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Chapter 11

Strategic Alliances and Knowledge Management

Strategies: A Case Study

Mario J. Donate-ManzanaresUniversity of Castilla-La Mancha, Spain

Fátima Guadamillas-GómezUniversity of Castilla-La Mancha, Spain

Jesús D. Sánchez de PabloUniversity of Castilla-La Mancha, Spain

abstract

Managing organizational knowledge in alliances implies establishing the best possible strategic de-sign to create, acquire, maintain, transfer, and apply organizational knowledge developed between the partners (or acquired from partners) in order to achieve competitive goals. In this chapter, the role of knowledge management strategy (KMS) in strategic alliances is analyzed in a technology-intensive company. Focusing on this, the importance of alliances for technological companies and the necessity of designing suitable KMSs in alliances–in terms of establishing objectives, knowledge management tools, and support systems–are explained first of all. This is followed by the analysis of a case study of KMS in the strategic alliances of a company currently developing different businesses in technological settings. Finally, a number of conclusions are discussed, based on how the implementation aspects concerning KMS in strategic alliances have been managed and the way they have contributed to the attainment of the company’s objectives and goals.

DOI: 10.4018/978-1-60566-348-7.ch011

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Strategic Alliances and Knowledge Management Strategies

1. IntroductIon

The growth of alliances has generated considerable interest in this topic among both academics and practitioners. Strategic management literature has recognized alliances as a source for firms to acquire and improve their knowledge-based capabilities in current innovation-intensive environments (Oxley and Sampson, 2004). Thus, alliances can act as mechanism for firms to develop a competi-tive advantage over their rivals, outperforming them by means of the company’s proven access to economies of scope and scale, complementary capabilities and knowledge, the possibility of competing in new markets, the improvement of their learning capacity, or the sharing of costs and risks of R&D projects, among other reasons (Saxton, 1997; Ireland, Hitt and Vaidyanath, 2002; Luo, 2008).

Knowledge Management Strategy (KMS) constitutes one of the main factors in order for firms to achieve these objectives and build col-laborative advantages through strategic alliances. Managing organizational knowledge in alliances involves working on the best possible strategic design to create, acquire, maintain, transfer and apply organizational knowledge developed or acquired amongst the partners in order to achieve competitive goals (Guadamillas, Donate and Sánchez de Pablo, 2006).

A clear relationship exists between strategic alliances and the KMS of firms. Lane and Lubat-kin (1998) and Stuart (2000) contend the main objective of partners in a technological alliance is the inter-organizational learning, as a conse-quence of the difficulty faced by each partner in terms of solving their environmental problems internally. Inter-organizational learning is based on the absorptive capacity of the company, which represents its ability to value, assimilate and use the external (acquired) new knowledge (Cohen and Levinthal, 1990; Lane and Lubatkin, 1998). Ab-sorptive capacity depends on the path-dependent investment in R&D and technology developed

by the company, so the more innovative the firm is, the more likely it is to invest in alliances with a view to inter-firm learning. However, in order for such learning to take place, an adequate KMS has to be developed in order to effectively manage and exploit the flow of knowledge that is produced in the strategic alliance (Grant and Baden-Fuller, 2004). In doing so, this will speed up the development of innovation, thus making its implementation over a short period of time pos-sible, ultimately leading to important advantages for the firm whilst encouraging a superior level of learning at the same time (Stuart, 2000).

It is also important to remark on certain key organizational and technical aspects related to the role of KMS in the management of strategic alliances: the use of information technology (IT) and the systems that make the access to knowledge easier, the organizational culture that fosters innovation development and ethical and responsible behavior, and human resources (HR) practices. All of these make the establishment of a coherent structure for knowledge management in strategic alliances a complicated issue (Schmaltz, Hagenhoff and Kaspar, 2004).

Furthermore, there are other kinds of problems that arise in strategic alliances which make the effective development of collaborative activities and knowledge sharing complex. The first problem is both the specificity and tacitness of knowledge, meaning its effective storage and transfer are dif-ficult. Moreover, the distrust between partners and the cultural barriers in respect of collaboration imply certain reluctance on the part of companies to participate in alliances (Lane and Lubatkin, 1998; Ireland et al., 2002). Excessive technological and knowledge diversity (or similarity), for example, can be problematic insomuch as it gives rise to difficulties in terms of learning from partners (Lane and Lubatkin, 1998). Finally, the organizational form and the governance structure of the strategic alliance should be adapted to accomplish the alli-ance objectives and specific requirements of the companies involved.

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In this chapter, we attempt to analyze the KMS of companies involved in strategic alliances, and in particular, a number of aspects related both to the sharing and transmission of knowledge from the knowledge-based view of the firm. Thus, the role of technical and organizational factors in these processes will be analyzed in relation to culture, HR practices and the management of IT systems. The chapter will be structured as follows: first of all, the importance of KMS for individual companies in alliances in order to develop a collaborative advantage and obtain important returns on their R&D investment will be explained; secondly, we shall analyze the im-portance of organizational and strategic aspects that are involved in this process, stressing those factors that make the effective transmission and sharing of knowledge difficult.

Finally, the role of KMS oriented towards in-novation in strategic alliances will be analyzed in a Spanish company within a technology-intensive industry. This firm maintains cooperation agree-ments considered as being essential for knowledge creation and innovation development. Thus, the manner in which implementation aspects con-cerning KMS in strategic alliances have been managed and the way they have contributed to the attainment of their strategic objectives shall be explained.

2. knowledge ManageMent strategIes In strategIc allIances

As Inkpen (2000) points out, learning in a strategic alliance consists of gaining access to the partner’s knowledge in order to combine it with the par-ticular assets of the firm to be used in business activities. Moreover, Inkpen and Beamish (1997) contend that while the establishment of an alliance permits access to knowledge between partners, the transfer of knowledge which enables learning will only occur when certain conditions that make

this possible are in place. Furthermore, owing to tacit and non-observable knowledge being more valuable in terms of strategic content (Spender, 1996), firms may establish specific mechanisms to acquire this kind of knowledge, all of which is difficult and costly when put into practice.

