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PARTNERSHIP VS PORTFOLIO
Challenging Contextual Aspects of Alliance Partnerships vs Alliance
Portfolios – A Literature Review
By: Bonnie Aylor, 2030815
For: BMGT7086, Fall 2014, Dr. Robert Schreck, Unit10A1
Partnership vs Portfolio – Literature Review Page 1 of 20
By: Bonnie Aylor, 2030815 Thursday, December 18, 2014
TABLE OF CONTENTS
TABLE OF CONTENTS ................................................................................................. 1
ABSTRACT....................................................................................................................... 3
INTRODUCTION............................................................................................................. 4
RESEARCH PROBLEM AND QUESTION ................................................................. 5
WHAT IS COLLABORATION?.................................................................................... 5
THEME # 1: COLLABORATION HELPS BUSINESS TO SUCCEED.................... 7
Sharing resources.......................................................................................................... 7
Sharing knowledge........................................................................................................ 7
Sharing social capital.................................................................................................... 8
THEME #2: COLLABORATIVE PORTFOLIOS IMPACT SUCCESS ................... 8
Industry Experience...................................................................................................... 8
Entrant v. Industry Incumbent ................................................................................. 10
Link v. Scale ................................................................................................................ 10
Function v. Resource .................................................................................................. 11
Portfolio redundancy v. singular redundancy.......................................................... 12
THEME #3: CONTEXTUAL ELEMENTS EFFECT THE IMPACT ..................... 12
Market situation.......................................................................................................... 12
Management strategy ................................................................................................. 13
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Number of previous alliances..................................................................................... 14
Secondary contacts...................................................................................................... 14
INCONGRUENT TO OUTSTANDING CONSENSUS ............................................. 15
Knowledge v. Supply .................................................................................................. 15
Market uncertainty..................................................................................................... 15
Stage of market doesn't matter.................................................................................. 16
THESIS............................................................................................................................ 16
CONCLUSION ............................................................................................................... 17
References......................................................................................................................... 19
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ABSTRACT
Businesses use several methods in order to compete with other market players. One such
method that businesses use is to enter into collaborative relationships with other market
contenders. These contenders may be of the same industry or an entirely different industry. The
alignment of these individual partnerships as alliances conglomerated into a multi-alliance
portfolio can have a significant baring on the overall success of the business. Businesses share
resources, knowledge and social capital that use the portfolio structure and other contextual
elements of alliances to determine the outcome of the businesses success.
While research does prove that these collaborative relationships do exist, and that
portfolio factors and contextual factors relate directly to success of the collaboration, there are
some discrepancies in the data. For instance, different authors have conducted research that
prove that either the individual partnership or the entire portfolio of alliances have the greater
effect of success. Researchers have noticed that time of entry into collaboration does have an
effect on success while others have noticed that there is no real effect. Some researchers have
proven that market vulnerability effects success while others have proven that vulnerabilities can
be cured through other aspects of the collaboration body, including other contextual elements
and alternate portfolio dynamics. Finally, researchers have not been able to come to consensus
about whether collaborative relationships are more successful geared around supplies or
knowledge. These inconsistencies warrant a need for further research into the topic of means of
success for collaborative bodies.
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INTRODUCTION
In today’s times, process improvements and constant innovations, combined with a fast
growing array of different technological devices like computers, sensors, even smartphones,
means that the business market is becoming increasingly competitive. There are many different
measures that businesses can engage in so that management can actively participate in the
creation of success for the individual organization’s operations. One activity that businesses tend
to use to as an aid in constructing a successful outcome is that of collaborative alliance formation
(Eisenhardt & Schoonhoven, 1996). Research has discovered that collaborative practices have
indeed contributed to business success (Dussauge, Garrette, & Mitchell, 2000). However, it has
also been found that the portfolio of alliances that one business is involved in contributes to the
ability for single alliances to create success – the entire set of alliances combined effects the
success of two partners engaging in the alliance amidst that portfolio (Lavie & Singh, 2012).
Furthermore, data shows that the contextual aspects of the alliance partnerships, such as the type
of product or services used or the management system involved, have an impact on the success
of that alliance at all levels. These contextual aspects are described as single characteristics of
the alliances that are individualistic and are a part of how the alliance is formed or carried out
that may have either a direct or indirect impact on the individual alliance and other direct
elements that contribute to the alliance success (Lavie & Singh, 2012).
There are a specific set of contributing factors to the success of an alliance portfolio and
its individual alliances. These factors could related to the time of formation, the amount of other
similar partners in the alliance, the reason for the relationship, and other similar aspects of the
portfolio collage. Aside from these factors, there is also an integral effect that the overall
portfolio has in general on the individual alliances within it. Contextual components also
provide a specialized effect over the individual alliance through impacting either the portfolio of
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alliances or that individual alliance itself. Each alliance interacts between the intermediate
partner and the full alliance portfolio to determine an outcome. An alliance collaboration
contains various elements that make-up its successful body, including specific elements that
define it as a unit containing partnerships, alliances, and alliances portfolios. However, there are
inconsistencies in the literature surrounding collaborations, such as in regards to the type of
resource sharing that is most beneficial, the effect of the single partnership over the portfolio,
and the condition of the market during collaborative efforts which each have an effect on the way
that alliances are conducted as protective mechanisms. These inconsistencies can be used to
propose a new research thesis.
RESEARCH PROBLEM AND QUESTION
In researching different aspects of productive business processes, and business
innovations, one prevailing concept has established itself through many topics of literature - the
collaborative business atmosphere. This same topic comes to mind when considering ways to
invite productivity in planning for overseas business expansion. Therefore, it becomes
imperative to develop a greater understanding of how collaborative business practices work, and
what elements of collaborative exchanges create a successful business outcome. The research
question this becomes - What elements are needed to create a coherent business collaboration
and what factors of the collaboration tend to determine a productive outcome?
WHAT IS COLLABORATION?
In order to even begin to study the research problem, it is important to understand what
collaboration is in the business atmosphere. For the context of this research, collaboration can be
defined as the interaction of one focal firm between its individual partnerships and collaborative
alliances. According to Lavie & Singh (2012), an alliance occurs when a business enters into
partnership in order to share resources, marketing, knowledge, and social capital. Singh &
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Mitchell (2005) also see an alliance as an agreement between businesses to share their
experiences for the trading of resources and knowledge. However, Singh & Mitchell (1996)
further describe a partnership as the individual agreements related to a single resource, marketing
agenda or social capital. Cui & O’Conner (2012) depict a partnership as the single relationship
related to sharing between businesses that can be either diverse or redundant, but not both –
whereas an alliance involves multiple interactions that can take on both characteristics.
