Strategic Alliances

Leveraging Economic Growth and Development

Albert Link, Cristiano Antonelli

• Publisher: Routledge
• Year: 2018
• ISBN:
  9781317406129
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Strategic alliances have generally been used to refer to relationships that allow an organization to access the strengths and capabilities of other organizations, with the organization often focused on being the firm. The strategy behind such an alliance is for each firm in the alliance to draw on the core competencies of the other firm(s) with the goal of facilitating the growth and development of each member.

Strategic alliances have long been studied from several perspectives, including the way in which the alliance is brought about, alternative forms of relationships that form the structure of the alliance, efficiency gains from the alliance, and the life cycle of the alliance. The strategic alliances that are now being observed are those that involve partners other than firms. In many advanced nations, strategic alliances are subsidized by the public sector in the belief that they advance economic growth. One such form of this public/private partnership involves universities as the public partner; another form involves a government agency as the public partner; and a third form involves both.

This book transcends the traditional approach to a strategic alliance. As such, this collection might represent the locus of observational points that make up a new frontier, re-defining the scope of research that falls under the rubric of 'strategic alliances'. This book was originally published as a special issue of Economics of Innovation and New Technology.

Strategic technology alliances and networks

Nicholas Vonortas^a,b and Lorenzo Zirulia^c,d,e

^aCenter for International Science and Technology Policy, The George Washington University, Washington, DC, USA; ^bDepartment of Economics, The George Washington University, Washington, DC, USA; ^cDepartment of Economics, University of Bologna, Bologna, Italy; ^dCRIOS, Milano, Italy; ^eRCEA, Rimini, Italy

This paper briefly reviews the literature on strategic technology alliances (STAs) and networks, allocating the contributions to ‘micro’ (firm) and ‘meso’ perspectives (the network). The focus is on a logical reconstruction of important themes in the literature pertaining to the role of STAs in boosting innovation and in promoting the survival and growth of partners and their environments. Overall, the literature points to a quite important role of alliances and networks especially in knowledge-intensive industrial activities combining the production and utilization of technological knowledge for competitiveness and growth. Not unexpectedly, important differences are pointed out in terms of incentives and benefits from alliances across different types of firms and industries. Network structure evolves in accordance with the nature of the industry and with the type of technological advancement sought by participating organizations.

1. Introduction

In 2013 Accenture and General Electric initiated a strategic alliance to develop ‘technology and analytics applications that help companies across a range of industries take advantage of the massive amounts of industrial strength big data generated through their business operations’.¹ The two companies were expanding their existing collaboration in Taleris (Accenture and GE Aviation) which provides airlines and cargo carriers intelligent operation services to predict, prevent and recover from operational disruptions. This agreement aligns the complementary capabilities of a service company and conglomerate with arms in both services and manufacturing to exploit a potentially lucrative application of big data.

Nowadays, alliances are hardly the realm of enterprises in developed countries alone. Indus Towers was established in November 2007 as a joint venture between India’s Bharti Airtel, Vodafone Essar and Idea Cellular, with the goal of reducing infrastructure costs for each company. Bhati Airtel and Vodafone Esser, the two largest private telecom services providers in the country, realized that they could cooperate on tower development while remaining competitive in their core businesses of providing telecom services. Together, they decided to jointly establish an independent firm to construct and manage towers throughout the two firms’ common operating regions. Idea Cellular, the third largest telecom operator, was also offered a smaller share in the new firm. With a portfolio of over 110,000 towers, Indus Towers quickly became the largest telecom tower company in the world (Gulati et al. 2010). Over the past two–three decades, Brazil’s Petrobrás has evolved successfully into a global leader in deep sea drilling techniques by using strategic alliances to help it absorb external knowledge to generate unique solutions as well as develop its own formidable internal research capabilities (Furtado and Gomes de Freitas 2000).