Hamel (1991), Khanna, Gulati and Nohria (1998), Lane and Lubatkin (1998) and Stuart (2000) argue that the main objective of partners in strategic alliances is inter-organizational learning as a consequence of the difficulties faced by firms when attempting to internally resolve problems of differing natures for which specific knowledge is required. Hence, learning can be based on a wide variety of aspects such as market characteristics, operational problems, technological capabilities, management abilities and so on. On the other hand, the formal alliance structure can be considered as a “laboratory” for the organizational learn-ing of each partner where the firm’s knowledge pool is created and developed (Inkpen, 1998). In order to make this possible, learning has to be an important aspect of the strategic intention of partners who should also have skills to learn and integrate the new knowledge into their current knowledge base.

In addition to this, certain elements are required to make the advantages that have been gained through learning and knowledge transfer effective for partners. Mesquita, Anand and Brush (2008) point out the following: (1) knowledge transfer has to be agreed; (2) assets and capabilities have to be specifically developed through the alliance; (3) a suitable governance structure has to be developed in order to protect specific assets and coordinate the use of complementary resources and capabilities.

Firms establish different kinds of objectives and they can try to attain them through the devel-opment of diverse types of strategic alternatives. The KMS of a firm is based on the best possible strategic design in order to create, maintain, trans-fer and apply organizational knowledge to achieve competitive goals (Earl, 2001; Maier and Remus,

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2002; Choi and Lee, 2003; Garavelli et al., 2004; Donate and Guadamillas, 2007). The development of a KMS includes all the operations related to the creation, acquisition, integration, storage, trans-mission, protection and application of knowledge (Day and Wendler, 1998). In relation to strategic alliances, KMS is oriented to manage those flows of knowledge which are linked to exploitation and exploration processes, depending on the goals and scope of the established cooperation agreement. Based on the works of Donate and Guadamillas (2007) and Earl (2001), four dimensions make up the KMS of a company: (1) Knowledge manage-ment (KM) conception; (2) KMS objectives; (3) KM practices and tools; (4) KM support systems, all of which shall be analysed next.

kM concept

Strategic alliances enable the firm to acquire and/or exploit the knowledge of one or more partners in order to attain specific objectives and goals. In general terms, the KM concept refers to the company’s strategic orientation in respect of knowledge, which is reflected in the way the board of directors understand the potential con-tribution of KM for the firm. For example, they could understand that KM is just related to the use of information technologies or, conversely, be aware that it is a wider concept that includes both human and technical aspects (Huplic, Pouloudi and Rzevski, 2002). In relation to strategic alliances, it would express the main role that KM plays in the inter-organizational system. Obviously, the KM concept should be consistent with the alliance objectives because the more coherent they are, the more effective the final result of the cooperation agreement will be.

kMs objectives

This dimension could be understood as a com-pany’s orientation towards the solution of the knowledge “gap” in different operative and

strategic areas within the organization: quality problems, efficiency searching, new product de-velopment, solutions to customer service failures, etc. (Zack, 1999; Earl, 2001: 229). In general, organizations attach greater importance to the accomplishment of certain objectives over oth-ers. Moreover, managers will consider that KS can contribute towards the fulfilment of this to a greater or a lesser degree. This fact can influ-ence the way KM tools are designed and used in order to accomplish these objectives (Davenport, DeLong and Beers, 1998). In relation to alliances, objectives are established to acquire, explore or exploit partner knowledge, thus influencing the KM tools, the governance structure of the alliance and its implementation support systems. Clearly, all these aspects will differ depending on the alliance goals, as pursuing the improvement of technological capabilities as an objective is not the same as improving the level of the efficiency in the manufacturing area, for example.

kM tools

These are the specific methods or initiatives used by the organization to support the creation, transfer, storage, retrieval and application of knowledge, and they can include technical as well as human components (Alavi and Leidner, 2001; Alavi and Tiwana, 2003). As Davenport et al. (1998: 44-45) point out, these KM initiatives specifically seek to create knowledge reposito-ries, to improve knowledge access and transfer or manage knowledge as an asset –including its protection. In addition, the organization could focus on several procedures in a comprehensive manner, or on using some of its tools in a specific way. In an alliance, the main method for a partner to generate knowledge is through its acquisition, either on a voluntary basis or through learning by doing. Once the knowledge is created, mechanisms may be established to transfer knowledge from one location to another. Moreover, the storage of explicit knowledge can constitute a necessity, for

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which IT-based instruments built on a common basis could be very useful. Some initiatives might also be developed to apply the alliance knowledge, such as interdisciplinary teams or specific instru-ments based on IT, such as expert systems (Alavi and Tiwana, 2003). Finally, knowledge protection in the alliance is an important issue, although in some cases partners can protect their knowledge by establishing clauses in contracts, designing specific mechanisms (e.g. passwords, firewalls) or relying on the establishment of cooperation agreements in the future (Inkpen, 1998).

Implementation support systems

These are organizational aspects that should make the development of KM processes easier, such as a “knowledge-focused” culture, HR practices, flexible structures, and technical systems. Culture should promote knowledge exchange and sharing in order to allow for continual innovation and change (Nonaka, 1994).