While these partnerships are imperative in their individual form, they can also share
resources and join together in multiple unions to become alliances. These partnerships can be
affected by the mix of resources across alliances so that it may or may not contribute to the
success of the individual partnership (Dussauge, et al. 2000). These interactive relationships
insinuate the existence of an alliance portfolio that is a factor of collaboration. An alliance
portfolio is the group of individual partnerships held by a business that may or may not be joined
together in a single alliance but that effect the success of an individual partnership indirectly as a
group (Cui, 2013). There are the factors of the individual partnership that deal with the
immediate need, and then the factors of the full alliance portfolio that deal with would could be
immediately required, but definitely will be needed at some point in the future.
The combination of alliances within the alliance portfolio have a major effect on the
strength of a business’s entire collaborative program, and could have a life or death effect on the
individual partnership within the portfolio. However, these portfolio can change overtime with
partnerships leaving and entering the portfolio at any time in order to increase the effectiveness
of the full portfolio (Lavie & Singh, 2012). These changes move around the individual
partnerships in a manner that is supposed to strengthen the effectiveness of each individual
alliance, enhancing the value of the portfolio. The alliance portfolio could have a direct effect on
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the outcome of an individual partnership by providing alternative avenues for gathering
resources and supplies or through the reshaping of information and through the creation of
boundaries and guidelines in contracts related to the partnerships of the portfolio. The portfolio
can also determine whether or not a business is even willing to enter into partnerships with
another business due to the nature of each alliance. The strength of the outcome of a partnership
or single alliance will determine how long a portfolio remains unchanging.
THEME # 1: COLLABORATION HELPS BUSINESS TO SUCCEED
Sharing resources
Although there may be some inconsistencies, the literature has found that collaborative
practices help businesses to succeed. Businesses use collaborations so that they can save on
financial expenditures or obtain a greater reach with their marketing practices. For instance, a
small business might provide a low cost production service to a large corporate value chain and
gain good word from the large corporation with its name listed in product specifications. Many
times businesses will enter the collaboration in order to obtain resources during episodes of
vulnerability, where it is easier to collaborate then to try something individually (Eisenhardt &
Schoonhoven, 1996). Sometimes the business can become dependent on this sharing of the
resources and will do what needs to be done in order to keep the collaboration in place (Singh &
Mitchell, Partnerships, 1996). At other times, a business will use new partnerships for shared
resources in order to dissolve the dependence on the original partnership (Singh & Mitchell,
Partnership, 1996). Regardless of the reason for entering into the collaboration, the sharing of
resources has proven beneficial between partner organizations.
Sharing knowledge
The ability to share and gain knowledge from other collaborative alliances has proven to
be beneficial to doing business within a collaborative atmosphere. For this reason, businesses
debate over diversity in their portfolios and the type of diversity that should be administered so
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that they can trade knowledge (Cui & O’Conner, 2012). This is because diversity tends to mix
different pieces of knowledge, enhancing the overall resource gain (Cui, 2013). This knowledge
sharing is advantageous because it contributes to innovation, evolving the firm’s contribution to
the industry and society (Dussauge, et al. 2000). This knowledge sharing can help a business
survive through situations such as market shock because the business will be more prepared to
compete around the shock (Singh & Mitchell, Environmental Shock, 1996).
Sharing social capital
The sharing of social capital within alliances offers one other way to benefit from
collaboration. According to research conducted by Eisenhardt & Schoonhoven (1996),
companies that hired management that had experience in collaboration and had contacts through
this experience were more likely not only to survive, but to also engage in future collaborative
practices – the contacts obtained through experience serving as a form of social capital. Lavie &
Singh (2012) found that businesses that had outside contacts aligned before market failure, and a
greater level of marketing related alliance partners, were more likely to survive the failure than
those without. Singh & Mitchell (Environmental Shock, 1996) also found that businesses were
more likely to survive a market shock with collaborative partnerships in place related to market
commercialization, which entails greater access to other network constituents that can become a
form of social capital. Finally, Singh & Mitchell (2005) found that businesses were more likely
to even be able to have found alliance partnerships when they already had alliance partnerships
in place that could offer them the social capital required to build collaborative trust.
THEME #2: COLLABORATIVE PORTFOLIOS IMPACT SUCCESS
Industry Experience
Even though inconsistencies do exist and collaboration has proven time and again to
benefit a business towards success, the individual contextual components of the alliance portfolio
have an impact on the ability for the collaborative practices to be beneficial. One factor of the
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portfolio that can have such an impact is the amount of experience in the industry that is
displayed throughout the portfolio. Singh & Mitchell (2005) found that businesses were more
able to gain collaborative partners when they were showing a continuous growth in sales as well
as a continuous pattern of successful partnership agreements with other firms showing good
growth factors – hence they were displaying a pattern of successful experience in the market, not
only among themselves but also among their entire portfolio. This experience displays a sort of
exponential effect through both direct and indirect influence, in top and bottom positioning, for
maintaining healthy future alliance portfolios. Although Cui & O’Conner (2012) found that
diversity of resources is most beneficial for innovation due to the sharing of knowledge capital,
they also found that greater experience with collaborative factors could overcome that
component and offer greater success in areas like functional heterogeneity across the portfolio - a
factor determined to create complication to an alliance portfolio without this experience.
Therefore portfolios should be intermixed with highly experienced alliances as well as newly
knowledgeable market entrants.
Other researchers also found that experience contributed to dominant behaviors in an
alliance arrangement, as well as the ability to find new partnerships. Dussauge, et al. (2000)
found that the ability for a link alliance to reorganize or overtake the partnership agreement
occurred after experience with the collaboration offered a gain in knowledge that contributed to
the ability to reorganize or takeover the partnership resources – thus contributing to the
knowledge capital of the entire portfolio. The experience provided dominance after knowledge
was obtained, allowing the alliance to dissolve with the gaining partner being able to take over
the activities of both businesses. Finally, Eisenhardt & Schoonhoven (1996) found that
maintaining a management team with leaders that are experienced in collaborative practices
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created an atmosphere that favored alliance activity. These management professionals were
more knowledgeable of the ins and outs of collaborative practices as well as more likely to have
gained contacts in the collaborative atmosphere that could help with alliance formation. These
portfolio partners provided a delicate resource of secondary contact during market turmoil across
the entire alliance (Eisenhardt & Schoonhoven, 1996). Thus, the benefits of experience with
collaborative business can take a new enterprise even father within the alliance atmosphere.
Entrant v. Industry Incumbent
It is important to consider the differences in the use of collaboration with a business at
entrance into the market as compared to collabroation with industry incumbents as a major
contextual element of collaborative business, especially when first entering the market. Just as
collaborations will benefit more from experienced players in the portfolio, entrants wishing to
partner for collaborative enterprise are more likely to survive when collaborating with industry
incumbents rather than other market entrants (Singh & Mitchell, 2005). It is noted that these
sorts of businesses are also more likely to gain a growth in sales aspects and, in effect, gain other
collaborative partnerships. Eisenhardt & Schoonhoven (1996) found that businesses wishing to
enter into a market will often lean on these incumbents in order to provide resources such as
market capital and social capital that cannot be obtained just by entering the market. They also
found that businesses entering a market will be more likely to survive and gain partnerships for
collaborative efforts if they have management that has already gained experience through similar
work in the industry because potential partners are more able to trust that the firm will succeed.