The aforementioned examples are just three of a large number of strategic technology alliances (STAs) being formed every day. STAs play indeed a prominent role in contemporary business environments. Innovation is increasingly complex, building on several technological fields. This includes technology producers, namely high-tech manufacturing sectors such as pharmaceuticals, especially following the introduction of molecular biology in the mid-1970s, and microelectronics, where innovation hinges on competencies in fields as different as solid physics, construction of semiconductor manufacturing and testing equipment, and programming logic. It also includes technology users, namely knowledge-intensive services such as finance and management consulting; and it includes more traditional technology user sectors such as construction and agriculture. Firms cannot master all the relevant information and knowledge required to innovate and, therefore, they look for partners with complementary capabilities to assist in an increased rate of introduction of new products and processes, to monitor new opportunities and enter new markets, and to sustain long-lasting competitive advantage.

At the same time, in the scholarly realm, a vast literature on networks has emerged on several related fields such as economics, management, sociology and organization theory. In particular, an important area of research has focused on networks arising from strategic technological alliances (Malerba and Vonortas 2009; Ozman 2009). Nowadays, the idea that innovation must be understood looking also at the webs of the various relationships occurring among firms is widely, if not unanimously, accepted (Powell and Grodal 2004).

This paper reviews (selectively) the existing empirical literature on this theme, trying to locate important contributions within a single conceptual model. The model links in a co-evolutionary perspective the ‘micro’ dimension of organizations (in particular firms) and the ‘meso’ dimension of networks as a step towards the impact of STAs on growth and development (i.e. the ‘macro’ dimension).

The rest of the paper is structured as follows. In Section 2, a definition of STAs is put forward together with some basic evidence. In Section 3, we advance our conceptual framework which relies on a bidirectional causal link between strategic alliances and networks. In Section 4, we take the point of view of organizations and ask two questions: (i) what are the characteristics of networking activity of different types of organizations? and (ii) how networking activity impacts on their innovative and economic performance? In Section 5, we take the point of view of networks and ask what is the role of different organizations in affecting the growth and dynamics of networks and how it influences the rate and direction of technological progress in industries. Based on this review, Section 6 suggests possible directions for future empirical research. Finally, Section 7 concludes.

2. Definition, sources of data, stylized facts

2.1. Definition

The term strategic alliance was introduced in the 1980s to describe the multitude of forms of agreements between firms, universities and other research organizations that analysts had already begun to observe. Strategic alliances essentially refer to agreements whereby two or more partners share the commitment to reach a common goal by pooling their resources together and coordinating their activities (Teece 1992; Hagedoorn 2002).

Alliances denote some degree of strategic and operational co-ordination and may involve equity investments. Alliances can occur vertically across the value chain, from the provision of raw materials and other factors of production, through research, design, production and assembly of parts, components and systems, to product/service distribution and servicing. They can also occur horizontally between partners at the same level of the value chain. An alliance can have both horizontal and vertical elements. Alliances can involve cooperation among firms and other organizations, notably universities (Mowery and Sampat 2005). Partners may be based in one country. They may also be dispersed in several countries, thus establishing an international alliance.

A subset of alliances can be characterized as innovation-based, focusing primarily on the generation, exchange, adaptation and exploitation of technical advances. These are herein called STAs. This paper focuses on formal STAs. We do not consider forms of informal cooperation, occurring, for instance, through information exchange among engineers or scientists (Von Hippel 1987).

Our definition is broad, encompassing several ways in which collaboration can occur: various legal arrangements, different degrees of resources commitment, different levels and directions of technological flows, different coordination mechanisms and different time horizons may characterize strategic technological alliances. Examples include:

• research and development (R&D) joint ventures, where two or more organizations constitute a new legal entity in order to perform R&D activities. For instance, Total and Amyris announced in 2011 the formation of a joint venture to develop, produce and commercialize a range of renewable fuels and products;

• joint R&D agreements, where organizations share resources to undertake joint R&D projects. For instance, BASF and Monsanto Company announced in 2007 a long-term R&D and commercialization collaboration in plant biotechnology that focused on the development of high-yielding crops and crops that are more tolerant to adverse environmental conditions;

• licensing and cross-licensing agreements. For instance, in 2014 Google and Samsung signed a global patent cross-license agreement covering a broad range of technologies and business areas. The agreement covers existing patents and those filed over the next 10 years;²

• research contracts, where one partner undertakes research for another organization. For instance, Bend Research, a biotech company specialized in developing ways that make it possible for drugs to enter the body and go to the places they are meant to treat, had exclusive research contracts with Pfizer from 1994 to 2008.

