Organizational Learning in strategic alliances

Contents

1 Introduction
1.1 Problem definition
1.2 Course of the analysis

2 Theoretic background
2.1 Strategic alliances
2.2 Organizational learning

3 Organizational learning in strategic alliances
3.1 Learning intent
3.2 Transparency
3.3 Absorptive capacity and receptivity

4 Organizational learning dilemma

5 Conclusion and outlook

References

1 Introduction

1.1 Problem definition

Over the last decades business environment has undergone severe changes. Due to de regulation, fierce competition, and fundamental breakthroughs in science, industry structures have altered and become very complex and indeterminate.¹ Moreover, costs involved with product development and entrance to new markets have increased signifi cantly.² As firms from all over the globe are competing for the future, their fate is not so much determined by cash, but by intellectual energy³: To succeed in the market place learning and acquiring new knowledge becomes increasingly important.⁴ Thus, compa nies need to be perceived as a portfolio of core competencies and value creating disci plines. But as these abilities are not distributed equally among firms, only a limited number can achieve this single handedly. The great majority, though, needs a helping hand.⁵

Firms can create new competitive advantages by orchestrating their resources. Notewor thy, “[…] a firm’s critical resources may also extend beyond firm boundaries.”⁶ “Alli ances can be a vehicle for gaining access to new knowledge outside traditional organ izational boundaries.”⁷ This knowledge allows companies to learn from their partners. As a matter of fact, strategic alliances are blossoming: The number of alliances between U.S. firms and partners from Europe, Asia and Latin America has been growing by 25% per year recently.⁸ Despite its importance and the richness of opportunities, many stra tegic learning alliances cannot meet their makers’ expectations. They fall behind in means of performance and valuable output. In an empiric study conducted by Hamel, a majority of interviewed alliance managers expressed disappointment about their alli ances’ performance and Inkpen adds that the creation of a successful learning alliance environment is rather the exception than the rule.⁹ Given these diverging and sometimes poor outcomes, this paper explores key factors that determine success of interorganiza tional learning in strategic alliances.

1.2 Course of the analysis

Before going into depth some fundamental terms deserve further explanation. For the sake of clarity strategic alliances and organizational learning both are examined separately. A precise definition shall add to a better understanding and pave the road for an in depth investigation of their interplay in chapter three.

Inkpen and Hamel argue that three key determinants influence organizational learning: For learning to take place, a company must have a learning intent, the desired knowl edge needs to be accessible and transparent, and finally, a firm must possess the neces sary capacities to process and internalize the knowledge. These determinants will pro vide the framework; within which this paper explores determinants that facilitate inter organizational learning. Moreover, it has been suggested that strategic alliances are liv ing systems that evolve over time.¹⁰ This implies that alliances are subjected to internal and external factors, which can have great impacts on alliance equilibrium. Having ex amined the determinants in chapter three, chapter four will focus on their interplay and cover the driving dynamic forces, which can harm alliance success and have been re ferred to as the organizational learning dilemma.

2 Theoretic background

2.1 Strategic alliances

Strategic alliances have been defined as relatively enduring exchange and/or joint value creation agreements between two or more companies on a voluntary basis spanning across vertical, horizontal and other related boundaries involving the pooling, trading, exchange, sharing or co development of resources, products, technologies or services.¹¹ Inkpen further underlines the exclusiveness of alliance knowledge by stating that alli ances can grant access to partner’s resources, which are not available or restricted for competitors.¹² Motives for entering into alliances are mixed in nature having a competi tive and a cooperative nature.¹³ They can be summed up in four major categories, which reach from investments in relation specific assets, transaction cost reduction through increased efficiency, knowledge exchange and joint learning, to combining resources and capabilities in order to create new and unique products and/or services.¹⁴ Strategic alliances can have a broad variety of governance forms. As they bridge the gap between otherwise independent organizations by establishing a connection that can cap ture the potential for a stream of opportunities alliance architects need to carefully opt for an organizational structure that supports their specific goals.¹⁵ Criteria to be taken into consideration include time horizon, desired degree of flexibility and rigidity, con trol and efficiency, and financial commitment.¹⁶ One can differentiate alliance structures mainly by the degree of equity change or creation between the partners.