Link v. Scale
There is a considerable argument about the effects of link verses scale alliances for
predicting the final outcome of an alliance relationship. It is provided that alliances that are
formed in order to share knowledge resources, such as link alliances, are more likely to survive
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than alliances that are formed on the basis of economies of scale (Dussauge, et al. 2000). This is
mostly when the factor used to judge survival has to do with the outcome of the collaboration.
For knowledge based alliances, usually one firm will reorganize the partnership and the
partnership will stay in the state of the reorganization, or the knowledge gaining partner will
eventually take over the other (Dussauge, et al. 2000). However, the scale economy may either
remain in the same state as when it was formed because the partners become dependent on the
benefits of the alliance in that original state, or it will quickly dissolve due to misinterpretation of
the actual resource being shared before the alliance formed (Dussauge, et al. 2000). This
continuous sharing of the resource in its original state is not considered as successful as even a
reorganization because there is no change in circumstances after the alliance is formed, and the
businesses have an increased dependency factor due to the collaboration. Hence, if the
relationship were to dissolve, that dependency factor could slow processes of the individual
organizations involved.
Function v. Resource
Portfolios can be positively affected by the differences between the outcomes of
resources dependent collaborations verses functionally dependent collaborations. Singh &
Mitchell (Environmental Shock, 1996) found that resource diversity is important for overcoming
a market shock because the greater the number of partnerships with diverse resources, the least
likely that one partnership related to a market shock will be able to effect the survival of all of
the businesses involved. This effect may be due to the increased survival of firm innovation
when resource diversity allows for a gain in knowledge capital (Cui & O’Conner, 2012).
Sometimes this increased knowledge gain will allow one alliance partner to overtake another in
the partnership due to a shared agreement for such benefit to take place (Dussauge, et al. 2000).
In effect, the remaining partner will need more diversity of resources throughout its own
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individual portfolio, with a redundancy of functional attributes, in order to survive through a
reorganization of partnerships once that partnership dissolves (Lavie & Singh, 2012).
Portfolio redundancy v. singular redundancy
The amount of similar verses dissimilar resources contained in an alliance portfolio
would have a significant effect on the outcome of collaboration. This aspect clearly depicts
factors of similarity between single partnerships compared to those between full alliance
portfolios. It is discovered that singular dissimilarity could contribute to synergy among
alliances due to the gain in knowledge through these partnerships (Cui, 2013; Dussauge, et al.
2000). However, while this may be true, it is also important to maintain factors of similarity
throughout the alliance portfolio in order to protect against the early termination of individual
portfolios (Cui, 2013). Such redundancy provides a greater portfolio of reliance in the face of
resource specific market shock (Singh & Mitchell, Environmental Shock, 1996). It also may be
a cause of the increased level of market weight one partner can maintain over another in
partnership negotiations when resources are found through multiple alliance sources (Lavie &
Singh, 2012). This is because redundancy of resource partnerships means that one partner can
easily transfer indirect relations with one partner into more direct relations when another direct
partnership exercises too much supplier power. So while it is important to maintain diversity of
knowledge integration in individual partnership creation, the overall portfolio of partnerships
should display some redundancy of resources in order to safeguard against complications.
THEME #3: CONTEXTUAL ELEMENTS EFFECT THE IMPACT
Market situation
While it is true that a collaborative atmosphere may be beneficial to a business just for
the very usefulness of an alliance, and that the alliance portfolio has a good bearing on the
success of the collaboration, and amidst some inconsistencies; the data indicates that there is still
one other component that has an effect on the success of partner relations – the kaleidoscope of
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contextual elements within the alliance. One such contextual element has to do with the situation
of the market at any specific time during the collaborative relationship. Lavie & Singh (2012)
found that market conditions are a main driving force related to the way that alliance portfolios
evolve. Singh & Mitchell (Environmental Shock, 1996) found that entering into large numbers
of alliance could create complexity for the focal organization except when considering the effect
of multiple alliances during market shock – which will harm the business most if the resources
related to the partnership are also directly related to the market shock. Although Cui &
O’Conner (2012) found that resource diversity is most contributory to the success of business
through collaboration, they also found that functional heterogeneity is important during market
failure and that resource redundancy will assist in retaining resources as the firm continues to
function past such market failure. However, Eisenhardt & Schoonhoven (1996) found that one
discretionary principle regarding the formation of alliances during market vulnerabilities is that
when management teams have a large amount of combined experience on the market,
vulnerability may not be a contributory factor to alliance formation.
Management strategy
Incorporated general management strategies in an organization with guidelines related to
the management of alliances could benefit towards the success of a collabroation. In Lavie &
Singh’s (2012) study regarding the evolution of business portfolios, it was found that when one
partner clings to another outside of the individual partnership, the harmful effects of that clinging
from one business partnership to another tended to balance out when the alliance portfolio was
being managed efficiently before the partner began to cling. Furthermore, Singh & Mitchell
(Environmental Shock, 1996) found that the effects of market shock on diverse resource
portfolios when the shock was directly related to a single resource were reduced, and sometimes
even nitrified, when the portfolio was being managed effectively. Singh & Mitchell
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(Partnerships, 1996) found that portfolio management has the capability of arranging alliance
portfolios in such a way that partner dissolution will not affect the success of the focal firm. Cui
& O’Conner (2012) also found that the effects of functional diversity on intellectual resources
sharing are most beneficial with portfolio management practices in place.
Number of previous alliances
One contextual element that seems to be unanimous towards the success of a
collaborative relationship has to do with the number of previous alliances a focal firm has been
involved in. Singh & Mitchell (Partners, 1996) found that the effects of partner dissolution are
deeply lessened the greater the level of experience that the focal firm has with alliance
partnerships. In another study, Singh & Mitchell (2005) also found that the greater the number
of alliances a business has, the greater chance that they will be able to gain new alliances that
could increase their chances of success. Cui (2013) found that the greater the number of
alliances maintained previous to a partnership, and the level of redundancy thereof, could
negatively affect the chances of alliance termination after the partnership is active. Eisenhardt &
Schoonhoven (1996) also found that the greater the number of previous alliances that
management teams have dealt with, the greater chance that the firm will engage in future
alliances.
