Strategic Alliance Renewal as Related to Alliance Partner Outcome and Customer Goal Achievement: A Proposed Framework

A strategic alliance (SA) is a mutually beneficial long-term formal relationship formed between two or more parties to pursue a set of agreed upon goals to meet a critical business need while remaining independent organizations. It is a synergistic arrangement whereby two or more organizations agree to cooperate in the carrying out of a business activity where each brings different strengths and capabilities to the arrangement. The partner firms capitalize on efficiencies (bettering transaction costs), reduce the need for expertise or resources (reducing dependencies), and gain in the isomorphic way of doing business (mimetic following). A SA can be viewed as the “seller” of its products or services. The customer of an SA can be considered the “purchaser” of the alliance’s products or services. It is hypothesized that the seller dyad could deem its activity successful if the relational cohesion between partners in the dyad is strong (Lawler & Yoon, 1993, 1996; Thye, Yoon, & Lawler, 2002). In addition, it is also hypothesized that the customer of the SA has certain needs to satisfy to deem the goals it set are indeed achieved (House, 1971; Locke & Latham, 2002). Thus, there are two (2) independent variables to consider: 1) cohesion and 2) goal achievement.The dependent variable is alliance renewal. The author hypothesizes that alliance renewal is dependent on 1) cohesion of the alliance partners and 2) goal achievement of the customer of the alliance. When is the alliance sustainable in the utmost? When the partnership between the SA partners is most cohesive and when the customer achieves its goals. This combination of the two (2) independent variables yields the most sustainable alliance (Das & Teng, 1997). Hence, knowing “the conditions that determine the sustainability of alliance-derived advantages” (Day, 1995, p. 297) is essential for alliance renewal or alliance continuance. When is the alliance least sustainable? When the partnership between the SA partners is not cohesive and when the customer does not achieve its goals. This combination of the two (2) independent variables yields the least sustainable alliance, hence the alliance will not renew. Accordingly, it is broadly known that “many strategic alliances fail” (Das & Teng, 1997, p. 49). There are two other alternatives: when the alliance partnership is cohesive (Saxton, 1997), but the customer does not achieve his goals (Griffin & Page, 1996); and when the alliance partnership is not cohesive, but the customer achieves his goals. Either results in less than optimal alliance sustainability. In terms of ranking the relative likelihood of alliance renewal, though, the second most sustainable alliance would be when there is cohesiveness of the partners, but with the non-achievement of goals of the customer. In this case, the strategic alliance may continue, but with different partners. Ranked third in terms of alliance sustainability would be the one where the partners are non-cohesive, but there is goal achievement by the customer. In this case, the strategic alliance will sustain in the short run, while the customer is achieving his goals, but over the long run, the alliance will not sustain.Understanding the cohesiveness of the strategic alliance, as well as the relationship between the alliance partners and its customer(s), will further an understanding of the likelihood of alliance renewal, and will, as well, further an understanding of the likelihood of continued work for that customer and other similar customers. Ultimately, this dual interest in relative cohesiveness of the alliance partners and the relative goal achievement of the customer will show which is the optimal win-win design (most renewable) and the dismal lose-lose design (least renewable) of the strategic alliance entities. The real-world empirical data will come from the DesignBuild Institute of America (DBIA), which maintains a database of strategic alliances called “design-builders” and customers (owners) in the heavy construction industry. In short, the essence of this study is to show that cohesion and success are not the same characteristic, and this study will ultimately tease them apart with a large database, as opposed to the usual case-based-reasoning. Individual partner characteristics have been studied much in the past, but relationship characteristics, through cohesion and their performance on goals of the customer, and thereby on alliance renewal, has not been much described