Moreover, there are a number of essential changes that KM initiatives imply in HR prac-tices to make implementation possible. Thus, those related to the promotion of access to or availability of the knowledge of experts, the development of work teams and communities of practices, or incentive methods for monitoring and controlling process systems, among others, stand out as important elements in accomplishing the strategic –knowledge– objectives of alliance partners. The implementation of a KMS should also be supported by a suitable structure, which encourages the attainment of objectives and the development of knowledge processes in the co-operation agreement. Finally, technical systems refer to IT-based tools used for developing (and making easier) certain knowledge processes, such as data bases, e-learning tools, intranets or other communication instruments among partners. In general, the promotion of inter-dependence among partners is an essential aspect in order to improve the impact of the KMS on the alliance

performance. Thus, inter-dependence has a key role by promoting cooperation (Dyer, 1997), generating synergies (Saxton, 1997), encouraging reciprocity, and leveraging commitment to and trust in the alliance1.

One of the most relevant aspects in the KMS development process is the design of the imple-mentation support systems, which are referred to technical, human and organizational elements of KM in relation to the management of the alliance. Owing to their importance, all these aspects will be analyzed in more detail next.

3. technIcal and organIzatIonal aspects of kMs In strategIc allIances

3.1. culture

Culture can be understood as a collective thinking that identifies members in a group or category (Hofstede, 1991; Rodríguez and Wilson, 2002). In order for knowledge transfer that is produced among partners to generate learning, it is necessary that a certain difference between their knowledge bases exists (Lane and Lubatkin, 1998). At the same time, the relationship has to be close enough so for an appropriate transfer of knowledge to take place (Mowery et al., 1998). Thus, for learning to be effective, a balance concerning these two aspects has to be achieved; when the cultural dis-tance is greater, the novelty in terms of knowledge also increases albeit this also impacts on the com-munication capacity to transfer that information or knowledge by reducing it. Therefore, as learning is being developed, partners capacities tend to converge and knowledge transfer is considered to be a critical aspect.

As the alliance evolves, a common culture based on shared values is created which generates trust and supports mutual learning among part-ners through which new knowledge and shared capabilities are created, all of which increases the

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alliance value (Inkpen, 1998). That said, culture is related to trust, as cultural rules and values influence its development over the course of time. In this sense, it is necessary to understand the partner’s culture, by trying to identify which values are more beneficial to the alliance, along with those aspects that require a greater level of control. Moreover, trust and cultural adjustment are both interdependent elements, as poor cultural adjustment may produce suspicions among com-panies and form a significant barrier in the way of building up mutual trust (Sampson, 2005).

Another important aspect concerning culture in strategic alliances is its link with HR management. In this sense, HR has to contribute in building a shared culture that strengthens the alliance and encourages employees to accept common objec-tives in addition to mutual identification with a common project, making the coordination and control processes easier in the domain of the cooperation agreement. This common culture reduces uncertainty, promotes the endeavors of partners, creates respect for the basic values of each partner, generates interdependence and facilitates conflict resolution (Guadamillas et al., 2006). In order to make this possible, information sharing, transparency, trust and leadership –people acting as an intermediary, managing information flows– are necessary (Sampson, 2005).

3.2. hr Management

Quinn, Anderson and Finkelstein (1996) point out a number of changes that KM implies for HR management. Thus, practices that support the development of knowledge processes stand out, such as the development of teams and communi-ties of practice, control based on the assessment of processes instead of results, or the incentives (monetary and non-monetary) that are designed in order to share knowledge.

HR practices in an alliance may have a sig-nificant influence on its success because it can contribute to making the adjustment between

corporate partners’ cultures and specific HR practices of the companies easier (the establish-ment of common objectives and practices), offer more effective control mechanisms, promote inter-organizational learning, and encourage the selection and development of teams that are able to share knowledge and work in an effective manner for the organization through collaboration. Thus HR management could contribute towards increasing productivity of the alliance and improve the abilities of partners in order to maximize the value of the cooperation agreement.

In addition, an effort must be made within the parameters of the alliance to offer employ-ees the kind of in-house training that cannot be obtained within the labor market, so as not to distract from the main objective at the heart of the agreement, knowledge transfer (Mesquita et al., 2008). In general terms, capabilities which must be learnt should be incorportated into specific inter-organizational government mechanisms or covered under special modes of knowledge transfer (Mesquita et al., 2008).

HR management should, therefore, be de-signed to make the knowledge transfer among alliance partners easier, improve communication and promote trust, especially in terms of the part-ner-partner relationship (in which the search and selection processes for a partner are included), partner-alliance relationships (which seeks a coherent and structural integration of knowledge) and the search for an optimal management of the asymmetries of the partners in relation to culture, vision and values. The main HR practices that promote knowledge transfer and organizational learning are: strategy and procedures training; development of a common culture for the alli-ance; promotion of the work teams; development of employees’ careers; programs which cater for increased work experience at various locations, functions and countries through the transfer of explicit knowledge; development of handbooks for employee training; development of specific

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databases and electronic systems to gather, share and apply knowledge in the alliance domain.

The most important aspects of HR practices in the different stages of the development of a strategic alliance shall be addressed next.

The search for an alliance partner. The main objective is to identify potential partners in keeping with the objectives of the KMS –exploration or exploitation, depending on the knowledge gaps the company wishes to cover– and analyze the partner/s strategic reasons in wanting to establish the cooperation agreement. Thus, certain aspects have to be considered in relation to partners, such as cultural and management style differences, their objectives and motives, the capabilities and resources they will contribute to the alliance and their previous alliance experience and results. The main HR issue in this previous stage will be the planning of HR practices in relation to KMS objectives for the strategic alliance.

Alliance development. The main aspects to analyze at this stage are the physical site of the alliance, the design of the alliance structure and the recruitment and selection of the alliance managers in line with goals and objectives. In the most complex alliance types (for example, a joint venture), negotiation among partners will be necessary to design the HR policies. In more simple alliances (for example, an alliance established through a contract) responsibilities are better defined, making it is easier for each partner to design their own policies concerning the alliance (recruitment, selection, contracting and job specification).

