CHAPTER 7: Effective Management of Strategic Alliances in International Construction

Interfirm collaboration has become an important component of creating competitive advantage in many sectors. Strategic alliances are of particular importance in international construction since local regulations and cultural differences preclude foreign companies from conducting business profitably, hence encouraging foreign companies to establish joint ventures with local companies. However, managing such strategic alliances is difficult because of the complex structure of such alliances that entails diverse organizational and managerial styles, and competing objectives and strategies. In this chapter, the key drivers governing the effective management of strategic alliances in international construction will be explored. In this respect, motives, risks, and advantages of establishing and operating such alliances will be discussed; performance issues will be addressed with particular emphasis on the indicators and drivers that govern the success of strategic alliances; and a framework for analyzing the performance of such alliances will be presented. This research builds upon the findings of a questionnaire survey administered to 28 Turkish contractors who entered into a total of 68 strategic alliances with non-Turkish partners. Based on the findings of this survey and the analysis of the data using structural equation modeling, the success factors associated with the evolutionary stages of a strategic alliance, namely, partner selection, formation, and operation will be discussed, and recommendations will be provided. The role of partner-fit, the quality of partner relations, the effectiveness of the control structure, and the impact of project management skills for deriving long-term alliance benefits will be discussed. It is expected that the information in this chapter will help construction professionals during the planning process of strategic alliances.