Towards a Theory of B u s i n e s s Business

Alliance
Alliance Formation Formation
Jagdish N. Sheth and Atul Parvatiyar
Emory University, Atlanta, USA
71
The popularity of business alliances has increased in recent years. Business
and academic press have reported thousands of alliances involving many
international companies (EUram, 1992; Ghemawat et al., 1986; Gross and
Neuman, 1989; Morris and Hergert, 1987). Its importance is realized by the
fact that some of the world's largest companies, including AT&T, Philips, General
Motors, Siemens, IBM, Ford, Boeing, Olivetti, General Electric, Xerox, Toyota,
Mitsubishi, General Foods, and several others, are involved in these business
alliances. A variety of patterns are also observed such as large-small company
alliances (Doz, 1988; Hull and Slowinski, 1990), private (profit) -- public (non-
profit) partnerships (Lynch, 1989), competitor alliances (Hamel, et al., 1989),
and spider-web alliances (Gullander, 1975) wherein an intricate army of
interconnections between companies, often across international and industrial
boundaries, exist -- as in the case of networks and Keiretsu[1] (Ferguson, 1990;
H~kansson and Johanson, 1988).
The scope of these business alliances from specific functional agreements
- as in R&D, product development, distribution, logistics, marketing, etc. --
-

to full scope joint venture and/or consortia. This had led to several names and
labels for business alliances: for example, joint ventures, R&D consortia,
minority participation, cross-licensing, cross-distribution, supply purchasing,
franchising, co-manufacturing, cross marketing, buying groups, and so on. Some
authors have begun to use "strategic alliance" as a common term to refer to
all types of business alliances (Harrigan, 1986; Ohmae, 1989; Parkhe, 1991).
This however, is likely to cause confusion because, as we will show later in
this article, not all business alliances are formed with a strategic purpose;
furthermore, strategic alliance is a term borrowed from military and political
science where it has a specific connotation, namely formal association of
sovereign states for the use (or non-use) of military force, intended against
specific other sovereign states, whether or not these sovereign states are
explicitly identified (Snyder, 1991). As such, the use of "strategic alliance" in
business is best suited for competitive alliances and, in our opinion, it would
not be used as a generic term for all alliances. In this article, we will develop
a typology of business alliances in order to reduce some terminological confusion.
Given the current popularity of business alliances, a comprehensive theory
to explain the purpose, properties and governance of alliances is needed.
Although research in this area has been sparse, previous studies in strategic
management and international business have developed constructs on the Scandinavian International Business
rationale for co-operation (Contractor and I.orange, 1988), alliance complexity Review, 'Col. 1 No. 3, 1992,
pp. 71-87. ~ MCB University
(Killing, 1988), factors governing degree of co-operation in 50:50 equity joint Press, 0962-9262