JOURNAL OF APPLIED SCIENCES RESEARCH

ISSN: 1819-544X Published BY AENSI Publication

EISSN: 1816-157X http://www.aensiweb.com/JASR
2016 May; 12(5): pages 35-40 Open Access Journal

The Significance of Relational Capital on

Alliance Performance in Indonesia
Construction Companies
1Dicky Hida Syahchari, 2 Dr.Mohd.Azlan B.Yahya, 3 Muhammad Amsal Sahban
1University
of Tama Jagakarsa, Faculty of Economic, 12530 South Jakarta, Indonesia.
2Senior
Lecturer, Universiti Utara Malaysia, Othman Yoep Graduate School of Business, 06010 Sintok, Kedah, Malaysia.
3Management College of Lasharan Jaya, 90231, Makassar, South Sulawesi.

Received 2 April 2016; Accepted 28 May 2016; Published 2 June 2016

Address For Correspondence:

Dicky Hida Syahchari University of Tama Jagakarsa, Faculty of Economic,,12530,South Jakarta,DKI Jakarta,
Tel +6281807559571: E-mail: dickyhs@yahoo.com

Copyright © 2016 by authors and American-Eurasian Network for Scientific Information (AENSI Publication).
This work is licensed under the Creative Commons Attribution International License (CC BY).
http://creativecommons.org/licenses/by/4.0/

ABSTRACT
Relational Capital has become play an important role in effectively relationship between companies in an
alliance. This paper reviews and integrates previous studies to point to the significance of relational
capital towards alliance performance specifically in Indonesia construction companies. Futhermore, this
study investigates the conceptualization of relational capital within alliance performance as well as
examining the relational capital and alliance performance by previous researchers. Finally, this paper
proposes a research framework to investigate the relationship of relational capital with alliance
performance in Indonesia construction companies.

KEYWORDS: Relational Capital; Alliance Performance; Construction Companies

INTRODUCTION

Companies have to adapt rapidly change of the business world. One of solution ways are convert from
individual to group companies. The designed a suitable is strategic alliance that consider the internal
requirements and to achive all target of partners. Powell [28] argues in prior study that the alliance is form the
combination between internalization and market dealings in the company). Parkhe [25]states that the crucial to
explore and to recognize the elements that influence the attainment of the alliance performance is the high
failure rate among alliances between 30 and 70 percent. Base on part alliance research reports that the standard
of alliance success rates only at 53 percent, the well-known reasons for alliance failure cause from wrong
strategies, incompatible partners, inequitable or unrealistic deals, and weak management. Additionally, Thuy
and Quang [33] highlighted the same issue regarding the failure rate of the alliance in Vietnam. While an
alliance continues to experience high dissolution rate, understanding the theory, management practice of an
alliance, relationship and performance become inevitable in order to ensure alliance success. Consequently, the
study of the factors that influence alliance performance becomes more pertinent and a necessary topic that
requires greater attention by researchers as suggested by several authors.
Harbison and Pekar [14] indentify that strategic alliance has grown in the last 20 years, and has been well
explored since the 1970s. The strategic alliance defined as the companies obtain another necessary resources
from the partners due to they cannot be produced internally [27]. In addition, Parkhe [25] used transaction cost
economics theory and game theory to expand several model of strategic alliance. Since then, there has been a lot
To Cite This Article: Dicky Hida Syahchari, Dr.Mohd.Azlan B.Yahya, Muhammad Amsal Sahban., The Significance of Relational
Capital on Alliance Performance in Indonesia Construction Companies, 2016. Journal of Applied Sciences Research. 12(5); Pages:
35-40
36 Dicky Hida Syahchari et al., 2016/ Journal of Applied Sciences Research. 12(5) May 2016, Pages: 35-40

