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Behavioral Factors in Strategic AlliancesPurnendu Mandal

Dale H. ShaoMarshall University, shaod@marshall.edu

Chong W. KimMarshall University, kim@marshall.edu

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Recommended CitationMandal, Pernendu, Dale H. Shao, and Chong Kim. Encyclopedia of Information Science and Technology. Vol. 1. 2005.

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Acquisitions Editor: Mehdi Khosrow-PourAsst. Acquisitions Editor: Renée DaviesSenior Managing Editor: Jan TraversManaging Editor: Amanda AppicelloDevelopment Editor: Michele RossiCopy Editors: Amanda Appicello, Elizabeth Arneson, Maria Boyer, Alana Bubnis, Jane Conley, Renée Davies,

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Purnendu MandalLamar University, USA

Dale H. ShaoMarshall University, USA

Chong W. KimMarshall University, USA

Copyright © 2005, Idea Group Inc., distributing in print or electronic forms without written permission of IGI is prohibited.

STRATEGIC ALLIANCE

Recently, there has been a growing trend among informa-tion technology (IT) organizations to form strategic alli-ances to increase competitive advantages in the market-place. For an organization to exploit the benefits of alli-ances, human factors and IT factors must be among thebasic components of any strategic plan (Kemeny &Yanowitz, 2000). Despite the obvious need to considerhuman and IT factors when developing a long-term plan,many strategic plans developed in the past that led toalliances have failed to consider human aspects. Examplesof failure in the implementation of IT systems due to thelack of consideration of human factors have come to lightin recent years, but a comprehensive study of the consid-eration of human factors in the development of strategicalliances resulting in a major IT system alignment for afirm, is still rare in IT literature.

A successful alliance should not imply an impositionof one organization’s culture over another. It is not arequirement that both organizations change the socialstructure, but the unique personalities of the two culturesshould be considered when combining the resources oftwo organizations. The new organization should create anew working culture that brings together the best ele-ments of each (Rule & Keown, 1998). Unfortunately, the

creation of a new culture is rarely practiced, as alliancesare often viewed solely from a financial perspective,leaving the human issues as something to be dealt withlater, and many times with a minimal amount of effort. Thecreation of a new culture involves operations, sales,human resources management, technology, and struc-ture, as well as many other internal and external entitiesand forces. It is undoubtedly an expensive and time-consuming endeavor to create a new working culture, butin the end, more value is created, and employees are morecontent and productive.

Strategic alliances are “co-operative relationshipsbetween two or more independent organizations, de-signed to achieve mutually beneficial business goals foras long as is economically viable” (Paris & Sasson, 2002).The main purpose of an alliance is to create one or moreadvantages such as product integration, product distri-bution, or product extension (Pearlson, 2001). In strategicalliances, information resources of different organiza-tions require coordination over extended periods of time.

Bronder and Pritzl (1992) suggest that a strategicalliance exists when the value chains between at least twoorganizations (with compatible goals) are combined forthe purpose of sustaining and/or achieving significantlycompetitive advantage. They derived four critical phasesof a strategic alliance; namely, strategic decision for an

Figure 1. Strategic alliance phases (Bronder& Pritzel, 1992)

Start Finish

- Situation Analysis - Identification of Potential - Evaluation of Shareholder Value Potential

- Field of Cooperation - Intensity of Cooperation - Networking Opportunities

- Fundamental Fit - Strategic Fit - Cultural Fit

- Contract Negotiation - Coordination Interface - Learning and Adaptation

Strategic Decision

Alliance Configuration

Partner Selection

Alliance Management

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Behavioral Factors in Strategic Alliances

alliance, alliance configuration, partner selection, andalliance management, as shown in Figure 1. These fourphases provide the basis for a continuous developmentand review of the strategic alliance, which increases thelikelihood of the venture’s success.