Alliance implementation. At this stage, vi-sion, mission, values, strategies and structures have to be assessed. Partners also need the support and development of suitable HR mechanisms that al-low them to learn, share and exploit knowledge in keeping with goals and objectives that have been established under the KMS. They should design specific actions such as: persons in charge of tasks, abilities and skills necessaries to carry out those tasks, assessment and monitoring systems,

career planning, support to employees, training and incentives for knowledge sharing.

Control and assessment. Finally, the control and assessment of the attainment of knowledge objectives is necessary in order to evaluate whether the alliance is producing benefits (and/or prob-lems) for all the alliance partners. An individual (company) assessment also has to be made to evaluate the contribution and pay-offs that have been obtained by the company. Good results from the alliance will imply that partners have been capable of learning from each other and social capital and new knowledge will have been cre-ated. If problems arise, a new perspective will be required in which KMS objectives, KM concept, tools and implementation systems will have to be aligned to ensure that flows of knowledge go in the right direction.

Effective HR management should, therefore, contribute to the improvement of learning pro-cesses, create and exploit synergies and efficiency, and support the development of knowledge pro-cesses. In order to accomplish these objectives, critical aspects and potential HR issues derived from the cooperation agreement that the firm has to consider in relation to its KMS are:

1. Employees are reluctant to changes. In this sense, problems will depend on the alliance type (obviously, some agreements will imply more changes than others) and motives for the companies to establish the cooperation agreement (e.g., exploration vs. exploitation). Some motivation systems and information transparency are required in order to make the implementation and acceptance of changes easier.

2. Owing to the independence that each firm maintains, partners should make the HR strategy that is developed in individual companies compatible with the HR strategy which is applied to the alliance, because some problems could arise in relation to employees, such as:

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a. Company employees might perceive that the treatment given to employees connected with the alliance is better concerning certain HR practices: in-centives, salary, social benefits, etc.

b. Alliance employees might consider that the HR strategy is better for them than the strategy which is applied in their companies. Thus, when the alliance finishes or his/her role has finished and the employee returns to the company, a period of adjustment will be neces-sary to ensure that the employee’s performance is not affected by such changes.

c. Lack or difficulties of adaptation to new work tasks that are developed in the ambit of the alliance, mainly as a consequence of cultural differences in relation to individual companies.

3. In some cases certain situations could arise, in which company executives might perceive their jobs as being threatened if there is a possibility of substituting certain tasks (e.g., outsourcing) by carrying them out in the am-bit of the cooperation agreement. Therefore, a feeling of insecurity might creep in and motivation could drop, all of which would affect firm performance.

4. Owing to the temporary nature of alliances, HR managers have to make an effort to moti-vate employees involved with the alliance to ensure they work properly. In this stage, the generation of an atmosphere that encourages innovation and knowledge exchange is an essential aspect; all the employees should know the objectives and meaning of the agreement and the positive and negative effects on their current situation.

5. The assignment of executives to the alliance. The rotation of executives linked to the agreement is a sensible manner in which to operate, not only on the basis of organiza-tional learning but also by way of avoiding

excessive dependence of a specific person in certain aspects of the KMS for the strategic alliance.

6. Recruitment and selection of the rest of employees involved in the alliance. Personal recruitment may be carried out by each of the companies (partners) or jointly, taking into account the alliance features. Sometimes the personnel selected for the alliance are not suitable or some employees might be disappointed by the fact that they have not been selected to form part of the alliance personnel.

7. Controversies over reward and salary sys-tems. Incentive systems should be the same for the employees who are participating in the alliance, irrespective of what company they come from and whether they are work-ing exclusively on the agreement or not. Nevertheless, certain problems related to rewards and incentives, such as justice and equity, could arise. In an attempt to avoid issues such as these, the design and establish-ment of a committee made up of members from all of the partnerships is advisable in order to ensure that the incentives are paid as a result of the contribution to the alliance objectives without considering personal aspects (e.g., hierarchical position).

3.3. It systems

IT can play a critical role as a supportive tool in alliances and they can be said to help to explain the fast growth of networks in the last few years (Gulati et al., 2000). The utility of IT can be considerable in the management of some of the more important tasks of the agreement, such as the transmission and storage of knowledge and the outcome of monitoring of activities.

Strategic alliances reduce transaction hazards because of trust generated among partners. In this sense, IT tools permit the storage of information about partners and thus, diminish organizational

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asymmetries. In addition to this, they reduce the loss of information resources in the network (Clemons and Row, 1992). At the same time, IT tools also contribute to leverage the value cre-ated in alliances through partners’ joint use of design, engineering or computer assistance tools in production. In this case, logic is a by-product of the advantages of synergy gained through the concentration of each partner on their core resources and capabilities –i.e., areas that they know how to make better.

IT tools are a critical aspect of the activites of organizational knowledge management –knowl-edge and information access, transfer, sharing and storage. IT tools play a critical role in the manage-ment of the organizational knowledge owing to the fact that knowledge, under certain conditions (i.e., codification), can be treated as an object that can be divided up in modules (structured), gathered

and transferred (Zander and Kogut, 1995; Sanchez and Mahoney, 1996).

Thus, knowledge management and the advan-tages of IT application in alliances and networks are, in the first instance, related to the management of the firm’s social capital as an intensive resource in knowledge and information. Secondly, they are critical for the building, improvement and use of valuable inter-firm specific knowledge-sharing routines that are difficult to imitate and substitute (Dyer and Singh, 1998).

IT tools are critical for enabling and support-ing information and knowledge sharing processes among partners that permit the creation of specific routines and the possibility of obtaining relational rents (Dyer and Singh, 1998). In most cases, these routines make partners an important source of information and ideas, which result in an innova-tive stream for the firm. However, organizational

Figure 1.