of theoretical improvement to disentangle of strategic alliances, from begining is Dyer and Singh [8] promote
the relational view, followed by Young-Ybarra and Wiersema [36] with social exchange theory, and finally Das
and Teng [6] propose resource-based perspective. Researchers have dedicated diligently to learn the company's
reason to participate in alliance forms and also attempted for investigate and explain the important elements that
generate alliance effectively.
Pior research suggests that relational capital essential to the success of a lot kinds of business relationships,
from strategic alliances [1] for an importer / exporter relations and to supply chain relationships [4]. In
Townsend [34] state relational capital consists of "social-psychological aspects of the relationship which covers
two crucial factors of trust and commitment"(p.150,). Relational capital to facilitate the acquisition of resources,
enhance performance, push innovation, and finally influence the competitive edge [23].
Relational capital that applies to alliance covers the flow of information and resources that companies earn
from the network of relationships [11]. Although the global alliance consisting of inter-company relationships,
it is the individuals in the companies who build relationships that affect actions and decisions [26]. The types of
partner relationships range from low-trust, arms’ length contractual agreements to high trust, arms’ length-term
commitment that enhances the competitive position of each of the companies that participated [13]. Trust can
explained as the belief of word or promise from a credible party. As defined by Ganesan [10] high trust covers
credibility and righteousness. As the business relationship grows from a single transaction for recurring events
they form a relational context [21]. Further exchange depends on buyer confidence in the reliability of the
supplier. With positive results, the willingness to continue cooperation grow, become a commitment.
The construction industry is a highly complex industry, owing to all the interdependencies between tasks,
parts and units involved in the process and which need to be coordinated states that name of "partnership" in the
construction industry were employed alternately with alliance term. "Partnering" in construction sector can be
explained as a long-term commitment among two or more organizations for the purpose of achieving specific
business objectives by maximizing the effectiveness of each participant's resources. In addition, to explain the
purpose of the partnership is to achieve a common goal and a win / win solution and eliminate the adversarial
relationship in the midst of the several members and motivate them for work jointly [2]. Additionally, Barlow &
Jashapara states that strategic alliances in the construction industry could be distinguished based on duration of
the project team working together (can be based on a one project-off or a extended from one project to project),
also they made specific reference to the setting of strategic alliances in the construction sector :
“In the construction industry, a distinction is frequently made between long-term partnering, lasting the
duration of several projects and one-off project partnering”. In Indonesia, local construction companies expects
are given the opportunity in every major construction project. The government is expected to make regulations
that could open widely the opportunity for them. The important thing is give they a chance, because we can
cooperate with more advanced companies, said Presiden Director Wiratman & Associates Consultants
Multidiciplinary Wiratman. Meanwhile, Head of Facilities Construction Business Development Center from
Indonesia Ministries of Public Works, Arief Diana Rachman Putra said the presence of foreign construction
companies cannot be avoided. Local construction companies should be able to work together with foreign
construction companies, as was done with the construction company from China. However, Arief expects
alliance with foreign construction services not only occur on construction projects in the country, but it could
continue and work together on projects in other countries outside Indonesia [7].
Business Monitoring International reported in 2012, Indonesia construction sector are maintaining 6.9%
growth forecast for Indonesia construction sector although construction activity in Q212 remained as strong as
in Q112 they do not see significant scope for Indonesia to outperform in H212 due to challenging global
economic conditions. Looking beyond 2012 they are cautiously optimistic about construction and have slightly
revised up our real growth forecasts for the sector to 7.2% in 2013 (from a previous forecast of 7.0%).
Infrastructure growth in 2020 in the field of transportation, such as roads (toll) and the bridge is expected to
reach 25% of all construction projects. Infrastructure in the area of railroad and power plant (energy and power)
ranked second and third with a total growth rate reached 23% and 17% by 2020. With respect to growth, the
government has allocated the largest funding infrastructure development in the transport sector.(BMI,2012).
National construction services are expected to increasingly be able to develop its role in national
development through increased reliability backed by a solid business structure and able to realize the results of
quality construction work. Reliability is reflected in the competitiveness and capabilities organizing
construction work more efficiently and effectively. Moreover, a solid business structure is reflected by the
establishment of a synergistic alliance among large, medium, and small companies, as well as general qualified,
specialist, and skilled. [7].

Literature Review:
Construction Industry:
Matthews, Pellew, Phua, & Rowlinson argue basic difference between the manufacturing industries and
construction are hires subcontractors, and consultants and a a lot of supplies, In manufacturing produce repitive
37 Dicky Hida Syahchari et al., 2016/ Journal of Applied Sciences Research. 12(5) May 2016, Pages: 35-40

product, in other side the outputs of construction industry vary in their design and diverse production processes,
cause to hard in identifying the involved steps. On the other hand, service industries can be categorized as either
producer services or consumer services. Producer services, exist where users are mainly from othercompanies,
i.e. accounting service, management consulting and engineering. The second category is consumer services
such as hotels and retail stores. The construction industry could be grouped in the first category. The key areas
of technology used in the construction industry are administrative and physical transformation processes. The
first key areas consist of knowledge of administrative skills, methodology for managing large scale projects,
and organization and analysis of technical/specialized information. The second consist of the application of
tools and equipment in the appropriate construction process.