Typically, the first phase of a strategic alliance is thedecision to go forward with the development of a strategicalliance (i.e., it asks this question: Is this strategic alliancejustified?). Phase II (Configuration of a Strategic Alli-ance) focuses on setting-up the alliance’s structure. PhaseIII (Partner Selection) is one of the most important successfactors of the strategic alliance. This phase addresseswhether the firms that are considering the partnershiphave characteristics that are conducive to a successfulstrategic alliance. Some of the concerns in this phase arefundamental fit (e.g., Do the company’s activities andexpertise complement each other in a way that increasesvalue potential?), strategic fit (e.g., Do strategic goalstructures match?), and cultural fit (e.g., Is there a readi-ness to accept the geographically and internally grownculture of the partners?). The final phase, Phase IV, isconcerned with managing a strategic alliance (e.g., Howdo partners continually manage, evaluate, and negotiatewithin the alliance to increase the odds of continuedsuccess?). People-related issues are the major focus ofthis phase.

Before an organization commits to a strategic alliance,it should have a management plan developed to deal withthe human behavior aspects of the newly created organi-zation. Parise and Sasson (2002) discuss the knowledgemanagement practices that organizations should followwhen dealing with a strategic alliance. They break downthe creation of a strategic alliance into three major phases.

• Find: making alliance strategy decisions and screen-ing and selecting potential partners.

• Design: structuring and negotiating an agreementwith the partners.

• Manage: developing an effective working environ-ment with the partner to facilitate the completion ofthe actual work. This phase includes collecting datarelating to performance and feedback from bothpartners on how they think the alliance is progress-ing. Managing relationships and maintaining trustare particularly critical during the Manage Phase.

The application of proper knowledge managementtechniques is especially important for a successful alli-ance (Parise & Sasson, 2002). There must be a systematicapproach for capturing, codifying, and sharing informa-tion and knowledge; a focus on building social capital toenable collaboration among people and communities; anemphasis on learning and training; and a priority on

leveraging knowledge and expertise in work practices.Parise and Sasson (2002) suggest a list of the buildingblocks of alliance management. Four of these buildingblocks relate specifically to human behavior factors.

• Social Capital: Building trust and communicationchannels that allow unambiguous discussions withthe partner is a necessary ingredient for an effectiverelationship.

• Communities: Communities of practice allow for thesharing of personal experiences and tacit knowl-edge based on individuals with a common interestor practice. Communities can be realized by usingelectronic meeting rooms, forums, or more formalalliance group structures.

• Training: Companies that rely heavily on strategicalliances should provide formal training for manag-ers and team members in their strategic plans. Pro-viding staff with the skills necessary to exist in a newsystem (in this case, a strategic alliance) is oftenoverlooked in the development of the new system.

• Formal Processes and Programs: Alliance know-how should be institutionalized. An example of thisis Eli Lilly, a leading pharmaceutical firm, whichcreated a dedicated organization called the Office ofAlliance Management, which was responsible foralliance management.

The literature on strategic alliances shows that orga-nizations that use alliance management techniques toprovide for stress and knowledge management are moresuccessful than those who do not. Leveraging knowledgemanagement across a company’s strategic alliance is acritical success factor for partnering companies. Thegreatest contributors to knowledge management in anorganization are the information-literate knowledge work-ers—mainly the IT professionals.

CULTURAL ASPECTS IN ALLIANCES

Alliances among firms would naturally result in manyorganizational changes. Leavitt (1965) concluded thatthere are four types of interacting variables to considerwhen dealing with organizational change, especially inlarge organizations. These variables are task variables,structural variables, technological variables, and humanvariables. He proposed structural, technological, andpeople approaches to organizational changes, which de-rive from interactions among these four variables.

The four variables are highly interdependent so thata change in any one variable usually results in compen-satory changes in other variables. The introduction of

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Behavioral Factors in Strategic Alliances

�new technological tools (e.g., computers) may causechanges in structure (communication system), changes inpeople (their skills and attitudes), and changes in perfor-mance and tasks. Therefore, it is imperative to consider allareas that might be affected when a company plans tointroduce change to an organization.