Non equity alliances are said to be structurally more flexible and short term ori ented. Flexibility also described as the ease with which structural agreements can be altered is crucial, allowing for adaptation to changing economic and market conditions and ensuring responsiveness and agility. Disadvantages of non equity alliances range from limited irreversible commitment and weak authority structures to unclear property rights, which might lead to unintended knowledge transfers.¹⁷ In contrast to the previ ously discussed non equity alliances, in equity based joint ventures (JVs), ties between the parent companies go beyond contractual agreements as resources from more than one organization are combined to create a new organizational entity.¹⁸ As parent com panies devote financial resources to the alliance, they become committed to the alliance, which also serves as a source of trust.¹⁹ Moreover, equity based alliances account for a high degree of structural conformity and long term orientation. Under these circum stances relationships can be built up and its higher level of rigidity and stability facili tates planning.²⁰ Osborn and Baughn examined governance structures in 153 R&D alli ances and their respective outcomes. They finally concluded that research and develop ment firms prefer joint ventures. Major advantages arise from good alliance implemen tation into the parent company, which facilitates flow of information and provides for a day to day coordination. Moreover, as equity based alliances, like joint ventures, enter as legal entities partner interests are more aligned and opportunism can be reduced to a certain degree.²¹

2.2 Organizational learning

The importance of knowledge acquisition and learning has been pointed out by several researches and is indeed a major motivation for many companies to enter into strategic alliances. For that reason, it is crucial to understand how knowledge is created and how it travels within the organization.

It has been argued that innovative ideas occur only to the individual and thus organ izational learning occurs through the medium of individual members.²² Nevertheless, interaction between individuals is crucial to amplify and develop knowledge, as organ izational learning is more than just the mere sum of its individuals learning.²³ Knowl edge creation can be perceived as a spiral like process, which propels upwards from the individual to the organizational level.²⁴ As a matter of fact, it involves different sub processes, which are closely interwoven with each other and occur across different lev els of the organization.²⁵

Besides, organizational learning involves interaction between tacit and explicit knowledge. Explicit knowledge can be characterized as being systematic, universal and transparent. Thus it can be written down, encoded, easily communicated and explained to anyone with some basic understanding of the generic technology. As it “[…] is not deeply rooted, ingrained or embedded within the person or firm applying it”²⁶ one does not even have to be an employee of the firm to acquire explicit knowledge. Typical ex amples for explicit knowledge are blue prints, technical specifications, product designs and manufacturing processes. In contrast, tacit knowledge is very difficult to communi cate. Lei, Slocum and Pitts suggest that “[…] it is often interwoven with a certain per spective, imagination or skill that can only be learned through practice and immersion directly with the person who possesses it.”²⁷

[...]

¹ See Hamel/Prahalad (1996), p. 43.

² See Hamel/Prahalad/Yves (1989), p. 133.

³ See Hamel/Prahalad (1996), p. 158.

⁴ See Argyris (2002), p. 4.

⁵ See Hamel/Prahalad (1996), pp. 36 37, 90.

⁶ Dyer/Singh (1998), p. 660.

⁷ Inkpen (1998), p. 79.

⁸ See Bleeke/Ernst (1995), p. 97.

⁹ See Hamel (1991), pp. 86 88; Inkpen (1998), p. 70.

¹⁰ See Kanter (1994), p. 97.

¹¹ See Gulati/Zajac (2000), p. 365; Osborn/Hagedoorn (1998), p. 61; Parkhe (1993), p. 796.

¹² See Inkpen (1996), p. 70.

¹³ See Parkhe (1991), p. 581; Hermens (2001), p. 194.

¹⁴ See Dyer/Singh (1998), p. 662.

¹⁵ See Kanter (1994), p. 98.

¹⁶ See Osborn/Baughn (1990), p. 505; Hermens (2001), p. 194.

¹⁷ See Hermens (2001), pp. 194 196.

¹⁸ See Inkpen/Beamish (1997), p. 178.

¹⁹ See Kanter (1994), p. 103.

²⁰ See Hermens (2001), p. 194.

²¹ See Osborn/Baughn (1990), p. 514.

²² See Simon (1999), p. 17.

²³ See Fiol/Lyles (1985), p. 804.

²⁴ See Nonaka (1994), p. 15.

²⁵ See Crossan/Lane/White (1999), p. 524.

²⁶ Lei/Slocum/Pitts (1997), p. 215.

²⁷ Lei/Slocum/Pitts (1997), p. 215.