Alliance performance:
The alliance is the design of international cooperation to achieve the prevalent target of members between
distinct firms. According Doz (1996) the type of alliance could be short term or long-term contractual
cooperation and the members of alliances coincide to collaborate on some particular business matters. There are
many arguments which encourage firms to establish the aliance, including inadequate resource, low rate of
innovation, large manufacturing expense, market entrance and weak technology. Nevertheless, Lei Slocum
states one of the causes why firms participate the strategic alliance is to establish their competitive benefit in the
worldwide market
Das [6] argue Alliance performance is defined as the level to which both partner companies attain their
strategic goals in an alliance. On the other hand, performance is defined as the focal partner's perception of the
level to which the alliance has been effective in achieving its predetermined purposes and targets. Type of
alliance is not restricted to a special function (e.g. joint bids), but a more general valuation of performance is
suitable. In addition, the alliance company may have adversity tracing quantitative performance indicators [2].
Therefore, the focal company may be preferable able to create a subjective valuation as to how well the alliance
has attained the targets compatible to focal company. Both qualitative and quantitative alliance performance has
been used in the literature. Misra et al [22]; Mohr [24]; Cronin and Baker [5] argue the term of performance has
been based on particular, perceptible quantitative objectives such as, inventory turnover. Qualitative valuations
of the performance include the competence to complete required coordination [24], successful completion of
the exchanges or planning or the degree to which the alliance is evaluated as productive and worthwhile.
In the term of organizational competence and performance, subjective condition for performance are
frequently the best. They go move forward, and compare a number of models, to deduce that there is not a
single model of organizational competence and performance, nor should there be. Cameron and Whetten [3]
states the suitable performance indicator is one which combine the relevant target that compatible to the
particular context being explored.

Relational Capital:
Relational capital is a response to the inadequacies of contracts that enablles alliance partners to deal with
their bounded rationality and opportunism [32].
Gulati R & Kletter D [12] pointed that relational capital can be explained as the value of a company’s
connection of relationships with its customers, alliance members, suppliers, and internal sub-units. Relational
capital concerns the firm’s connections with its link of customers and its link of strategic partners and
stakeholders. Kale P, Singh [16] states that relational capital generates a fundamental for knowing and studying
how transfer among partners, in addation partners can expand the resources in their allianceconnection to
upgrade their business achivement. Therefore, contemporary business companies are handling their connections
network as assets.
Dyer & Singh [8] states relational capital in alliances be guided to a relational rent created in an
interchange relationship that cannot be created by one of company in insulation. On the other hand Dyer &
Singh; Wathne & Heide [35] generated by means of social network activities. Companies have been concentrate
to obtain a trust-based, jointly advantages, and long-term connections with inside and outside partners for
sustainable of the relationships that based on the goal interdependence theory and also thesocial exchange
theory. In addition, a high degree of relational capital is probable to cause relational stability between partner
companies. Social exchange theory places the interactions between people and organization at the core of
relationships. Just like any other relationship, communication is important for an alliance to be successful. It
allows information exchange among and between members in the firms within strategic alliances. Interestingly,
Ohmae notes that a strategic alliance is very much like a marriage; and the marriages are successful because of
trust, commitment, and communication between the partners. The strategic alliances with high levels of trust,
encourage partners to engage in more open communication, information sharing and willingness to take risks.
We acknowledge the following to be true. Communication affects trust and commitment; the more the partners
communicate, the more they trust and commitment (in a positive way) or distrust and less committed to their
partners (in a negative way). Trust affects communication and commitment; the partners are willing to
38 Dicky Hida Syahchari et al., 2016/ Journal of Applied Sciences Research. 12(5) May 2016, Pages: 35-40

communicate and commit if they trust each other; and Commitment affects trust and communication; the more
committed the partners are, the more they are willing to communicate and to trust their partners

Relational Exchange Theory:

The importance of relationship management in alliance cannot be denied. Krasner [17] stated that
“Partnerships aren’t failing because of legal or financial issues, but because of the relationship between the
companies” [17]. Clearly, partner relations could be one of the major problem causes of high failure rate due to
the poor alliance performance [29]. According to Doz (1996) relational factors and the partner’s behaviors are
critical to the success of strategic alliances. In order to increase the chances of successful partnership formation,
alliance managers are required to understand the nature of key relational success factors, i.e. trust and
commitment in the alliance formation process [30]. However, the antecedent of alliance performance from
behavioral perspective or relational approach is limited and fragmented [33].
The relational issues in alliances are related to project-specific relational aspects such as trust with
companies, conflict with companies, satisfaction with agreement, cooperation within venture, cultural between
alliance partners [33]. These issues could be categorized under processual factors which may affect alliance
performance [29]. One of the predominant theories that could explain how these issues affect the overall
alliance performance is Relational Exchange Theory by Macneil [21]. This theory attempts to explain the
creation, development and demise of social relationships. More specifically, relational exchange refers to the
exchange as the basic of cooperation between parties [20,21]. Relational exchange was firstly developed from a
continuum purely discrete transaction, i.e. one short transaction in which there is little or no relational contract
between the parties. For example, a purchase from a roadside vendor (one-short transaction) is developed to
relational exchange when the long-term orientation continues to exist and complex relationship occurs. This
relationship is developed into the systematic form such as franchise relationship and alliance relationship [20].
The relational exchange construct are divided into three main dimensions; namely solidarity, role integrity and
mutuality [20]. Solidarity is the relational exchange of each party that upholds the norm preserving the
relationship as long as the other is apparently willing to uphold it. Role Integrity refers to transactions exchange
between the parties enacting roles that reflect their promises and expectations [20]. Mutually refers to the
exchange of partners cooperate to create surplus which normally at this stage the parties involved may engage
in conflict over the division of that surplus [20].

Conceptualization and Operationalization of Relational Capital on Alliance Performance:

Gulati R and Kletter D [12] pointed that "relational capital can be explained as the value of a company’s
connection of relationships with its customers, alliance members, suppliers, and internal sub-units". Relational
capital concerns the firm’s connections with its link of customers and its link of strategic counterparts and
stakeholders. Kale P, Singh [16] states that relational capital generates a fundamental for knowing and studying
how transfer among counterparts, in addation counterparts can expand the resources in their allianceconnection
to upgrade their business achivement. Therefore, contemporary business companies are handling their
connections network as assets.
Dyer & Singh [8] state relational capital in alliances be guided to a relational rent created in an interchange
relationship that cannot be created by one of company in insulation On the other hand Dyer & Singh [8];
Wathne & Heide [35] generated by means of social network activities.
Companies have been concentrate to obtain a trust-based, jointly advantages, and long-term connections
with inside and outside partners for sustainable of the relationships that based on the goal interdependence
theory and also thesocial exchange theory. In addition, a high degree of relational capital is probable to cause
relational stability between counterpart companies.
In this study measure of the relational capital is the extent of trust, communication and commitment
associated with the alliance relationships.

Relationship Between Relational Capital And Alliance Performance:

The positive effects can be indirect and mediated by social capital on Alliance performance found by
Kwon, 2008 In a equal finding that the relationship capital can mediate the relationship between alliance
performance and inter-firm variety/suitability, which conducted by.
According to Das and Teng [6], relational attributes are one of the explanations for strategic alliance
performance. Inter-firm trust and commitment have been found to be the critical factors in partner satisfaction
and they have a direct link with performance [37].
Certainly, without communication quality and participation, it is very difficult to achieve successful
partnerships since communication becomes critical in signaling future intentions of the partner firms [24].
According to Sambasivan et al,. [31], relational capital affects the relationship between interdependence and
strategic alliance outcomes. Based on the above arguments, we posit the following hypothesis:
H1:Relational Capital has positive affect on Alliance Performance.
39 Dicky Hida Syahchari et al., 2016/ Journal of Applied Sciences Research. 12(5) May 2016, Pages: 35-40

Research Framework of Study:

Based on the literature review and the proceeding discussions of the major concepts of relational capital
and its impact on alliance performance, a conceptual framework for this study was developed as in Figure 1

Fig. 1: Theoretical Framework

This study will analyze the relational capital perceptions and alliance performance perceptions of
construction companies in Indonesia. A systematic organizations collection of data from partner firms will be
operationalized using interviews and structured questions to tap opinions and perceptions of partners on the
subject discussed above.

Conclusion:
The aim this study is to examine and verify empirically the impact of Relational Capital on alliance
performance in construction companies in Indonesia. This study hopes to know whether Relational Capital is a
vital factor for alliance performace in Indonesia especially in the construction industry.
According the theoretical review, the significant of relational capital plays an important role in business
environment. Relational capital through the angle of aliance performance is able to preserve long-term
cooperation between partner involve in alliance.
Building long-term company gain and assign the expenses of operation, it should needs a good relationship
between partners. Therefore, this study appear to present with the question ‘Does there significant important of
relational capital toward alliance performance?’ especially in construction industry in Indonesia. In order to
guarantee the survival of alliance performance, long-term cooperation means the alliance companies will have
additional competitive advantage compared to others through employ of relational capital.

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