Alliances for innovation and the strategic intent to build core competence.

Abstract

Alliances for innovation were investigated for how they can become an integral part of acquiring core competences in firms. The problem studied focuses on the role of a firm's capacity for organizational learning, through the practice of participative management, in (1) internalizing know-how and technology from a partner and (2) affecting the dependence symmetry in the relationship. These two alliance outcomes constitute a relatively new standard for judging alliances, fostered principally through the efforts of Hamel, Prahalad, and Doz. This research follows their lead, guided by a series of propositions regarding the effect of a firm's capacity for learning through operational and strategic decision-making practices to attain these firm specific alliance outcomes. The propositions incorporate two moderating effects on the relationship between these learning practices and alliance outcomes. One is from the opportunity constraints due to either the industry structure and uncertainty of market demand estimates, or the alliance organizing costs. The other moderating factor modelled in this relationship is the level of technological competence required for innovation. Predominantly small firms innovating through alliances in the manufacturing and business service sectors were surveyed for testing the propositions. Small firms were emphasized because of their more limited ability to utilize such large firm advantages for moving know-how and technology as established scale, scope, and presence. These constraints on small firms allowed for rigorous treatment of the propositions regarding the role of participative management in competence building. Manufacturing and business service sectors provided a broad range of technologies. It was found that almost all of the collaborating firms studied had intentions for (1) internalizing know-how and technology from and (2) reducing dependence on their partners. While controlling for the restrictions imposed by the market-based opportunity constraints, organizing costs, and the technology itself both types of learning (operational and strategic) were significant causal predictors of a firm's performance on these outcomes. These learning postures also were significant in affecting the manner of communication and control practices utilized between the partners as well as changes in governance terms and functional activities performed. By addressing these issues firms should be found to more effectively and efficiently pursue their strategic intentions for building core competence through alliances.