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Abstract
Empirical research indicates that more than half of strategic alliances fail, and the outcomes of alliance failure can be devastating. Despite the increased concern about managing strategic alliances, the field still lacks a theoretical framework to describe the conditions and dynamics leading to the failure of strategic alliances. This paper attempts to distill, derive, and integrate theories across different disciplines into a unified framework that offers a better understanding of alliance failure. The conceptual framework focuses on two primary sources of alliance failure: interfirm rivalry and managerial complexity. We propose that strategic alliances fail because of the opportunistic hazards as each partner tries to maximize its own individual interests instead of collaborative interests. Also, strategic alliances fail because of the difficulties in coordinating two independent firms (i.e., coordination costs), and in aligning operations at the alliance level with parent firms' long-term goals (i.e., agency costs). The paper extends the theoretical framework by looking into a process model of alliance development and failure.
(Alliance Failure; Interfirm Rivalry; Managerial Complexity)
When two parties in an alliance cooperate at an early stage, they realize that they might compete with each other at some later stage. Nevertheless, they are willing to invest time and effort in anticipation of specific outcomes that would benefit them, even if the period of collaboration is temporary. However, both parties know that the current intention by itself is insufficient, for, once completed, they could act opportunistically by withholding important information, providing false information, or simply cheating the other. Moreover, the sheer complexity of the alliance might preclude the partners from evaluating their contributions over time, leading to perceptions that their contributions are unbalanced and asymmetric. As one partner learns faster about the other, dependencies escalate, creating even more asymmetry. If the partners trust each other (confidence on the goodwill of the other), and if significant resources and commitment are expended on the alliance, these problems would be minimized. But trust and commitment are tempered by perceptions of gains and losses, equity considerations, goal conflicts, and role ambiguities between partners. Even in a highly complementary alliance, it is a daunting task to manage conflicts arising from managerial and organizational dissimilarities between the partners.
Within the context of our opening vignette, several conditions affect...