Pre-existing people-related problems at a target com-pany often cause many alliances to fail to reach their fullfinancial and strategic potential. Numerous case studiesreport failure of alliances due to a lack of consideration forthe potential impact of behavioral and structural aspects(Numerof & Abrams, 2000). To build an effective alliance,institutions must pay particularly close attention to cul-tural, personality, and structural incompatibilities. Lead-ers from alliance institutions need to recognize the person-ality differences in their managers, as well as the demandsrequired by the stage of the organizational life cycle stagethat their organization is in (Segil, 2000). It has also beendemonstrated that successful alliance partners share manystrong similarities in performance and relationships (e.g.,people skills) (Whipple & Frankel, 2000). Understandingpotential incompatibilities gives institutions that are con-templating alliances a solid foundation on which to explorethe feasibility of joint projects. It also increases the likeli-hood that the alliance will operate successfully (Whipple& Frankel, 2000).

Successful alliances are impeded when the culture ofone or both associations highly differs in value. “Highcontrol value” is inconsistent with tolerance for ambiguityand the “willingness to compromise” often required forstrategic alliances. Maron and VanBremen (1999) suggestthe use of William Bridges’ Organizational Character In-dex, which can be a useful tool for analyzing the culturaldifferences between two associations to determine howwell they might work together. It promotes better under-standing between two associations; it fosters an apprecia-tion for what both partners could bring to an alliance; andit identifies underdeveloped qualities in both associationsthat could inhibit the success of an alliance.

IT ISSUES IN ALLIANCES

Long-term IT considerations, such as IT architecture, isanother major consideration when developing a strategicalliance. A strategic consideration, such as new alliances,requires the visioning of a different IT architecture.Applegate, McFarlan, and McKenney (1999) view IT ar-chitecture as an overall picture of the range of technicaloptions available to a firm, as well as standard businessoptions. “Just as the blueprint of a building’s architectureindicates not only the structure’s design but how every-thing – from plumbing and heating systems, to the flow of

traffic within the building – fits and works together, theblueprint of a firm’s IT architecture defines the technicalcomputing, information management and communica-tions platform” (p. 209).

Figure 2 brings out the dynamic nature of the ITarchitecture development process. The technology com-ponent, shown by the dotted oval, is concerned withdesign, deployment, and how it is used. This part is thecore of IT architecture, and a large proportion of ITprofessionals’ time is devoted to these activities. Con-sideration of business options that feed to various tech-nology options is a higher-level activity in the IT archi-tecture development process. Business options such asstrategic all iances, mergers and acquisit ions,outsourcing, diversification, and so forth are influencedby major internal, as well as external, factors such ascurrent business practices, business opportunities, andorganizational strategy. There is a direct link betweentechnology and organizational strategy. The technology(with its operational and technical settings) exerts astrong influence on the organization’s future strategicdirection. Thus, one can observe a close link betweentechnical and other business factors, and, like ever chang-ing business, the IT architecture is a dynamically evolv-ing phenomenon (see Figure 2 through connecting lines).

An alliance can exist between any types of organiza-tions. For example, a telecommunications organizationcould form an alliance for international joint ventures, oran alliance could be established between a bankingorganization and an IT supplier. The notion of develop-ing a strategic alliance suggests that an organization’sperformance can be significantly improved through joint,mutually dependent action. For a strategic alliance to besuccessful, business partners must follow a structuredapproach to developing their alliances to ensure that allmajor items have been addressed, and should include, aspart of this process, strategic planning, communication,efficient and effective decision-making, performanceevaluation, relationship structure, and education andtraining.

Strategists have often suggested that organizationsshould consider entering into similar or somewhat re-lated market sectors to broaden their product/serviceportfolios (Henderson & Clark, 1990; Markides &Williamson, 1997). Both of the dimensions of market(customer and product, Ansoff, 1986) in a related marketcan be identified easily and strategies formulated fordeployment. The main advantage of adopting such astrategy is that an organization can easily use its compe-tencies and strategic assets in generating a strategiccompetitive advantage (Markides & Williamson, 1997).Determining the design and the requirements of a newinformation system (IS) is a relatively simple task. In

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Behavioral Factors in Strategic Alliances

contrast, diversification into a significantly differentmarket for an IT/IS organization is a very challenging taskthat requires considerable evaluation of the IT infrastruc-ture and human relations.