Secondary contacts
Finally, businesses that have a significant number of secondary contacts are more likely
to succeed in a collaborative atmosphere than businesses that do not. Singh & Mitchell,
(Environmental Shock, 1996) found that engaging in alliances secondary to the resource directly
involved with the shock would allow the business to continue to succeed in face of the shock. In
a different study the same year (Singh & Mitchell, Partnerships, 1996) they found that having
secondary contacts in the market would allow a business a greater chance of realigning
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partnerships when immediate partnerships dissolved, increasing their chance of survival. Cui &
O’Conner (2012) found that although resource diversity contributes to the success of firms
regarding knowledge resources, creating redundancy through secondary contacts will allow a
business to succeed through partnership failure. Furthermore, Eisenhardt & Schoonhoven (1996)
also found that the reason that larger numbers of management team members with alliance
experience can contribute to the success and formation of new alliances is because of the ability
to maintain secondary contacts in the market for building such alliances.
INCONGRUENT TO OUTSTANDING CONSENSUS
Knowledge v. Supply
Although the data on alliances was comprehensive, there were still some incongruences
throughout the data that need further mentioning. First of all, the consensus regarding the type of
resource, knowledge based or supply based, that is shared across an alliance that is bound to
create success for the businesses involved varied among researchers. While Dussauge, et al.
(2000) believe that knowledge base sharing is important in order to create innovation and
compete between other industry players through differentiation, Singh & Mitchell
(Environmental Shock, 1996) believe that some redundancy of resources is important to
overcome market shock – hence the need for scaled economy type alliances. Furthermore, Cui
(2013) believes that scale economies are important in order to safeguard against termination of
partnerships while Cui & O’Conner (2012) show that resource diversity is important in
collaborative activities in order to enhance information sharing, while functional heterogeneity
could be harmful except for in instances where management of finances are required.
Market uncertainty
A second inconsistency in the data has to do with market uncertainty. While Eisenhardt
& Schoonhoven (1996) found that market uncertainty is a derivative of alliance formation, Cui
(2013) found that market uncertainty could be a barrier to alliance formation. However, Cui &
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O’Conner (2012) found that market uncertainty can be managed through redundancy of some
resources and functional similarity. Lavie & Singh (2012) see it a different way, they found that
market uncertainty causes evolution of portfolio design, but does not directly affect alliance
formation.
Stage of market doesn't matter
A final inconsistency has to do with the stage of the market in relation to the success of
alliances after formation. According to Eisenhardt & Schoonhoven (1996), the stage of the
market does not matter, the success of an alliance relies more on the need for alliance and the
experience and social capital gained by management before alliances were formed. Basically,
market stage is not able to effect the market once other factors contributing to alliance formation
and success are taken into consideration. However, Singh & Mitchell (2005) found differently.
They found that the mere formation of alliances and then the success of such depends on the
ability to form alliances early on – at entrance into the market. This is because alliance
formation depends heavily on the successful formation of alliances previous to any particular
partnership.
THESIS
Throughout the material there were a few different inconsistencies. There was one
inconsistency that remained as a major theme throughout each document in the material. This is
in relation to the type of resource being used – knowledge v. supply resources. This goes even
deeper when examining whether diversity of the resource effects the alliance more or if diversity
of functions between alliances more greatly affect the success of the alliance. The research
thesis left to be studied is in regards to the type of resource. The thesis shall be stated as such –
Alliance portfolios should be managed so that knowledge based resources across individual
partnerships remain diverse while supply resources remain with slight redundancy in order to
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create a scaled economy that will last through market uncertainties, while the functional situation
between partnerships does not have an effect on this outcome as long as methods for conducting
the alliance coincide. The research will also define specifically the difference between
knowledge based and supply based resources, and will explain a difference between the effect of
primary and secondary partnerships.
CONCLUSION
There are many ways in which businesses seek to adapt to markets in order to survive.
One of these techniques involve the use of collaborative enterprise. Multiple researchers have
found that collaborative business provides sufficient benefit to individual business, and some
have even found that it provides its most beneficial value from the start of the business onwards.
However, the success of the collaboration depends on the alliance portfolio as well as the context
of the alliance. The portfolio relationship has to do with the types of resources that are shared
and the functional attitudes of each individual business belonging to the portfolio. Contextual
aspects have to do with the indirect elements of the relationship – such as market conditions,
collaborative experience of those making decisions, time in the market, and management
functions towards the alliance. All of these separate factors can combine to make the difference
regarding whether or not collaborative business truly effects the value of an entity entered into
the collaborative agreement.
However, researchers have found inconsistencies in the data regarding what factors are
most conducive to the success of these collaborative relationships. One such contextual element
has to do with the type of resource used in the alliance – knowledge based or supply based. This
contextual element suggests the need for further research to determine exactly how such resource
allocation effects alliance success, and whether or not functional heterogeneity will contribute to
the effect. Secondarily, research needs to define if there is the same effect when dealing with
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primary alliances as compared to secondary. At the conclusion of such research, evidence
regarding how to make successful collaborations will be of major benefit to businesses looking
to enter into the collaborative marketplace.
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REFERENCES
Cui, A. S. (2013). Portfolio Dynamics and Alliance Termination: The Contingent Role of
Resource Dissimilarity. Journal Of Marketing, 77(3), 15-32.
Cui, A., & O'Connor, G. (2012). Alliance Portfolio Resource Diversity and Firm Innovation.
Journal Of Marketing, 76(4), 24-43. doi:10.1509/jm.11.0130
Dussauge, P., Garrette, B., & Mitchell, W. (2000). Learning from competing partners: Outcomes
and durations of scale and link alliances in Europe, North America and Asia. Strategic
Management Journal, 21(2), 99. Retrieved from
http://search.proquest.com.library.capella.edu/docview/225011571?accountid=27965
Eisenhardt, K. M., &Schoonhoven, C. (1996). Resource-based View of Strategic Alliance
Formation: Strategic and Social Effects in Entrepreneurial Firms. Organization
Science, 7(2), 136-150.
Lavie, D., & Singh, H. (2012). The evolution of alliance portfolios: the case of Unisys. Industrial
& Corporate Change, 21(3), 763-809.
Mitchell, W., & Singh, K. (1996). Survival of Businesses Using Collaborative Relationships to
Commercialize Complex Goods. Strategic Management Journal, 17(3), 169-195.
Singh, K., & Mitchell, W. (1996). Precarious Collaboration: Business Survival after Partners
Shut Down or Form New Partnerships. Strategic Management Journal, 1799-115.