2.2. Data sources

The reliability of alliances data has been a frequent concern in the literature (Schilling 2009). In broad terms, data sets used in the empirical analyses on STAs can be grouped into three classes. Literature-based data sets are built by consulting specialized journals, financial newspapers and other general sources of information of public announcements of collaborative agreements. Two notable examples in this category are the Cooperative Agreements and Technology Indicators (CATI) data set, collected by John Hagedoorn and colleagues at the Maastricht Economic Research Institute on Innovation and Technology (MERIT), and the Securities Data Company (SDC) Platinum Joint Ventures and Strategic Alliances data set collected by Thompson Reuters. Both data sets collect data for several sectors worldwide. CATI has a focus on R&D-related agreements and excludes from the analysis publicly funded agreements, whereas SDC covers both R&D- and non-R&D-related alliances involving different types of organizations, such as firms, universities and research centres. Industry-specific data sets have been assembled as well. For biotech, the Recombinant Capital (RECAP) database collects data coming from sources such as press releases, Securities and Exchange Commission filings and company presentations describing alliances between organizations of any type, whereas the Bioscan database tracks over time the activities of a specific set of firms designated as biotechnology related. For Information and Communication Technology (ICT) sectors, the Advanced Research Project on Agreement database has been developed at Politecnico di Milano (Colombo and Garrone 1998).

A second type of data set is produced by surveys. In this case, data are collected through questionnaires in which firms report the extent of their collaborative activities, the motives behind them and the types of collaborators (i.e. competitors, customers, suppliers or universities). Veugelers and Cassiman (2002) and Tether (2002), for instance, used data from the Community Innovation Surveys, collected by the member states of the European Union, for the analysis of innovative inputs and outputs by European firms. Recently, Kim and Vonortas (2014) used data from the European AEGIS Survey to understand the factors underlying the willingness of small knowledge-intensive firms to participate in collaborative agreements.³

A third class of data refers to government-sponsored cooperative agreements or originates from anti-trust laws. Data on projects promoted by the European Union (in particular within the context of European Framework Programmes) have been collected for some time and analysed (see, for instance, Breschi and Cusmano 2004). For the USA, data have been collected by the Cooperative Research (CORE) and the National Cooperative Research Act-Research Joint Ventures (NCRA-RJV) databases using information from the Federal Register at the US Department of Justice (Vonortas 1997; Link, Paton, and Siegel 2005). Under the National Cooperative Research Act, voluntary filings of R&D partnerships give firms benefits in the case of anti-trust interventions. Finally, for Japan, Branstetter and Sakakibara (2002) have analysed R&D consortia with a degree of government subsidization and intervention.

While the consistency in coverage of STAs across databases is limited, Schilling (2009) shows that different sources (in particular MERIT-CATI, SDC, CORE, RECAP and Bioscan) exhibit similar (although definitely not identical) trends in terms of sectoral composition and activity over time. High-tech industries such as information technologies and biotechnology constitute the bulk of STAs activities, especially in the most recent decades. STAs became prominent around the second half of the 1980s.⁴

2.3. Motivations behind strategic alliances

The theoretical and empirical literature has, over the years, tried to identify the most prevalent motives for the establishment of strategic alliances (Link and Zmud 1984; Hagedoorn 1993; Hagedoorn, Lin...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Citation Information
• Notes on Contributors
• Strategic alliances: an introductory framework
• 1. Strategic technology alliances and networks
• 2. Academic faculty as intellectual property in university-industry research alliances
• 3. University research alliances, absorptive capacity, and the contribution of startups to employment growth
• 4. Personal strategic alliances: enhancing the scientific and technological contributions of university faculty in Malaysia
• 5. The impact of public investment in medical imaging technology: an interagency collaboration in evaluation
• 6. Public investments in sustainable technology: an evaluation of North Carolina’s Green Business Fund
• 7. Standards and innovation: US public/private partnerships to support technology-based economic growth
• 8. The cost of knowledge and productivity dynamics. An empirical investigation on a panel of OECD countries
• Index