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differences, knowledge bases and IT structure among partners influence on the way knowledge is managed in the alliance with the objective of leveraging the experience and competencies of the participants (Schmaltz, Hagenhoof and Kaspar, 2004). Figure 1 shows how IT can support the al-liance development and management, within the context of a knowledge management system at firm and alliance level (considering two firms):

As the model shows, alliance advantages can occur on two different levels: (1) individual, through value creation during the interaction process between alliances management and so-cial capital in each firm; (2) dyadic, through the creation and improvement of specific inter-firm knowledge-sharing routines. They can be defined as “a regular pattern of inter-firm interactions that permits the transfer, recombination or cre-ation of specialized knowledge, (…) and these are institutionalized inter-firm processes that are purposefully designed to facilitate knowledge exchanges between alliance partners” (Dyer and Singh, 1998: 665).

Two issues arise in relation to knowledge transfer among alliance partners that affect IT tools and their use and effectiveness in support-ing the creation and improvement of inter-firm routines and the potential for obtaining relational rents. First, IT tools are required for knowledge codification processes. In doing this, knowledge can be transferred across firm boundaries and can be understood among partners –including the development of a common code shared by firms in the cooperative relationship (Kogut and Zander, 1992) which could even constitute an advantage for partners (Oliveira, 1999). In addition to this, IT tools can improve the absorptive capacity of each alliance partner, based on the support for the development of overlapping knowledge bases and the interaction between routines.

In general terms, the establishment of a coher-ent structure for the development of knowledge management in strategic alliances implies solving some technical problems and taking decisions

about what information technologies to use, along with the design and implementation of the knowledge management system.

4. cooperatIon Issues related to kMs

In some cases, alliances fail or their results fall short of what was expected owing to problems in the sharing of knowledge between the firms involved. The main difficultly is to face two po-tential concerns: to maintain an open knowledge exchange to achieve collaborative advantages and to control knowledge flows to avoid the un-intended leakage of valuable technology (Oxley and Sampson, 2004).

Firms often erect barriers that make the ef-fective development of collaborative activities, knowledge sharing and transmission in alliances difficult. The main problems discussed in this section will be: (1) the specificity and complexity of knowledge; (2) distrust between partners; (3) technological knowledge diversity; and (4) the organizational form or governance structure of alliances (Guadamillas et al., 2006).

the specificity, complexity and tacitness of knowledge

In order to carry out the alliance objectives suc-cessfully, it is essential for a certain amount of specific knowledge to be shared between the participating partners. There are some difficul-ties in relation to knowledge transmission and sharing, especially when knowledge is specific, complex and tacit. This kind of knowledge is dif-ficult to keep and transmit because it depends on the context, experience, language and previously accumulated knowledge (Grant, 1996; Oliveira, 1999). Tacit knowledge is difficult to share and transfer to other people (Nonaka and Takeuchi, 1995). The same problem arises with knowledge that is specific to a context or culture (Zander

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and Kogut, 1995). Transferring tacit and specific knowledge is a very costly and lengthy process. When knowledge is explicit, it is easier to share and to transfer, but it has a smaller strategic value than tacit knowledge (Zander and Kogut, 1995). Acquiring the latter kind of knowledge can be the main reason to participate in an alliance.

protection of strategic knowledge

One of the main risks of strategic alliances is the difficultly in protecting certain types of essential knowledge (Oxley and Sampson, 2004: 727): hints and ideas about strategy orientation, directions and partial results of technological research; com-petitive benchmarking data; codified knowledge contained in formulas, design and procedures; tacit knowledge involved in skills and routines and the essential competences of key employees that can be hired when the alliance is finished. The risk of the partner developing an opportunistic behaviour in the alliance and appropriating this kind of stra-tegic knowledge is one of the main factors that discourage firms from participating in an alliance. On the other hand, sometimes the sharing of some strategic knowledge is necessary for achieving alliance objectives. Trust between participants is required in order to make this possible.

Mutual distrust among partners

Firms are especially reluctant to share knowledge with companies that may become competitors in the future. Mechanisms and systems to reduce distrust and opportunism and to improve collabora-tion between partners are very important. The com-mon space created in an alliance allows partners to share their tacit and explicit knowledge, their abilities and productive processes. Furthermore, if an adequate level of trust is attained it is possible to create and exchange new knowledge, especially that which is tacit, generated in the agreement and which afterwards is absorbed and assimilated by firms, leading them to improve their capabilities

(Inkpen, 1998). Therefore, it is possible to affirm that the last goal of a cooperation agreement, carried out to access the partner’s knowledge, is the internalization of this knowledge and also of that generated in the alliance. In this case, cooperation is a tool that makes organizational learning easier.

alliance organizational form or governance structure

The lack of common routines, clear lines of author-ity and limited hierarchical organizational forms can make cooperation difficult, along with the sharing of knowledge and learning for the mem-bers of the alliance. Although all organizational forms have disadvantages, partners must imple-ment that which is optimal according to the nature of the agreement (joint ventures, alliances, joint equity ventures, etc.). The more hierarchical the organizational forms are the more they facilitate the control of processes and performance, albeit they also imply higher costs and more bureaucracy (Oxley and Sampson, 2004).

5. case study analysIs: kMs In tecnobIt strategIc allIances

5.1. Introduction

In general, a case study aims to examine a “contemporary phenomenon within its real-life context” (Yin, 1994: 13). As a research method, it is viewed as improving our knowledge of individual and organizational phenomena (Van Maanen, 1979; Yin, 1994). Case studies primarily involve researchers undertaking an in depth study of a particular organization with a wide variety of information being collected as a result. In our case, we collected multiple data and informa-tion from interviews with one of the company’s main directors and other company documents. In interviews, questions were kept unrestricted

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in order to encourage the manager to converse freely (Maykut and Morehouse, 1994). Extracts from internal reports, the company’s web page and other relevant documentation were also used to make up the case study.

