The Impacts of Alliance Purpose and Partner Similarity on Alliance Governance
| DOI | http://doi.org/10.1111/1467-8551.00214 |
| Author | Nitin Pangarkar,Saul Klein |
| Published date | 01 December 2001 |
| Date | 01 December 2001 |
Background
The last two decades have witnessed a dramatic
increase in the rate of strategic alliance formation
(Anderson, 1990; Hergert and Morris, 1988;
Johansson, 1995), particularly in international
markets. Increasingly, strategic alliances are seen
as competitive necessities (Johansson, 1995; Parkhe,
1993). Alliances enable firms to achieve a variety
of objectives, such as attaining a wider geographic
presence, sharing risks, pooling complementary
skills, and achieving critical mass (Varadarajan
and Cunningham, 1995). Alliances, however, are
also characterized by ‘inherent instability arising
from uncertainty regarding a partner’s future be-
haviour and the absence of a higher authority to
ensure compliance’ (Parkhe, 1993, p. 794). Though
estimates of alliance mortality rates are wide rang-
ing (Blodgett, 1992; Business Week, 1986; Geringer
and Hebert, 1991; Harrigan, 1985; Inkpen and
Beamish, 1997; Kogut, 1988; Park and Ungson,
1997; Porter and Fuller, 1986), scholars studying
strategic alliances agree that more appropriate
structuring of alliances might help make the
cooperation more robust, thus reducing the likeli-
hood of failure (Gulati, 1995; Parkhe, 1993).
This study focuses on the choice between two
alternative alliance governance structures: those
involving equity stakes, and those without any
equity investment. Previous research has argued
that equity stakes mitigate the possibilities of
opportunism by partners and thus are an important
British Journal of Management, Vol. 12, 341–353 (2001)
© 2001 British Academy of Management
The Impacts of Alliance Purpose and
Partner Similarity on Alliance
Governance
Nitin Pangarkar and Saul Klein*
Faculty of Business Administration, National University of Singapore,
FBA2, 17 Law Link, Singapore 117591 and *Faculty of Business, University of Victoria,
P.O. Box 1700, STN CSC, Victoria, BC V8W 2Y2, Canada
email: fbapn@nus.edu.sg (Pangarkar); email: sklein@business.uvic.ca (*Klein)
It is generally recognized that the governance structure of an alliance has an impact on
its probability of success. In this study, we examine the choice between two alternative
alliance governance structures: equity and non-equity. Drawing from transaction cost
economics, two sets of factors, namely alliance purpose (R&D or marketing) and
cultural distance between partners, are hypothesized to influence the above choice. We
further hypothesize that collaborative R&D alliances, where both parties contribute
technical knowledge, are more likely to lead to the formation of equity alliances than
non-collaborative research agreements, where only one partner may be doing the
research work. Based on a sample of 2407 alliances formed in the global biotechnology
industry, we find partial support for the hypothesized relationships. Specifically, we find
that collaborative R&D alliances are more likely to be equity alliances, whereas non-
collaborative R&D alliances do not have any impact on the choice of the governance
form. We also find that alliances formed with a marketing purpose are less likely to
be equity alliances. We did not find any relationship between cultural distance and the
choice of equity alliances.
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