CONCLUSION

Strategic alliance is a complex business decision thatinvolves careful consideration of business processes, ITarchitecture, human issues, and many other factors. Overemphasizing one factor or downplaying another may leadto a compromising situation that can have seriouslynegative consequences for both of the organizationsinvolved. Behavioral issues in their broader sense impactall phases of a strategic alliance. For IT professionals, theunderstanding of behavioral or human issues is of criticalimportance in the analysis and design of the system thatwill support a strategic alliance. The new system must takeinto account not only traditional system design consid-erations, but knowledge management and its growingimportance in system design, which increases organiza-tional effectiveness and ensures the firm’s long-termexistence.

REFERENCES

Ansoff, I.H. (1986). Corporate strategy. London: Sidwickand Jackson.

Applegate, L.M., McFarlan, F.W., & McKenney, J.L.(1999). Corporate information systems management: Textand cases. Boston: Irwin McGraw-Hill.

Bronder, C., & Pritzl, R. (1992). Developing strategicalliances: A successful framework for cooperation. Euro-pean Management Journal, 10(4), 412-420.

Henderson, R., & Clark, K. (1990). Architectural innova-tion: The reconfiguration of existing product technolo-gies and the failure of established firms. AdministrativeScience Quarterly, 35, 9-30.

Kemeny, J.M., & Yanowitz, J. (2000, March). Strategicalliances: Finding the hidden leverage for success. Re-flections, 1(3), 62-71.

Leavitt, H.J. (1965). Applied organizational change inindustry: Structural, technological and humanistic ap-proaches. In James March (Ed.), Handbook of organiza-tions (pp. 1144-1170). Randy, McNally & Company.

Figure 2. Forces affecting overall IT architecture

Cultural Issues

Technology

Design - Platform - Systems - Networks

Use - Computing - Communications

Technology Options - Integration Level - Level of Technology

Business Options - Strategic alliance - Diversification - Outsourcing

Business Opportunities

Current Business Practices

Organizational Strategy

Deployment - Solution and Services - ERP, etc - Networks

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�Markides, C.C., & Williamson, P.J. (1997). Related diver-sification, core competencies and corporate performance.In A. Cambell, & K. Sommer Luchs (Eds.), Core compe-tency-based strategy (pp. 96-122). London: InternationalThomson Business Press.

Maron, R.M., & VanBremen, L. (1999). The influence oforganizational culture on strategic alliances. AssociationManagement, 51(4), 86-92.

Numerof, R.E., & Abrams, M.N. (2000). Subtle conflictsthat wreck merger visions. Mergers and Acquisitions,35(3), 28-30.

Parise, S., & Sasson, L. (2002, March/April). Leveragingknowledge management across strategic alliances. IveyBusiness Journal, 41-47.

Pearlson, K.E. (2001). Managing and using informationsystems. New York: John Wiley & Sons.

Rule, E. & Keown, S. (1998, September/October). Compe-tencies of high-performing strategic alliances. Strategy &Leadership, 26(4), 36-38.

Segil, L. (2000). Understanding life cycle differences.Association Management, 52(8), 32-33.

Whipple, J., & Frankel, R. (2000, Summer). Strategic alli-ance success factors. The Journal of Supply Chain Man-agement: A Global Review of Purchasing and Supply, 21-28.

KEY TERMS

Alliance Management: Allows two different organi-zations to effectively work together and combine re-sources, which is expected to bring benefits to bothorganizations.

Culture: A societal manifestation influenced by tra-ditions, religion, history, acceptable behavior, and manyother factors.

IT Strategic Alliance: A broad agreement betweenbusiness partners to operate cooperatively, usually facili-tated by IT systems.

IT Architecture: A conceptual framework of IT in anorganization that supports business processes. IT in-cludes hardware, software, telecommunications, data-base management, and other information processing tech-nologies used in computer-based information systems.

Information-Literate Knowledge Worker: A workerwho knows what information is needed, knows how andwhere to obtain that information, understands the mean-ing of information, and can act based on the informationto help the organization achieve its greatest advantage.

Strategic Planning: Corporate long-term planningthat ensures the existence of an organization.