Supplement or Complement? Looking at the resource profile of business alliances
Business alliances offer opportunities and pitfalls alike for partner firms. Knowledge and experience can be transferred to the benefit of all, internal processes improved, and resources combined. On the flip side, communications may be less fluid, cultural and geographical distance a problem, and the vested interest of all participating firms not necessarily the same. Regardless of whether the firms involved are from the same industry, it is crucial to see whether they are singing from the same hymn sheet from a pooled resource perspective in order to assess the potential workings of the partnership.
Firms choose to partner up with other firms with an overall commercial objective in mind. However, along the way, they can reap other benefits that may help improve their own operations and even release an improved end product or service. Such alliances can support firms looking to expand on the international scene, help them to learn from one another’s way of doing business, and combine expertise and experience to mutual benefit. Knowledge and more specifically knowledge transfer is key to the process, as without a smooth flow of information between partners within the alliance the partnership as a whole may break down. Although seemingly intangible, knowledge should be considered more than ever before as a concrete resource upon which the success of a business alliance hinges.
Making or breaking an alliance
Creating the ideal conditions for inter-firm learning relies upon a series of drivers. Overlapping knowledge base and governance structures are likely to boost partnership performance, as is mutual trust amongst members. Without this latter factor, time, energy and money must be spent on monitoring processes to ensure that all firms are pulling in the same direction. This said, the success of knowledge transfer process in an alliance can be reflected in two sides of any learning outcome: Know-how and Know-why. Without any of these two sides, learning outcome of an alliance is not worthy.
Absorbing knowledge to create
Firms may have the necessary internal processes, trust to their partner and required motivation to facilitate knowledge transfer with their alliance, but what if they do not have the ability? The concept of “Absorptive Capacity” developed in the 1990s identifies the capacity that firms have to buy into knowledge, not in the financial sense of simply purchasing knowledge resources via patenting but in the sense of entering into the spirit of a partnership by investing in R&D and succeeding in learning from their fellow partners. Put simply, the Absorptive Capacity is the ability of a firm to understand, disentangle and utilize any external knowledge in its internal processes. The Absorptive Capacity of a firm helps firm if they wish to explore avenues for collaboration and pooled resources in order to create something new, together.
To complement or to supplement?
The ability of firms to truly explore a business alliance is very much governed by the relative nature of their respective resources. Firms with similar resources to offer will ultimately supplement each other quantitatively in order to propose a higher scale outcome. On the other hand, firms with dissimilar resources may be able to join forces in order to devise a new product or service as their resources complement one another. By considering relative resource profile of firms rather than purely looking at the industry in which they operate, it is possible to understand not only the motivations for firms to join alliances in the first place, but also how their resources will combine, overlap or supplement one another and, consequently, how happy a business marriage it will prove to be.
As mentioned previously, lack of trust and excessive knowledge protection represent potential pitfalls, and so future research should also place under the microscope alliances where a climate of competition reigns within resource pooling context of an alliance. Most importantly, though, it is now clearly unsatisfactory to judge the ability of a firm to absorb knowledge from its alliance partners from a purely industry-based perspective. Establishing how their resources overlap or complement one another will determine the nature and potentially the success of the partnership.
This article draws inspiration from the paper Knowledge transfer in alliances: the moderating role of the alliance type, written by Hamid Mazloomi Khamseh and Dominique Jolly and published in Knowledge Management Research & Practice volume 12 (2014).
Hamid Mazloomi Khamseh is an Assistant Professor of Strategy and Innovation at Rennes School of Business, France. His research interests include Intern-firm Knowledge Transfer, Alliance Formation and Evolution, Strategic Management of Knowledge, and Innovation Management and Absorptive Capacity.