Partnership vs Portfolio – Literature Review Page 20 of 20
By: Bonnie Aylor, 2030815 Thursday, December 18, 2014
Singh, K., & Mitchell, W. (2005). Growth Dynamics: The Bidirectional Relationship between
interirm Collabroation and Business Sales in Entrant and Incumbent Alliances. Strategic
Management Journal, 26(6), 497-521. doi:10.1002/smj.462

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LiteratureReview_AylorBonnie_FinalPaper_Unit10a1

  • 1. PARTNERSHIP VS PORTFOLIO Challenging Contextual Aspects of Alliance Partnerships vs Alliance Portfolios – A Literature Review By: Bonnie Aylor, 2030815 For: BMGT7086, Fall 2014, Dr. Robert Schreck, Unit10A1
  • 2. Partnership vs Portfolio – Literature Review Page 1 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 TABLE OF CONTENTS TABLE OF CONTENTS ................................................................................................. 1 ABSTRACT....................................................................................................................... 3 INTRODUCTION............................................................................................................. 4 RESEARCH PROBLEM AND QUESTION ................................................................. 5 WHAT IS COLLABORATION?.................................................................................... 5 THEME # 1: COLLABORATION HELPS BUSINESS TO SUCCEED.................... 7 Sharing resources.......................................................................................................... 7 Sharing knowledge........................................................................................................ 7 Sharing social capital.................................................................................................... 8 THEME #2: COLLABORATIVE PORTFOLIOS IMPACT SUCCESS ................... 8 Industry Experience...................................................................................................... 8 Entrant v. Industry Incumbent ................................................................................. 10 Link v. Scale ................................................................................................................ 10 Function v. Resource .................................................................................................. 11 Portfolio redundancy v. singular redundancy.......................................................... 12 THEME #3: CONTEXTUAL ELEMENTS EFFECT THE IMPACT ..................... 12 Market situation.......................................................................................................... 12 Management strategy ................................................................................................. 13
  • 3. Partnership vs Portfolio – Literature Review Page 2 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 Number of previous alliances..................................................................................... 14 Secondary contacts...................................................................................................... 14 INCONGRUENT TO OUTSTANDING CONSENSUS ............................................. 15 Knowledge v. Supply .................................................................................................. 15 Market uncertainty..................................................................................................... 15 Stage of market doesn't matter.................................................................................. 16 THESIS............................................................................................................................ 16 CONCLUSION ............................................................................................................... 17 References......................................................................................................................... 19
  • 4. Partnership vs Portfolio – Literature Review Page 3 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 ABSTRACT Businesses use several methods in order to compete with other market players. One such method that businesses use is to enter into collaborative relationships with other market contenders. These contenders may be of the same industry or an entirely different industry. The alignment of these individual partnerships as alliances conglomerated into a multi-alliance portfolio can have a significant baring on the overall success of the business. Businesses share resources, knowledge and social capital that use the portfolio structure and other contextual elements of alliances to determine the outcome of the businesses success. While research does prove that these collaborative relationships do exist, and that portfolio factors and contextual factors relate directly to success of the collaboration, there are some discrepancies in the data. For instance, different authors have conducted research that prove that either the individual partnership or the entire portfolio of alliances have the greater effect of success. Researchers have noticed that time of entry into collaboration does have an effect on success while others have noticed that there is no real effect. Some researchers have proven that market vulnerability effects success while others have proven that vulnerabilities can be cured through other aspects of the collaboration body, including other contextual elements and alternate portfolio dynamics. Finally, researchers have not been able to come to consensus about whether collaborative relationships are more successful geared around supplies or knowledge. These inconsistencies warrant a need for further research into the topic of means of success for collaborative bodies.
  • 5. Partnership vs Portfolio – Literature Review Page 4 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 INTRODUCTION In today’s times, process improvements and constant innovations, combined with a fast growing array of different technological devices like computers, sensors, even smartphones, means that the business market is becoming increasingly competitive. There are many different measures that businesses can engage in so that management can actively participate in the creation of success for the individual organization’s operations. One activity that businesses tend to use to as an aid in constructing a successful outcome is that of collaborative alliance formation (Eisenhardt & Schoonhoven, 1996). Research has discovered that collaborative practices have indeed contributed to business success (Dussauge, Garrette, & Mitchell, 2000). However, it has also been found that the portfolio of alliances that one business is involved in contributes to the ability for single alliances to create success – the entire set of alliances combined effects the success of two partners engaging in the alliance amidst that portfolio (Lavie & Singh, 2012). Furthermore, data shows that the contextual aspects of the alliance partnerships, such as the type of product or services used or the management system involved, have an impact on the success of that alliance at all levels. These contextual aspects are described as single characteristics of the alliances that are individualistic and are a part of how the alliance is formed or carried out that may have either a direct or indirect impact on the individual alliance and other direct elements that contribute to the alliance success (Lavie & Singh, 2012). There are a specific set of contributing factors to the success of an alliance portfolio and its individual alliances. These factors could related to the time of formation, the amount of other similar partners in the alliance, the reason for the relationship, and other similar aspects of the portfolio collage. Aside from these factors, there is also an integral effect that the overall portfolio has in general on the individual alliances within it. Contextual components also provide a specialized effect over the individual alliance through impacting either the portfolio of
  • 6. Partnership vs Portfolio – Literature Review Page 5 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 alliances or that individual alliance itself. Each alliance interacts between the intermediate partner and the full alliance portfolio to determine an outcome. An alliance collaboration contains various elements that make-up its successful body, including specific elements that define it as a unit containing partnerships, alliances, and alliances portfolios. However, there are inconsistencies in the literature surrounding collaborations, such as in regards to the type of resource sharing that is most beneficial, the effect of the single partnership over the portfolio, and the condition of the market during collaborative efforts which each have an effect on the way that alliances are conducted as protective mechanisms. These inconsistencies can be used to propose a new research thesis. RESEARCH PROBLEM AND QUESTION In researching different aspects of productive business processes, and business innovations, one prevailing concept has established itself through many topics of literature - the collaborative business atmosphere. This same topic comes to mind when considering ways to invite productivity in planning for overseas business expansion. Therefore, it becomes imperative to develop a greater understanding of how collaborative business practices work, and what elements of collaborative exchanges create a successful business outcome. The research question this becomes - What elements are needed to create a coherent business collaboration and what factors of the collaboration tend to determine a productive outcome? WHAT IS COLLABORATION? In order to even begin to study the research problem, it is important to understand what collaboration is in the business atmosphere. For the context of this research, collaboration can be defined as the interaction of one focal firm between its individual partnerships and collaborative alliances. According to Lavie & Singh (2012), an alliance occurs when a business enters into partnership in order to share resources, marketing, knowledge, and social capital. Singh &
