Chapter 7: An Empirical Test of the Internal Tensions Perspective of Strategic Alliances

A strategic alliance has been defined as a (Parkhe, 1991) “relatively enduring interfirm cooperative arrangement, involving flows and linkages that utilize resources and/or governance structures from autonomous organizations, for the joint accomplishment of individual goals” (p. 581). Parkhe (1993) later underscored that alliances were an arrangement “characterized by inherent instability arising from uncertainty regarding a partner’s future behavior and the absence of a higher authority to ensure compliance” (p. 794)

A failed alliance is defined as: an alliance that is terminated without reaching the objectives of one or more partners. The term “prematurely” is not used in the above definition as we assume that an alliance can be terminated at some predetermined point and still be a failure. A partner may wish to continue a failed alliance to preserve financial stability and external image, termed as “shadow of the future” effect (Axelrod, 1984). Park and Russo (1996) proposed refining the definition of instability and failures although they did not elaborate the point. Alliance instability is often used interchangeably with alliance failure in the literature, instability being defined by Inkpen and Beamish (1997) as “major changes or dissolutions of alliances that are unplanned from the perspective of one or more partners.” The concept dissolution, in law, means to end a legal entity or agreement and is therefore the same as termination, that is, the act of ending the alliance through willful action but excluding uncontrollable external factors such as bankruptcies, acts of God, and so on. However, in light of the issue brought up by Park and Russo and what we have discussed so far, outcomes of alliance relationships can be explained through a complex set of factors such as tensions (Das & Teng, 2000). Thus, tensions in alliances must be viewed as a complex phenomenon leading to several possible outcomes both positive and negative. We suggest three types of possible events resulting from alliance tensions: change, instability and failure. De Rond and Bouchikhi (2004) stated that “social science researchers have no valid, a priori reason to put higher value on stability than change” (p. 59). Obviously change is a positive outcome of tensions being balanced in a mutually acceptable way. To take that point further we present in Figure 7.1 four potential outcomes of tensions in alliances.