The company analyzed has been chosen be-cause it has developed its growth strategy based on new knowledge created internally but especially through strategic alliances. The company was founded in 1976 as DOI-Associate Engineers. Located in Madrid (Spain) its main activity centred on the control of industrial processes. In 1981, an industrial plant was created in Valdepeñas (Ciu-dad Real, Spain) and the company’s name was changed to Tecnobit. Over the next decade, the company’s development took place: in 1983, an important contract was signed with the Spanish Ministry of Defence; in 1987, the command and control activities began; in 1992, the first EF-2000 contracts (avionics) were obtained; in 2000, the Tecnobit Group was created; and in 2003, compa-nies that made up the Tecnobit Group were melted into a single legal entity. The current name for the company is Tecnobit S.L., and its shareholders are: CCM Corporation (48%), IT Deusto (48%) and other shareholders (4%).

Tecnobit develops five activity lines, with the following sales income distribution (2007): Avion-ics (49%); command and control systems (21%); simulation systems (14%); optronics (8%) and IT systems (8%). It has two plants, Alcobendas (Madrid, Spain) and Valdepeñas (Ciudad Real, Spain), with a total extent of 20.300 m2. It has 330

employees, of which 60% have a university degree in engineering or computer sciences. In respect of financial data, in 2007 Tecnobit improved on the (good) results of 2005 and 2006. (Table 1)

Tecnobit has also devoted, on average, 8.5% of sales income to R&D (in 2007 €4.9 million was invested). Moreover, in the last few years it has improved its efficiency due to the reduction of commercial and general expenses, achieve through functional and organizational restructuring, all of which is reflected in the financial performance of the company.

What is especially interesting about the evolu-tion of the company is how it has diversified its business lines, beginning with its main activity of aviation electronics (avionics) spreading to new simulation and training projects within the same industry2, as well as towards the IT field, through the creation of command and control systems, the development of software, and knowledge management projects. The diversification has been carried out via internal development and knowledge acquisition through cooperation agree-ments and the purchase of certain companies. With the newly acquired companies, Tecnobit extended its activities beyond the electronics industry, to provide maintenance and technical support to other companies within the industry. During 2003-2007, Tecnobit furthered its ex-pansion strategy, incorporating a new computer services company into the business, and currently continues to consolidate its position and growth in related industries. One important point worth

Table 1. Main figures (evolution) in Tecnobit

Concept* 2005 2006 2007 %∆ (2006-2007)

Equity 25.3 28.6 33.5 17.13

Incomes 40.7 50.4 57.3 13.69

EBITDA 10.4 12.2 14.7 20.49

Net profit 2.6 3.5 4.9 40

Clients’ portfolio 144.2 159.4 162.9 2.19

*Million of €

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mentioning here is the company’s effort towards its international expansion, which has resulted in international sales by the firm representing an increasing proportion of its total sales income, as a consequence of its reputation and the consolida-tion of its brand image.

Industries in which this company operates are rapidly changing because they are technology-intensive, and there is an increasing trend towards industrial concentration to gain advantages derived from size. In this setting, and to face these com-petitive conditions and the innovation challenge, Tecnobit has designed a dynamic and aggressive growth strategy, with the objective of generating synergies (essentially based on taking advantage of the knowledge that it possesses) and improv-ing the value of the company through internal development and related diversification. Thus, Tecnobit has based its diversification pattern on the application of available resources, and its ex-pertise and knowledge in IT, internally developed or acquired, for the development of new products and services.

Additionally, Tecnobit attaches great impor-tance to internal IT systems, and it tries to manage them in order to take advantage of the great po-tential which, from a strategic and organizational viewpoint, these technologies can offer in relation to certain critical activities for knowledge manage-ment –to ease the access to and the transfer and storage of knowledge and information within the firm and in strategic alliances as well.

5.2. strategic alliances in tecnobit

Tecnobit has successfully developed a growth strategy through diversification involving related businesses representing the aviation electronics and IT industries. This strategy was based on the application of its accumulated knowledge, which was internally developed by the organization or obtained and integrated in its knowledge base as a result of its external acquisition in strate-gic alliances and the purchasing of companies.

KMS applied to its strategic alliances and their management (IT systems, governance structure or HR practices) has played a fundamental role in this process.

Strategic alliances and the purchase of com-panies have been used by Tecnobit to acquire knowledge that the company did not possess and that would have been difficult and costly to develop internally. Sometimes, the acquired knowledge has been complementary to existing knowledge, with which it has been successfully integrated, bearing in mind that the firm has a good level of absorptive capacity (Cohen and Levinthal, 1990), and occasionally, such knowledge has directly been used to break into new markets.

Alliances have been developed by Tecnobit to cover different objectives, both to exploit and explore knowledge in different areas (Grant and Baden-Fuller, 2004; Rothaermel and Deeds, 2004). Alliances frequently present themselves as an option for Tecnobit to grow technologically because they involve less financial risk compared to other alternatives, such as company acquisitions. They are also appropriate when technological capabilities are too difficult to develop internally and the firm would spend too much time in doing this3. Tecnobit, apart from technological alliances, has entered into cooperation agreements with other firms and institutions in financial, commercial, service, manufacturing and industrial domains4. Sometimes, these firms have important differ-ences to Tecnobit in aspects such as size, sectors or countries, but they are always characterised by complementary knowledge and a compatible culture which have enabled alliance objectives to be accomplished.

