We have all read the press stories announcing business alliances. They almost always are presented in the brightest glow they will ever have. All involved are sure that both companies want the deal equally and look forward to the mutually beneficial relationship in the most positive terms. However, when you follow these deals over time more than half of them flop and only a few of them come anywhere close to the announcement hype. In fact, it is quite common to see firms in alliance agreements not cooperating according to the terms of the alliance agreement. Why should this be?
Wilma Suen spent five years studying a alliances and specifically why they fail. This book came from her doctoral studies on this topic and is quite interesting. Part of the problem stems from the notion people have that alliances are like marriages when they are not. They rarely benefit the firms involved equally (there may be more than two) and when situations arise when one of the member firms can behave opportunistically, they often do. Why should their shareholders not benefit as much as they can? Suen sees the measures that matter most in analyzing alliances are their power and interdependence. She says that the alliance should not be evaluated as a single entity, but in terms of the individual firms and the balance of power and mutual dependence. I found the real world illustrations that she uses to make her points quite helpful.
The author also points out that not all firms behave opportunistically each time they have an opportunity to do so. However, she says that these are usually not examples of corporate altruism, but can be evaluated in terms of the cost of breaking the trust necessary to benefit from the alliance. That is, breaking trust to pick up a dollar might well cost ten dollars of benefit if the alliance is kept together. However, if the firm can pick up fifteen dollars for itself by breaking their alliance agreement (and not necessarily breaking the alliance - because the other firm is more dependent on it), it may well do so.
If you are involved with alliances in any way, or think you might be, this is a good read.
Reviewed, by Craig Matteson, Ann Arbor, MI
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