In the article “Interfirm Rivalry and Managerial Complexity: A Conceptual Framework of Alliance Failure” Seung Ho Park and Gerardo R. Ungson explore reasons why most alliances do not succeed. Park and Ungson focus on two main factors—interfirm rivalry and managerial complexity. Interfirm rivalry is explained as companies who have formed alliances competing after the main reason for the alliance has been fulfilled. According to the authors this issue is common at this stage because “they could act opportunistically by withholding important information, providing false information, or simply cheating the other” (Park & Ungson, 2001, p. 37). Managerial complexity is the other important issue causing alliance failure. Parks and Ungson claim there are many issues that must be coordinated in alliance management causing problems and leading to failure. The whole article explores these issues in depth and explains why--in their opinion-- most alliances fail.
Unlike Park and Ungson, the assigned readings this week focused on steps that would lead to successful alliances. Barney and Hansen’s article, “Trustworthiness as a Source of Competitive Advantage” states that one should take into account an organization’s trustworthiness before forming an alliance. The article examines three types of trust: weak form trust, semi-strong form trust, and strong form trust. These various types of trust are key to determining which companies to build an alliance with.
Barney and Hansen define the three types of trust as weak form trust being “limited opportunities for opportunism;” semi-strong form trust as “trust emerges in response to social and economic governance mechanisms that impose costs on opportunistic behavior;” and strong form trust as “an exchange partner behaves in a trustworthy manner because to do otherwise would be to violate values, standards, and principles of behavior” (Barney & Hansen, 1994, p. 181). With these definitions in play, it seems it is the organization’s task to determine levels of trust that an alliance would be build upon. Park and Ungson claim that there is no way to know whether trustworthiness will change once the purpose of an alliance is complete, but according to Barney and Hansen that may not be he case. It seems that most organizations would want to remain trustworthy in the eyes of others to protect the opportunity for future alliances.
As for Park and Ungson’s thoughts on managerial complexity, Gulati’s article “Alliances and Networks” explores five issues that should be considered when forming alliances - which includes “the dynamic evolution of alliances” and “the performance of alliances” (Gulati, 1998, p. 293). The author claims that “exchanges can be transformed significantly beyond their original design and mandate once they are under way” (Gulati, 1998, p. 304). This shows that even after planning managerial processes, organizations still must be alert to changes. Managing complex alliances will not be easy, but companies entering into alliances should not go into them without plans.
Based on this week’s readings, if organizations follow all of the suggested steps before entering into alliances, Park and Ungson’s article about failed alliances should be moot. It seems companies they examined did not focus on trustworthiness as much as they needed to. It also seems that some of the managerial complexities faced could have been avoided with more careful planning before alliances were formed.
References
Park, S.H., and Ungson, G.R. (2001). “Inerfirm Rivalry and Managerial Complexity: A Coneptual Framework of Alliance Failure.” Organizational Science, Vol. 12, No.1, pp. 37-53.
Barney & Hansen, (1994). "Trustworthiness as a Source of Competitive Advantage." Strategic Management Journal, Vol. 15, pp. 175-190.
Gulati, R. (1998) "Alliances and Networks" Strategic Management Journal, Vol. 19, pp. 293-317.
Sounds like an interesting article. Could you provide a little more clarity on what Park and Ungson mean by interfirm rivalry in this context? Do the authors cite any numbers on rates of alliance survival to support their claims that most alliances fail? Do they take into consideration the distinction that Gulati makes between natural and untimely deaths?
ReplyDeleteYou say “if organizations follow all the suggested steps before entering into alliances, Park and Ungson’s article about failed alliances should be moot.” However, I’m not sure I agree. What other sorts of factors (e.g. environmental changes) might influence the success of an alliance?
While Park and Ungson never specifically define interfirm rivalry, the following passage paints a vivid picture: "trust and commitment are tempered by perceptions of gains and losses, equity considerations, goal conflicts, and role ambiguities between partners" (Park & Ungson, 2001, p.37) There are charts listing failed alliances and it is stated multiple times that alliances fail more often than they succeed, but there are no numbers cited. The authors do cite reasons such as "alliance age" and mutual agreements on terminations of alliances, but they still classify these as failed alliances.
DeleteIt seemed to me that these issues they cite as being the framework for alliance failure could be overcome. With in-depth planning and developing, I do not think these issues would have to be deal breakers. As you mentioned, there are other factors (environmental/economical change)that cause success - or failure - of alliances. It just seemed to me that a lot of weight was placed on these two factors that may not cause failure to all alliances.