of Buyer-Supplier Co-development in the Semiconductor Industry, In Cooperative Strategies and Alliances, Contractor F.J. and Lorange P (eds), Elsevier Science: Oxford, 381-418. Denison D., Lief C. and Ward J.L (2004) Culture in Family-Owned Enterprises: Recognizing and Leveraging Unique Strengths, Family Business Review, 17(1), 61-70. Dyer J.H, Kale P and Singh H. (2001) How to Make Strategic Alliances Work, Developing A Dedicated Alliance Function is Key to Building The Expertise Needed for Competitive Advantage, Sloan Management Review, 42(4),37-43. Faugier J. and Sargeant M. (1997) Sampling Hard to Reach Populations, Journal of Advanced Nursing, 26, 790-797. Forrest J. (1992) Management Aspects of Strategic Partnering. Journal of General Management, 17 (4), 25-40. Grant R.M. and Baden-Fuller C. (2002) The Knowledge-Based View of Strategic Alliance Formation: Knowledge Accessing Versus Organizational Learning, In Cooperative Strategies and Alliances, Contractor FJ, Lorange P (eds). Elsevier Science, Oxford, 419-436. Hamel G., Doz Y., Prahalad C. (1989) Collaborate with Your Competitors and Win, Harvard Business Review, 67(1), 133-139. Harbison J.R. and Pekar P. (2004) Cross-Border Alliances in the Age of Collaboration, A Booz-Allen-Hamilton Study. Kale P. and Singh H. (1999) Alliance Capability and Success: A Knowledge-Based Approach, Working paper, Wharton School, University of Pennsylvania. Kaplan R.S. and Norton D.P. (1996) Translating Strategy into Actions: The Balanced Scorecard, Harvard Business School Press, Boston. Kothari C.R. (2004) Research Methodology-Methods and Techniques, Sage, New Delhi. Lajara B.M., Lillo F.G and Sempere V.S (2002) Human Resources Management, A Success and Failure Factor in Strategic Alliances, Employees Relations, 25(1), 61-80. Leung K. and White S. (2006) Exploring Dark Corners: An Agenda for Organizational Behaviors Research in Alliance Context, Handbook of Strategic Alliances, Shenkar O. and Reuer J (eds.), Sage Publication, New Delhi, 199-218 Lorange P. and Roos J. (1990) Strategic Alliances, Formation, Implementation and Evolution. Blackwell, Cambridge. MA. Lorange P. and Roos J. (1991a) Analytical Steps in the Formation of Strategic Alliances, Journal of Organizational Change Management, 4 (1), 60-72. Lorange P. and Roos J. (1991b) Road blocks to the success of a Strategic Alliance (and How to Go Around Them), Handelshoyskolen. Makadok R. (2001) Towards a Synthesis of the Resource Based and Dynamic Capability Views of Rent Creation, Strategic Management Journal, 22 (5), 387-401. Mowery D.C, Oxley J.E. and Silverman B.S. (2002) The Two Faces of Partner-Specific Absorptive Capacity: Learning and Co- specialization in Strategic Alliances, In Cooperative Strategies and Alliances, Contractor FJ, Lorange P (eds), Elsevier Science, Oxford, 292-319. Navickas V. and Mykolaityte V. (2010) The Alteration of The Strategic Alliances Paradigm in the Global Economy, Econmics and Management, 15, 155-158. Nielsen B.B. (2007) Determining International Strategic Alliance Performance: A Multidimensional Approach, International Business Review, 16, 337361. Prahalad C.K. and Hamel G. (1990) The Core Competence of the Corporation, Harvard Business Review, 66(3), 79-91. Prahalad C.K. and Hamel G. (1993) Strategy as Stretch and Leverage, Harvard Business Review, 71(2), 75-84. Reuer J.J, Zollo M. and Singh H. (2002a) Post-Formation Dynamics in Strategic Alliances, Strategic Management Journal, 23(2), 135- 151. 32 giftjourn@l Dinesh Kumar Likhi Reuer J.J., Park K.M. and Zollo M. (2002b) Experiential Learning in International Joint Ventures: the Roles of Experience Heterogeneity and Venture Novelty, In Cooperative Strategies and Alliances, Contractor F.J., Loreange P. (eds), Elsevier Science, Oxford, 321-344. Sanchez R. (2001) Building Blocks for Strategy Theory: Resources, Dynamic Capabilities and Competences, In Rethinking Strategy, Volberda HW, Elfring T (eds). Sage Publications, London, 143-157. Simonin B.L. (1999) Ambiguity and the Process of Knowledge Transfer in Strategic Alliances, Strategic Management Journal, 20(7), 595-623 Snijders, T. (1992) Estimation on the Basis of Snowball Samples: How to Weight, Bulletin Methodologies Sociologique, 36, 59-70. Spanos Y.E. and Lioukas S. (2001) An Examination Into The Causal Logic Of Rent Generation: Contrasting Porters Competitive Strategy Framework and the Resource-Based Perspective, Strategic Management Journal, 22(10), 907-934. Spekman RE, Isabella LA and MacAvoy TC. (2000) Alliance Competence, Maximizing the Value of your Partnerships, John Wiley and Sons, New York. Sushil (2003) Give a New LIFE to Your Organization!, Global Journal of Flexible Systems Management, 4 (1 & 2), ii. Thomke S. and Kuemmerle W. (2002) Asset Accumulation, Interdependence and Technological Change: Evidence from Pharmaceutical Drug Discovery, Strategic Management Journal, 23(7), 619-635. Todeva E. and Knoke D. (2005) Strategic Alliance and Models of Collaboration, Management Decision, 43(1), 123-148. Vanhaverbeke