Some cooperative agreements entered into by Tecnobit have particular significance, even if they are of a very different nature. On the one hand, in the avionics area, it has established an exploration alliance with the Israeli company, Rafael DM, on the joint development of a laser indicator5. It has also been working with the American companies Lockheed Martin and Cubic Defence Electronics,

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in the development of diverse simulators. It is try-ing, for example, to adapt Cubic’s air simulator (in which this company is the world’s technological leader) to the terrestrial domain, such as in combat cars. Moreover, co-operative agreements have been developed with public institutions, such as the University of Castilla-La Mancha, for the development of various technological projects. On the other hand, Tecnobit has signed an agree-ment with the German firm Hyperwave for the exploitation of its computer tool –also referred to as Hyperwave, as previously point out– through commercialization in Spain and Latin America. In general, Tecnobit is satisfied with all these alli-ances, in terms of objectives attainment, acquisi-tion of complementary technological knowledge through learning, and the possibilities this gives to Tecnobit of growing through the exploration and exploitation of new markets and products6. Moreover, Tecnobit has channelled some of its cooperative agreement projects through its par-ticipation in official R&D programs7, for which it has received financial support. For example, it has participated in the Technological Aeronautic Plan II, which includes important financial support for carrying out these investment projects. It also maintains collaboration projects in technological matters with other government research centers, such as the R&D Army Center (CIDA).

In some cases, and due to the difficulties of incorporating certain capabilities and tacit knowledge into the organization through stra-tegic alliances or other means (imitation, hiring of technical experts, etc.), technology-intensive firms that had the required capabilities were directly acquired. Essentially, the explanation for these acquisitions is based on the knowledge characteristics to be transferred; that is to say, due to problems of causal ambiguity, high specific-ity and context-dependency, which would have made the transfer or replication of knowledge and capabilities difficult to carry out otherwise (DeCarolis and Deeds, 1999; Grant, 1996; Reed and DeFillipi, 1990).

5.3. kMs for alliances in tecnobit

In this section, Tecnobit’s KMS in strategic alliances is exposed, distinguishing in turn its objectives and KM conception, KM tools and the most significant aspects of the implementation support systems.

objectives and kM conception

As has previously been pointed out, objectives for KMS in alliances combine exploitation and exploration issues. On the one hand, depending on the exact nature of these goals, cooperation agreements have ranged from joint ventures in the case of exploration objectives in order to pool knowledge and other kinds of resources with the partner company, to contractual agreements and informal structures when the exploitation of the partner’s knowledge and resources has been necessary. For Tecnobit, the more exploratory the alliance is, more innovative the final aim of the cooperation agreement will be. Obviously, the structure of the alliance will be different in relation to tools and systems because the prob-lems that need to be solved are different as well. On the other hand, the perspective of Tecnobit’s managers concerning KM conception is clear: the company employees should bear in mind that the human and cultural component is as important as IT tools in the development of projects, and KM should not only be centered on information management but in trying to promote interaction and knowledge sharing among employees, and employees-partners in strategic alliances.

It tools and systems for kM

Tecnobit’s current IT tools for knowledge manage-ment, apart from being oriented towards external markets, are widely used in the internal organiza-tion as well as strategic alliances. They are based on the use of web technologies in open and multi-platform systems, jointly with the development

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of applications and content with international standards through the use of document manage-ment and content tools. In terms of KM tools based on IT, the following stand out as being the most important: information and control systems, document management tools, storage systems and other data and information archive systems. Overall, these tools have been designed to assist in the creation, storage, retrieval, transfer and ap-plication processes of knowledge management, permitting the development of these processes in order to attain the company and alliance objectives in the ambit of KMS.

kMs support systems

Tecnobit considers that one of the main success factors in an alliance is the trust between partners. For this reason, it considers it necessary to develop a shared culture with its alliance partners in order to generate trust and an efficient HR strategy. To achieve this aim, an optimal alliance plan is necessary, in which the search for a partner and the understanding of the partner´s culture are key issues. Consequently, Tecnobit selects partners that will complement their culture in the search for common goals.

With the objective of enhancing efficiency and integration even further whilst providing greater flexibility to its innovative activities and change, the organization has been structured in terms of projects. The decision-making process is, therefore, decentralized, on the basis that the closer the deci-sion unit is to the decision taken, the better qualified they are to do this. This kind of flexible structure is applied in some exploration alliances under which the integration of employees from different companies is required. Tecnobit has developed a policy whereby employees are continuously mov-ing between projects, thus increasing flexibility. In doing so, communication between employees and knowledge transfer becomes easier.

A high level of flexibility exists because the employees are assigned to diverse projects within

different lines of activity to cover the alliance needs, thus attempting to develop a “concurrent engineering” where employees “can think about everything”, by having a global vision of the company’s projects. As a result, the employees move within all lines of activity, which promotes the sharing of knowledge and ideas, and stimulates creativity (Nonaka and Takeuchi, 1995). This organizational structure also allows Tecnobit to rapidly respond to changing customer needs and preferences, which ultimately enables it to adjust to the dynamic and complex conditions of its competitive environment.

The main HR practices of Tecnobit that support the KM processes in alliances are:

The design and implementation of exten-• sive training practices. It is important to highlight that the knowledge generated in an alliance cannot be used easily by other competing firms –i.e., it is highly specific to the alliance.The use of teamwork. The firm considers • that teamwork is the best option in order to achieve its alliance goals. The interaction between employees from different firms increases shared knowledge, making the development of learning processes pos-sible. In teamwork it is important to select the most suitable employees to achieve the common objectives. Moreover, a continual negotiation process should be carried out between partners to immediately solve the problems which may arise.The specific contracting of highly qualified • external employees.The identification of internal employees • with the best abilities, skills and quali-fications to work in each activity of the alliance. HR policies can contribute to the alliance success if managers are able to identify employees with the ability to form better interpersonal relationships, on the basis that they have more highly

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developed social abilities and are able to learn and transfer knowledge more easily. Moreover, the knowledge generated in al-liances for these workers will be integrated into the firm more efficiently, thus making them the most suitable employees to work in the alliance. During the last year, certain exploratory studies have been carried out in Tecnobit in order to identify the most suitable employees from a learning per-spective in terms of its intra-organizational learning network. With this knowledge in mind, managers can better develop reward systems and motivational schemes for their employees and adjust their management style to the existing conditions (Sánchez de Pablo et al., 2008).

