25

2010, Global Institute of

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: dinesh.likhi@sailex.com
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
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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.
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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.
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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?