W., Duysters G and Noorderhaven, N. (2002) External Technology Sourcing Through Alliances or Acquisitions: an Analysis of Application Specific Integrated Circuits Industry, Organization Science, 13, 714-733. Wakeam, Jason (2003) The Five Factors of a Strategic Alliance, Ivey Business Journal Online, London, May/June, 1. Yoshino M.Y. and Rangan U.S. (1995) Strategic Alliances, An Entrepreneurial Approach to Globalization, HBS Press, Boston, MA. Yoshino M.Y. and Rangan U.S. (1996) Forging Alliances: A Guide to Top Management, The Columbia Journal of World Business, 31 (3), 6-13. Zaheer A. and Harris J. (2006) Inter organizational Trust, In Handbook of Strategic Alliances, Shenkar and Reuer (eds.), Sage, New Delhi, 168-188 Zeng M. and Hennart J-F. (2002) From Learning Races to Cooperative Specialization: Towards a New Framework for Alliance Management, In Cooperative Strategies and Alliances, Contractor FJ, Lorange P (eds), Elsevier Science, Oxford, 189-210. Zollo M. and Winter S.G. (2002) Deliberate Learning and the Evolution of Dynamic Capabilities, Organization Science, 13(3), 339-351. 33 2010, Global Institute of Flexible Systems Management Managing Strategic Alliances: Drivers of Success from a Case of Select Industries in India Appendices During literature review, it became evident that there is wide variance in definitions of variables. With interviews of experts in the field, as attempt was made to evolve working definitions of key variables as given below: Context: Context means influence of internal business environment on strategic orientation of the company. Participating organization may or may not face similar external environment but ability to gain from strategic alliances is greatly affected by internal context. Internal context may undergo change due to internal changes like norms of fair dealing, open flow of information, level of coordination, long-term orientation and joint decision- making. Such norms in internal context are expected to have direct impact on the behavior of leaders support and commitment, which in turn helps in building resources and alliance capabilities and consequently the performance of the strategic alliances. Leadership: Leadership primarily means a process by which Chairman, Chief Executive, and top management of any business unit perform the roles of a manager and leader during all stages of strategic alliance life cycle. Key dimensions like support and commitment to the strategic alliance are the underlying success criteria of leadership. The role of the influence of leadership on external and internal context is also noted in the literature and the research study. Inter- Alliance Capabilities: The inter-firm capability focuses on processes within the individual firm that foster trust with partnering firms through relationship and management of cultural diversity. Intra- Alliance Capabilities: The intra-firm capability focuses on processes within the individual firm that foster knowledge management through knowledge dissemination and integration and firm-specific structural issues like people, dedicated department, routines and competencies. Alliance Revitalization Capabilities: It may be developed by a process of joint effort of partners through mutual interactions to get a new life by going through new learning, innovations, entrepreneurial styles and flexibility. Alliance Performance: The variable captures all the indicators related to how the strategic alliance performs from its financial, internal business, innovation, learning and customers perspectives. There are five micro variables under macro variable of Context. These are defined below: Context-Fair Dealing: It may be defined as the degree of fair dealing by the partnering organization(s) within the organization for any strategic and managerial decisions and actions. Such a context influences building leadership support and commitment towards alliance capabilities and alliance performance. Context-Open Flow of Information: The degree of flow of information within partnering organization(s) and practice of sharing with the other organization(s) in the context may Appendix 1 Working definitions of variables influence leadership commitment and support, which in turn build alliance capabilities. Context-Level of Coordination: Degree of coordination within partnering organization(s) and practice of coordination with other organization context may also help in enhancing leadership commitment and support. Context-Long-term Focus: Degree of long-term orientation of decisions and actions by the partnering organization. Such a context changes styles of leadership in building alliance capabilities. Context-Joint Decision-Making: Degree of joint decision- making by the various officials of partnering organization(s) context influences building a responsive leadership that will facilitate building alliance capabilities. Under Inter Alliance Capabilities, there are six micro variables. These are defined below: Relationship Capability-Operational: Relationship Management Capability-Operational may be developed by enhancing degree of compatibility, flexibility and avoidance of conflicts with partnering organization. Relationship CapabilityStrategic: Relationship Management Capability-Strategic is developed through better quality of participation, communication and cooperation, degree of coordination, commitment, ethical conduct, sharing belief, feedback and flexibility. Cultural Management CapabilityAdaptability: Cultural Management Capabilities-Adaptability is defined as the ability for managing interaction with partner firm in an adaptable manner. Cultural Management CapabilityInvolvement: Cultural Management Capabilities-Involvement is defined as the ability for managing interaction with partner firm with high degree of involvement. Cultural Management CapabilityConsistency: Cultural Management Capabilities-consistency may be increased by sticking with partner firm with a high degree of consistency. Cultural Management Capability-Mission: Cultural Management Capabilities-mission is defined as the ability for managing interaction with partner firm with a high degree of appreciation of partners mission. Under Intra Alliance Capabilities, there are three micro variables. These are defined below: Structural Capability-: Structural capability may be defined as the ability to develop alliance people, cross- functional perspective, dedicated department and Alliance Know-how and supportive processes and structure. Knowledge Management Capability-: Knowledge Management Capability-characteristics may be defined as the ability to transfer knowledge, which is influenced by its characteristics, driven by the extent of ambiguity, tacitness, complexity, and specificity. Knowledge Management capability-organization is affected by partners protectiveness and interactions and efforts in managing cultural distance and organizational distance. 34 giftjourn@l Appendix 2 Table 1: Factor Analysis for Macro Variables Macro Variable Micro Variables in Construct Factors Confirmed by Factor Analysis Cum. (%) of the loadings Long -Term Orientation Joint Decision Making Fair Dealing Open Flow of Information Coordination Leadership Relationship Capabilities- Operational Relationship Capabilities- Strategic Cultural Management Capabilities-Adaptability Cultural Management Capabilities-Involvement Cultural Management Capabilities-Consistency Cultural Management Capabilities-Mission Structural Capabilities Knowledge Management Capabilities-Characteristics Driven Knowledge Management Capabilities- Characteristics Knowledge Management Capabilities-Organization Alliance Revitalization Capability Strategic Alliance Performance Context* Leadership Inter Alliance Capability Intra Alliance Capability Alliance Revitalization Capability Strategic Alliance Performance 3 1 6 3 1 1 75.06 51.65 52.49 51.27 56.30 53.39 * 2 Variables Excluded in Factor Analysis Dinesh Kumar Likhi 35 2010, Global Institute of Flexible Systems Management Table 2: Factor Analysis for Micro Variables Variable / Construct Item Nos. Confirmed by factor Analysis in Constructs Cumulative (%) of the loadings Fair Interaction Communication & Decision Long -Term Orientation Leadership Relationship Capabilities-Operational Relationship Capabilities-Strategic Cultural Management Capabilities- Adaptability Cultural Management Capabilities- Involvement Cultural Management Capabilities- Consistency Cultural Management Capabilities- Mission Structural capabilities Knowledge Management Capabilities- Characteristics Knowledge Management Capabilities- Organization Alliance Revitalization Capability Strategic Alliance Performance 5 4 3 5 6 9 4 3 5 1 3 6 6 4 4 69.89 50.08 53.77 51.65 51.81 56.50 59.40 67.29 51.11 - 70.97 45.39 54.78 56.30 53.39 * Note: No Item was excluded in Factor Analysis, as each item was confirmed. Managing Strategic Alliances: Drivers of Success from a Case of Select Industries in India 36 giftjourn@l Dinesh Kumar Likhi Dinesh Kumar Likhi is General Manager (Business Planning) in Steel Authority of India Limited. He holds degrees in Bachelor of Metallurgical Engineering, from University of Roorkee, M.Tech from REC Rourkela, PG Diploma in management, MBA in Corporate Strategy from Maastricht School of Management, The Netherlands and Ph.D in strategic alliance area from IIT Delhi. He has 28 years wide experience in automobile and steel industry. He is a life member of Indian Institute of Metal and Global Institute of Flexible Systems Management. He is currently working as member of Technical committee of IIM-Delhi Chapter, Governing Council of GIFT and Chairman of School of Strategic Alliance. Reflecting Applicability in Real Life What role cooperative strategies (CS) can play for accelerating excellence and competitiveness? What are popular mechanisms of CS in your firm or other organization actively pursuing CS? Why? How can you assess, if the firm is strategically managing cooperation? On what factors and criteria of competitiveness can they evaluate trends?