The design and implementation of vari-• ous incentive systems to promote specific aspects in the alliance, such as knowledge sharing or the extensive use of IT.The development of a shared culture be-• tween partners. The importance of a shared culture has been analyzed previously but it is necessary to emphasize that Tecnobit fosters a shared culture which encour-ages employees to accept a common vi-sion. Thus, more benefits can be obtained by making the coordination and control of common activities easier; (control must be carried out on two levels: individual and inter-organizational).The design of employees’ careers. Usually, • alliances are of a temporary nature, that is

Table 2. KMS in Tecnobit’s strategic alliances

Dimensions Explanation

KM Concept To obtain knowledge and integrate it to achieve exploration or exploitation objectives, bearing in mind that KM is not only related to IT management but that cultural and human factors are also very important for alliance success.

KMS Objectives Exploitation of partners’ technologies and resources to gain in respect of quality, efficiency or service to clients.

Exploration of partners’ knowledge in order to improve innovation capabilities and learning.

KM Tools Knowledge creation Socialization and sharing of knowledge through formal and informal meetings, teamwork and tools based on IT.

Interdisciplinary teams with university researchers

Knowledge storage Databases for each common project

Knowledge protection Confidentiality and non-concurrence agreements in contracts

Implementation support sys-tems

Culture To establish principles and values based on the transfer and sharing of knowledge among partners in relation to alliance goals

To develop inter-organizational knowledge networks through cooperative projects

HR Practices Promotion of access to databases

Rewards given to employees who suggest new ideas and share their knowledge

To assign key employees to the alliance

Structure Work teams, joint ventures, contracts or informal structures, depend-ing on the alliance objectives (exploration vs. exploitation)

Technical Systems Databases, data-mining, data warehousing

Collaborative systems based on networking

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to say, their time span is limited. To avoid uncertainty among employees who work in the alliance, Tecnobit has developed well-established career plans in order for em-ployees to be able to perceive their future possibilities in the firm.The development of a balanced remunera-• tion plan within the alliance. Its main ob-jective is to avoid situations of unfair fi-nancial compensation on either side of the alliance.The use of electronic databases and other • specific IT solutions.

Finally, it is important to also note that these practices allow for some degree of individual and group autonomy while ensuring the achievement of the goals of the cooperation agreement.

As a result of this analysis, a table (Table 2) has been drawn up, which details Tecnobit’s KMS in relation to its strategic alliances.

6. conclusIon

In this chapter, we have analyzed KMS in alliances as an instrument for achieving the objectives of partners by establishing the company’s orientation towards KM, tools and instruments to develop knowledge processes and systems to support the KMS implementation, amongst which HR prac-tices and flexible alliance structures are included. Organizational problems in alliances concerning knowledge management have also been addressed. Finally, the way in which an innovation-intensive company establishes its KMS in order to attain objectives, based around alternatives of knowl-edge exploration or exploitation in alliances, has been discussed.

In general, although each alliance implies the development and implementation of a specific KMS considering its own circumstances and ob-jectives, the analysis of this case shows how, in order to face the strong competitive requirements

of the current environment, the coherence of the KMS in relation to the aim of the strategic alli-ance has to be taken into account. Certain aspects concerning the exploration or exploitation of the knowledge that is generated, shared and applied also have to be analyzed by each partner, such as: the exclusivity and complementary domains of strategic knowledge, the creation of new knowl-edge, and finally, the appropriation of profits derived from these, through the establishment of mechanisms which permit the protection of each partner’s knowledge domain while the knowledge sharing among them is maximized. Thus, man-agers should ask themselves certain questions concerning the structure and governance of the strategic alliance, such as: how can we develop new knowledge and what are the factors that in-fluence this process? For each factor considered, what kinds of mechanisms are available for the company and how can we use them to make knowledge management easier? In this sense, is the existing organizational alliance flexibility adequate? How can we make better use of IT tools to manage knowledge in the alliance? What kind of HR practices would facilitate the sharing of knowledge, minimizing the risk of undue ap-propriation of our strategic knowledge?

The response to all these questions implies the design of adequate KMS’s for the firm’s alliances, wherein objectives, the vision of man-agers in relation to KM, the KM tools and the implementation systems must be coherent and support the overall strategy of the organization. Particularly, it is especially important to manage cultural elements and deal with human aspects in cooperation agreements. In doing so, the transfer of knowledge is made possible, both to exploit and explore the knowledge of another partner(s). As the case of Tecnobit has shown, in technological settings, where knowledge is in a state of con-stant development, single companies operating by themselves come up against difficulties in terms of developing all the necessary knowledge in order to grow, enter into new markets and be

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technologically innovative in respect of products and processes, meaning that alliances and coop-eration agreements are essential to gain access to important knowledge for the firm. Companies also have to search for technological solutions in order to store, create and transfer knowledge effectively in the alliance, whilst protecting their most valuable knowledge from imitation. In this sense, it is more difficult for a partner to imitate tacit knowledge over explicit knowledge, which should be protected from unwanted appropriation through some kind of specific mechanism. In any case, for a firm to be able to assimilate and exploit a partner’s knowledge, it requires a certain amount of absorptive capacity, which ultimately depends on its internal innovative path (Cohen and Levinthal, 1990).

Finally, it should be pointed out that trust is the key factor in the success of a cooperation agree-ment, because it is the link between responsible behavior and knowledge sharing in the alliance. Trust needs to be generated between partners in cooperation agreements, in order for a firm to develop its business activities and achieve its strategic objectives.

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