  • 7. Partnership vs Portfolio – Literature Review Page 6 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 Mitchell (2005) also see an alliance as an agreement between businesses to share their experiences for the trading of resources and knowledge. However, Singh & Mitchell (1996) further describe a partnership as the individual agreements related to a single resource, marketing agenda or social capital. Cui & O’Conner (2012) depict a partnership as the single relationship related to sharing between businesses that can be either diverse or redundant, but not both – whereas an alliance involves multiple interactions that can take on both characteristics. While these partnerships are imperative in their individual form, they can also share resources and join together in multiple unions to become alliances. These partnerships can be affected by the mix of resources across alliances so that it may or may not contribute to the success of the individual partnership (Dussauge, et al. 2000). These interactive relationships insinuate the existence of an alliance portfolio that is a factor of collaboration. An alliance portfolio is the group of individual partnerships held by a business that may or may not be joined together in a single alliance but that effect the success of an individual partnership indirectly as a group (Cui, 2013). There are the factors of the individual partnership that deal with the immediate need, and then the factors of the full alliance portfolio that deal with would could be immediately required, but definitely will be needed at some point in the future. The combination of alliances within the alliance portfolio have a major effect on the strength of a business’s entire collaborative program, and could have a life or death effect on the individual partnership within the portfolio. However, these portfolio can change overtime with partnerships leaving and entering the portfolio at any time in order to increase the effectiveness of the full portfolio (Lavie & Singh, 2012). These changes move around the individual partnerships in a manner that is supposed to strengthen the effectiveness of each individual alliance, enhancing the value of the portfolio. The alliance portfolio could have a direct effect on
  • 8. Partnership vs Portfolio – Literature Review Page 7 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 the outcome of an individual partnership by providing alternative avenues for gathering resources and supplies or through the reshaping of information and through the creation of boundaries and guidelines in contracts related to the partnerships of the portfolio. The portfolio can also determine whether or not a business is even willing to enter into partnerships with another business due to the nature of each alliance. The strength of the outcome of a partnership or single alliance will determine how long a portfolio remains unchanging. THEME # 1: COLLABORATION HELPS BUSINESS TO SUCCEED Sharing resources Although there may be some inconsistencies, the literature has found that collaborative practices help businesses to succeed. Businesses use collaborations so that they can save on financial expenditures or obtain a greater reach with their marketing practices. For instance, a small business might provide a low cost production service to a large corporate value chain and gain good word from the large corporation with its name listed in product specifications. Many times businesses will enter the collaboration in order to obtain resources during episodes of vulnerability, where it is easier to collaborate then to try something individually (Eisenhardt & Schoonhoven, 1996). Sometimes the business can become dependent on this sharing of the resources and will do what needs to be done in order to keep the collaboration in place (Singh & Mitchell, Partnerships, 1996). At other times, a business will use new partnerships for shared resources in order to dissolve the dependence on the original partnership (Singh & Mitchell, Partnership, 1996). Regardless of the reason for entering into the collaboration, the sharing of resources has proven beneficial between partner organizations. Sharing knowledge The ability to share and gain knowledge from other collaborative alliances has proven to be beneficial to doing business within a collaborative atmosphere. For this reason, businesses debate over diversity in their portfolios and the type of diversity that should be administered so
  • 9. Partnership vs Portfolio – Literature Review Page 8 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 that they can trade knowledge (Cui & O’Conner, 2012). This is because diversity tends to mix different pieces of knowledge, enhancing the overall resource gain (Cui, 2013). This knowledge sharing is advantageous because it contributes to innovation, evolving the firm’s contribution to the industry and society (Dussauge, et al. 2000). This knowledge sharing can help a business survive through situations such as market shock because the business will be more prepared to compete around the shock (Singh & Mitchell, Environmental Shock, 1996). Sharing social capital The sharing of social capital within alliances offers one other way to benefit from collaboration. According to research conducted by Eisenhardt & Schoonhoven (1996), companies that hired management that had experience in collaboration and had contacts through this experience were more likely not only to survive, but to also engage in future collaborative practices – the contacts obtained through experience serving as a form of social capital. Lavie & Singh (2012) found that businesses that had outside contacts aligned before market failure, and a greater level of marketing related alliance partners, were more likely to survive the failure than those without. Singh & Mitchell (Environmental Shock, 1996) also found that businesses were more likely to survive a market shock with collaborative partnerships in place related to market commercialization, which entails greater access to other network constituents that can become a form of social capital. Finally, Singh & Mitchell (2005) found that businesses were more likely to even be able to have found alliance partnerships when they already had alliance partnerships in place that could offer them the social capital required to build collaborative trust. THEME #2: COLLABORATIVE PORTFOLIOS IMPACT SUCCESS Industry Experience Even though inconsistencies do exist and collaboration has proven time and again to benefit a business towards success, the individual contextual components of the alliance portfolio have an impact on the ability for the collaborative practices to be beneficial. One factor of the
  • 10. Partnership vs Portfolio – Literature Review Page 9 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 portfolio that can have such an impact is the amount of experience in the industry that is displayed throughout the portfolio. Singh & Mitchell (2005) found that businesses were more able to gain collaborative partners when they were showing a continuous growth in sales as well as a continuous pattern of successful partnership agreements with other firms showing good growth factors – hence they were displaying a pattern of successful experience in the market, not only among themselves but also among their entire portfolio. This experience displays a sort of exponential effect through both direct and indirect influence, in top and bottom positioning, for maintaining healthy future alliance portfolios. Although Cui & O’Conner (2012) found that diversity of resources is most beneficial for innovation due to the sharing of knowledge capital, they also found that greater experience with collaborative factors could overcome that component and offer greater success in areas like functional heterogeneity across the portfolio - a factor determined to create complication to an alliance portfolio without this experience. Therefore portfolios should be intermixed with highly experienced alliances as well as newly knowledgeable market entrants. Other researchers also found that experience contributed to dominant behaviors in an alliance arrangement, as well as the ability to find new partnerships. Dussauge, et al. (2000) found that the ability for a link alliance to reorganize or overtake the partnership agreement occurred after experience with the collaboration offered a gain in knowledge that contributed to the ability to reorganize or takeover the partnership resources – thus contributing to the knowledge capital of the entire portfolio. The experience provided dominance after knowledge was obtained, allowing the alliance to dissolve with the gaining partner being able to take over the activities of both businesses. Finally, Eisenhardt & Schoonhoven (1996) found that maintaining a management team with leaders that are experienced in collaborative practices
