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Article Excerpt
Rapidly changing competition, continuing technological innovation, shortening product life cycles, rising internationalization of markets and evolving customer preferences have led to greater numbers of strategic alliances and networks (Ohmae, 1989; Winter et al., 2003). These dramatic and simultaneous changes forced managers to realize that they may not have all the human, financial or technological resources necessary to respond effectively. Consequently, many managers are shifting their strategic focus away from preempting competition to a broader view of building competitive advantage through a selective and often simultaneous reliance on both collaboration and competition (Bartlett and Ghoshal, 1992; Brass et al., 2004; Gimeno, 2004). Ohmae claimed that "globalization mandates alliances, makes them absolutely essential to strategy" (1989: 143). Indeed, joint ventures and alliances are increasingly being perceived as critical elements of a corporation's business network and strategic weapons for competing within a firm's core markets and technologies (Bae and Gargiulo, 2004; Baum et al, 2000; Geringer, 1991; Harrigan, 1987).
Furthermore, as companies expand internationally, the importance of government business partners and relationships often grows dramatically. This is particularly true for firms pursuing new technology who are trying to protect their intellectual property rights in other countries. Companies seeking to acquire foreign technology and/or competence must also navigate the shifting and turbulent waters of government regulations and restrictions. Moreover, foreign governments themselves are often the target partners through joint ventures with state-owned enterprises or as sources of capital and/or R & D funding (Rondinelli and Black, 2000).
Certainly, these concepts are not new. Geringer (1988) was one of the first to examine partner selection in depth and found that both partner characteristics (national culture, past experience, structure, size) and task-related issues (technical know-how, access to markets, managerial experience, financial assets) were important components of partner selection. Nevertheless, despite Geringer's early analysis, Dacin, Hitt and Levitas (1997) stated almost ten years later, "While partner selection is an integral component of alliance (1) success, very little research has devoted explicit attention to this issue" (1997: 4). This study adds to the extant literature by examining how competitive strategy influences a firm's cooperative strategy, (i.e., with whom they are cooperating--suppliers, customers, etc.) and whether firms choose to develop relationships with their home or the host government. This has not been rigorously discussed in the partner selection literature. Therefore, a preliminary discussion on how a firm's competitive strategy influences its cooperative strategy when pursuing relationships within its business network is followed by the development of nine hypotheses regarding these relationships. The findings from a survey of 110 firms are then presented, and the survey's results are discussed.
Competitive Strategies
Firms can pursue various strategies to succeed in their competitive environment. Maidique and Patch (1982) outlined four business-level strategic types which are particularly useful when examining technology-related alliances (the test sample in this study). They discuss first mover, second mover or imitator, low-cost producer (LCP), and niche. First movers (first-to-market) try to gain an early, albeit temporary, monopoly in the market by introducing a new product before the competition. Consequently, innovation and R&D are critical to their success.
Low-cost producers (cost-minimization) attempt to compete on the basis of relative cost advantages over competitors through economies of scale, overhead minimization, process improvements, etc. Second movers (fast-followers) are quick to copy innovations by others and try to gain customers by avoiding and improving upon competitors' mistakes. A key component of second-mover success is excellent environmental scanning of its markets and competitors. The niche strategy centers on serving small groups of customers with special applications of basic technologies and is not used in this analysis due to this groups' small market size and specialized nature.
Business Network Relationships
Thompson (1967) proposed that organizational uncertainty is derived from failure to understand a task environment and from interdependence with elements of the task environment. Both competitive relationships and resource exchange relationships create webs of interdependencies and uncertainty for firms. Firms often establish various linkages among themselves to help cope with these uncertainties. Pfeffer and Salancik (1978) suggested that one benefit of such linkages is the acquisition of information about the activities of other organizations. Linkages are thought to reduce both vertical and horizontal external constraints through facilitating cooperation with governments and their regulatory agencies, customers, suppliers, and competitors (Bartlett and Ghoshal, 1992; Burt, 1980; Granovetter, 1985). Additionally, Meyer, Brooks and Goes (1990) theorized that revolutionary change within an industry, a phenomenon that is occurring with increasing frequency in global markets, stimulates the formation of inter-organizational relationships.
One of the benefits of these linkages is the acquisition of information about the activities of other organizations (Inkpen and Tsang, 2005; Pfeffer and Salancik, 1978; Thompson, 1967). D' Cruz and Rugman (1994) recognized that these types of relationships are not possible with all customers, suppliers, competitors, etc. and argued that these relationships are best utilized with key customers, government agencies, and the like. Moreover, greater focus on the value chain is being driven by the abrupt and constant changes that many industries are encountering (Webster, 1988, 1992), and Meyer et al. (1990) believe that companies deal with this uncertainty by forming inter-organizational relationships.
D' Cruz and Rugman (1994) proposed that firms established business networks to organize exchange through cooperative, non-equity relationships among firms and non-business institutions. They identified the five main partners in a business network as the core firm, key suppliers, key customers, selected competitors and the non-business infrastructure (e.g., service-related sectors, educational and training institutions, various levels of government, trade associations, and unions). Ritter et al. (2004) proposed a similar five-category model but used the term "complementors" instead of non-business infrastructure. Because complementors can generally be included in the business network (most likely as suppliers), the D' Cruz and Rugman framework was used because it captures the important dimension of non-business organizations.
The core firm is only interested in those partners' activities that are germane to the core firm's strategic intent (Hamel and Prahalad, 1989). The business network's relationships are the facilitating mechanism for achieving the strategic objectives of the core firm. It is important to remember that the core firm must maintain good relations with every member of the network; however, based on the organization's strategic orientation, some "key linkages" will be either more numerous or important to the core firm.
Rapid changes in the environment are forcing firms to abandon the internalizing ownership of core competencies (Prahalad and Hamel, 1990) and firm-specific advantages (Dunning, 1993) in favor of selectively de-integrating those aspects of these value chains that for cost or strategic reasons can be better performed elsewhere (D' Cruz and Rugman, 1994). Therefore, D' Cruz and Rugman basically argue that the rapidly changing markets are forcing firms to enter into strategic alliances and the nature of the core firm's alliances is governed by the core firm's overall strategy.
Suppliers, customers and competitors are also driven by their own competitive strategies (Gassenheimer et al., 2004) and will look for and form alliances with partners that are consistent with their strategies. Hence, a driving force for partner selection for these members of the business network is their own competitive strategy. In essence, similarity theory (Evans, 1963) argues that the more similar the parties in a dyad are, the more likely a favorable outcome....
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