Chapter 6: Turning Experience Into Alliance Capability: Alliance Evaluation in Rolls-Royce

Alliance capability is defined as the mechanisms or routines that are purposefully designed to accumulate, store, integrate, and diffuse relevant organizational knowledge acquired through individual and organizational experience with alliances (Kale, Dyer, & Singh, 2002). There are several important elements in this definition that require attention. One element is the role of experience with alliances. It is well known that companies with more experience with alliances tend to be more successful than companies with limited alliance experience (Anand & Khanna, 2000; Powell, Koput, & Smith-Doerr, 1996). Learning-by-doing is a first step for building an alliance capability, but it is not sufficient. Companies also need to focus on mechanisms or routines that formalize lessons learned and transfer alliance best practices inside companies (Spekman & Isabella, 2000). The effect of such dedicated alliance management has been proven in some large-scale empirical studies. Alliance training, alliance evaluation, and having an alliance specialist in a company was shown to raise alliance success rates, especially after learning-by-doing had reached its limits (Draulans, De Man, & Volberda,.2003; Heimeriks & Duysters, 2007). Similarly, the presence of an alliance department in a company, which acts as a repository for learning and stimulates the exchange of alliance best practice, significantly increases alliance success (Kale et al., 2002). However, in the empirical literature alliance experience and alliance management mechanisms are treated as separate phenomena. Even though Kale et al.’s (2002) definition links mechanisms to experience, empirical studies into this link are absent. We present a case study of one such mechanism (alliance evaluation) and explore to what extent this mechanism helps companies to translate experience into alliance capability.