  • 11. Partnership vs Portfolio – Literature Review Page 10 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 created an atmosphere that favored alliance activity. These management professionals were more knowledgeable of the ins and outs of collaborative practices as well as more likely to have gained contacts in the collaborative atmosphere that could help with alliance formation. These portfolio partners provided a delicate resource of secondary contact during market turmoil across the entire alliance (Eisenhardt & Schoonhoven, 1996). Thus, the benefits of experience with collaborative business can take a new enterprise even father within the alliance atmosphere. Entrant v. Industry Incumbent It is important to consider the differences in the use of collaboration with a business at entrance into the market as compared to collabroation with industry incumbents as a major contextual element of collaborative business, especially when first entering the market. Just as collaborations will benefit more from experienced players in the portfolio, entrants wishing to partner for collaborative enterprise are more likely to survive when collaborating with industry incumbents rather than other market entrants (Singh & Mitchell, 2005). It is noted that these sorts of businesses are also more likely to gain a growth in sales aspects and, in effect, gain other collaborative partnerships. Eisenhardt & Schoonhoven (1996) found that businesses wishing to enter into a market will often lean on these incumbents in order to provide resources such as market capital and social capital that cannot be obtained just by entering the market. They also found that businesses entering a market will be more likely to survive and gain partnerships for collaborative efforts if they have management that has already gained experience through similar work in the industry because potential partners are more able to trust that the firm will succeed. Link v. Scale There is a considerable argument about the effects of link verses scale alliances for predicting the final outcome of an alliance relationship. It is provided that alliances that are formed in order to share knowledge resources, such as link alliances, are more likely to survive
  • 12. Partnership vs Portfolio – Literature Review Page 11 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 than alliances that are formed on the basis of economies of scale (Dussauge, et al. 2000). This is mostly when the factor used to judge survival has to do with the outcome of the collaboration. For knowledge based alliances, usually one firm will reorganize the partnership and the partnership will stay in the state of the reorganization, or the knowledge gaining partner will eventually take over the other (Dussauge, et al. 2000). However, the scale economy may either remain in the same state as when it was formed because the partners become dependent on the benefits of the alliance in that original state, or it will quickly dissolve due to misinterpretation of the actual resource being shared before the alliance formed (Dussauge, et al. 2000). This continuous sharing of the resource in its original state is not considered as successful as even a reorganization because there is no change in circumstances after the alliance is formed, and the businesses have an increased dependency factor due to the collaboration. Hence, if the relationship were to dissolve, that dependency factor could slow processes of the individual organizations involved. Function v. Resource Portfolios can be positively affected by the differences between the outcomes of resources dependent collaborations verses functionally dependent collaborations. Singh & Mitchell (Environmental Shock, 1996) found that resource diversity is important for overcoming a market shock because the greater the number of partnerships with diverse resources, the least likely that one partnership related to a market shock will be able to effect the survival of all of the businesses involved. This effect may be due to the increased survival of firm innovation when resource diversity allows for a gain in knowledge capital (Cui & O’Conner, 2012). Sometimes this increased knowledge gain will allow one alliance partner to overtake another in the partnership due to a shared agreement for such benefit to take place (Dussauge, et al. 2000). In effect, the remaining partner will need more diversity of resources throughout its own
  • 13. Partnership vs Portfolio – Literature Review Page 12 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 individual portfolio, with a redundancy of functional attributes, in order to survive through a reorganization of partnerships once that partnership dissolves (Lavie & Singh, 2012). Portfolio redundancy v. singular redundancy The amount of similar verses dissimilar resources contained in an alliance portfolio would have a significant effect on the outcome of collaboration. This aspect clearly depicts factors of similarity between single partnerships compared to those between full alliance portfolios. It is discovered that singular dissimilarity could contribute to synergy among alliances due to the gain in knowledge through these partnerships (Cui, 2013; Dussauge, et al. 2000). However, while this may be true, it is also important to maintain factors of similarity throughout the alliance portfolio in order to protect against the early termination of individual portfolios (Cui, 2013). Such redundancy provides a greater portfolio of reliance in the face of resource specific market shock (Singh & Mitchell, Environmental Shock, 1996). It also may be a cause of the increased level of market weight one partner can maintain over another in partnership negotiations when resources are found through multiple alliance sources (Lavie & Singh, 2012). This is because redundancy of resource partnerships means that one partner can easily transfer indirect relations with one partner into more direct relations when another direct partnership exercises too much supplier power. So while it is important to maintain diversity of knowledge integration in individual partnership creation, the overall portfolio of partnerships should display some redundancy of resources in order to safeguard against complications. THEME #3: CONTEXTUAL ELEMENTS EFFECT THE IMPACT Market situation While it is true that a collaborative atmosphere may be beneficial to a business just for the very usefulness of an alliance, and that the alliance portfolio has a good bearing on the success of the collaboration, and amidst some inconsistencies; the data indicates that there is still one other component that has an effect on the success of partner relations – the kaleidoscope of
  • 14. Partnership vs Portfolio – Literature Review Page 13 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 contextual elements within the alliance. One such contextual element has to do with the situation of the market at any specific time during the collaborative relationship. Lavie & Singh (2012) found that market conditions are a main driving force related to the way that alliance portfolios evolve. Singh & Mitchell (Environmental Shock, 1996) found that entering into large numbers of alliance could create complexity for the focal organization except when considering the effect of multiple alliances during market shock – which will harm the business most if the resources related to the partnership are also directly related to the market shock. Although Cui & O’Conner (2012) found that resource diversity is most contributory to the success of business through collaboration, they also found that functional heterogeneity is important during market failure and that resource redundancy will assist in retaining resources as the firm continues to function past such market failure. However, Eisenhardt & Schoonhoven (1996) found that one discretionary principle regarding the formation of alliances during market vulnerabilities is that when management teams have a large amount of combined experience on the market, vulnerability may not be a contributory factor to alliance formation. Management strategy Incorporated general management strategies in an organization with guidelines related to the management of alliances could benefit towards the success of a collabroation. In Lavie & Singh’s (2012) study regarding the evolution of business portfolios, it was found that when one partner clings to another outside of the individual partnership, the harmful effects of that clinging from one business partnership to another tended to balance out when the alliance portfolio was being managed efficiently before the partner began to cling. Furthermore, Singh & Mitchell (Environmental Shock, 1996) found that the effects of market shock on diverse resource portfolios when the shock was directly related to a single resource were reduced, and sometimes even nitrified, when the portfolio was being managed effectively. Singh & Mitchell
  • 15. Partnership vs Portfolio – Literature Review Page 14 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 (Partnerships, 1996) found that portfolio management has the capability of arranging alliance portfolios in such a way that partner dissolution will not affect the success of the focal firm. Cui & O’Conner (2012) also found that the effects of functional diversity on intellectual resources sharing are most beneficial with portfolio management practices in place. Number of previous alliances One contextual element that seems to be unanimous towards the success of a collaborative relationship has to do with the number of previous alliances a focal firm has been involved in. Singh & Mitchell (Partners, 1996) found that the effects of partner dissolution are deeply lessened the greater the level of experience that the focal firm has with alliance partnerships. In another study, Singh & Mitchell (2005) also found that the greater the number of alliances a business has, the greater chance that they will be able to gain new alliances that could increase their chances of success. Cui (2013) found that the greater the number of alliances maintained previous to a partnership, and the level of redundancy thereof, could negatively affect the chances of alliance termination after the partnership is active. Eisenhardt & Schoonhoven (1996) also found that the greater the number of previous alliances that management teams have dealt with, the greater chance that the firm will engage in future alliances. Secondary contacts Finally, businesses that have a significant number of secondary contacts are more likely to succeed in a collaborative atmosphere than businesses that do not. Singh & Mitchell, (Environmental Shock, 1996) found that engaging in alliances secondary to the resource directly involved with the shock would allow the business to continue to succeed in face of the shock. In a different study the same year (Singh & Mitchell, Partnerships, 1996) they found that having secondary contacts in the market would allow a business a greater chance of realigning
  • 16. Partnership vs Portfolio – Literature Review Page 15 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 partnerships when immediate partnerships dissolved, increasing their chance of survival. Cui & O’Conner (2012) found that although resource diversity contributes to the success of firms regarding knowledge resources, creating redundancy through secondary contacts will allow a business to succeed through partnership failure. Furthermore, Eisenhardt & Schoonhoven (1996) also found that the reason that larger numbers of management team members with alliance experience can contribute to the success and formation of new alliances is because of the ability to maintain secondary contacts in the market for building such alliances. INCONGRUENT TO OUTSTANDING CONSENSUS Knowledge v. Supply Although the data on alliances was comprehensive, there were still some incongruences throughout the data that need further mentioning. First of all, the consensus regarding the type of resource, knowledge based or supply based, that is shared across an alliance that is bound to create success for the businesses involved varied among researchers. While Dussauge, et al. (2000) believe that knowledge base sharing is important in order to create innovation and compete between other industry players through differentiation, Singh & Mitchell (Environmental Shock, 1996) believe that some redundancy of resources is important to overcome market shock – hence the need for scaled economy type alliances. Furthermore, Cui (2013) believes that scale economies are important in order to safeguard against termination of partnerships while Cui & O’Conner (2012) show that resource diversity is important in collaborative activities in order to enhance information sharing, while functional heterogeneity could be harmful except for in instances where management of finances are required. Market uncertainty A second inconsistency in the data has to do with market uncertainty. While Eisenhardt & Schoonhoven (1996) found that market uncertainty is a derivative of alliance formation, Cui (2013) found that market uncertainty could be a barrier to alliance formation. However, Cui &
  • 17. Partnership vs Portfolio – Literature Review Page 16 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 O’Conner (2012) found that market uncertainty can be managed through redundancy of some resources and functional similarity. Lavie & Singh (2012) see it a different way, they found that market uncertainty causes evolution of portfolio design, but does not directly affect alliance formation. Stage of market doesn't matter A final inconsistency has to do with the stage of the market in relation to the success of alliances after formation. According to Eisenhardt & Schoonhoven (1996), the stage of the market does not matter, the success of an alliance relies more on the need for alliance and the experience and social capital gained by management before alliances were formed. Basically, market stage is not able to effect the market once other factors contributing to alliance formation and success are taken into consideration. However, Singh & Mitchell (2005) found differently. They found that the mere formation of alliances and then the success of such depends on the ability to form alliances early on – at entrance into the market. This is because alliance formation depends heavily on the successful formation of alliances previous to any particular partnership. THESIS Throughout the material there were a few different inconsistencies. There was one inconsistency that remained as a major theme throughout each document in the material. This is in relation to the type of resource being used – knowledge v. supply resources. This goes even deeper when examining whether diversity of the resource effects the alliance more or if diversity of functions between alliances more greatly affect the success of the alliance. The research thesis left to be studied is in regards to the type of resource. The thesis shall be stated as such – Alliance portfolios should be managed so that knowledge based resources across individual partnerships remain diverse while supply resources remain with slight redundancy in order to
  • 18. Partnership vs Portfolio – Literature Review Page 17 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 create a scaled economy that will last through market uncertainties, while the functional situation between partnerships does not have an effect on this outcome as long as methods for conducting the alliance coincide. The research will also define specifically the difference between knowledge based and supply based resources, and will explain a difference between the effect of primary and secondary partnerships. CONCLUSION There are many ways in which businesses seek to adapt to markets in order to survive. One of these techniques involve the use of collaborative enterprise. Multiple researchers have found that collaborative business provides sufficient benefit to individual business, and some have even found that it provides its most beneficial value from the start of the business onwards. However, the success of the collaboration depends on the alliance portfolio as well as the context of the alliance. The portfolio relationship has to do with the types of resources that are shared and the functional attitudes of each individual business belonging to the portfolio. Contextual aspects have to do with the indirect elements of the relationship – such as market conditions, collaborative experience of those making decisions, time in the market, and management functions towards the alliance. All of these separate factors can combine to make the difference regarding whether or not collaborative business truly effects the value of an entity entered into the collaborative agreement. However, researchers have found inconsistencies in the data regarding what factors are most conducive to the success of these collaborative relationships. One such contextual element has to do with the type of resource used in the alliance – knowledge based or supply based. This contextual element suggests the need for further research to determine exactly how such resource allocation effects alliance success, and whether or not functional heterogeneity will contribute to the effect. Secondarily, research needs to define if there is the same effect when dealing with
  • 19. Partnership vs Portfolio – Literature Review Page 18 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 primary alliances as compared to secondary. At the conclusion of such research, evidence regarding how to make successful collaborations will be of major benefit to businesses looking to enter into the collaborative marketplace.
  • 20. Partnership vs Portfolio – Literature Review Page 19 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 REFERENCES Cui, A. S. (2013). Portfolio Dynamics and Alliance Termination: The Contingent Role of Resource Dissimilarity. Journal Of Marketing, 77(3), 15-32. Cui, A., & O'Connor, G. (2012). Alliance Portfolio Resource Diversity and Firm Innovation. Journal Of Marketing, 76(4), 24-43. doi:10.1509/jm.11.0130 Dussauge, P., Garrette, B., & Mitchell, W. (2000). Learning from competing partners: Outcomes and durations of scale and link alliances in Europe, North America and Asia. Strategic Management Journal, 21(2), 99. Retrieved from http://search.proquest.com.library.capella.edu/docview/225011571?accountid=27965 Eisenhardt, K. M., &Schoonhoven, C. (1996). Resource-based View of Strategic Alliance Formation: Strategic and Social Effects in Entrepreneurial Firms. Organization Science, 7(2), 136-150. Lavie, D., & Singh, H. (2012). The evolution of alliance portfolios: the case of Unisys. Industrial & Corporate Change, 21(3), 763-809. Mitchell, W., & Singh, K. (1996). Survival of Businesses Using Collaborative Relationships to Commercialize Complex Goods. Strategic Management Journal, 17(3), 169-195. Singh, K., & Mitchell, W. (1996). Precarious Collaboration: Business Survival after Partners Shut Down or Form New Partnerships. Strategic Management Journal, 1799-115.
  • 21. Partnership vs Portfolio – Literature Review Page 20 of 20 By: Bonnie Aylor, 2030815 Thursday, December 18, 2014 Singh, K., & Mitchell, W. (2005). Growth Dynamics: The Bidirectional Relationship between interirm Collabroation and Business Sales in Entrant and Incumbent Alliances. Strategic Management Journal, 26(6), 497-521. doi:10.1002/smj.462