FACTORS AFFECTING A

PARTNER’S PERCEIVED
EFFECTIVENESS OF STRATEGIC
BUSINESS ALLIANCE: SOME
SINGAPOREAN EVIDENCE
B. Ramaseshan, Puay Choon Loo

By Daniel Lin
WHAT IS THIS ARTICLE ABOUT?
 About factors affecting a partner’s
perceptions about effectiveness of their
strategic business alliances.
 This article touches on some aspects of
lecture 3: Entry strategy and Strategic
alliances.
INTRODUCTION
 Firms seek strategic business alliances in order to
reap mutual benefits such as core competencies
or to access resources that are otherwise difficult
to be found within their respective environments.
 However, most of these alliances fail before any
mutual benefits are reaped or potential synergies
are realised.
 Failure of alliances would have adverse effects on
firm’s financial performance in the short run as
well as hurt its international competitive position
(Hamil & Young, 1990).
 Killing (1982) suggested that alliances in which
satisfaction was not mutual among partners
should be considered unsuccessful.
THE 5 HYPOTHESES
 H1: Power imbalances in the alliance are negatively
related to the partner’s perceived effectiveness of the
alliance.

 H2: A partner’s commitment to alliance is positively

related to the partner’s perceived effectiveness of their
alliance.

 H3: The level of trust that a member has of its partner is

positively related to the perceived effectiveness of the
alliance.

 H4: Excessive dysfunctional conflicts between the

partners are negatively related to a partner’s perceived
effectiveness of their alliance.

 H5: Inter-organisational communication is positively

related to a partner’s perceived effectiveness of their
alliance.
POWER IMBALANCES
 H1: Power imbalances in the alliance
are negatively related to the partner’s
perceived effectiveness of the alliance.

 According to Muller (1970), firms with

superior power will act to exploit their power
thus resulting in the weaker partner reacting
defensively by trying to undermine and erode
the power of the superior firm.
 This could trigger a failure to tap on all
available resources and may also force the
stronger partner into taking up a retaliatory
position.
COMMITMENT TO ALLIANCE
 H2: A partner’s commitment to alliance
is positively related to the partner’s
perceived effectiveness of their
alliance.

 High commitment between partner firms will

lead to higher motivation and lower
employee turnover.
 Shamdasani & Sheth (1995) stated that
commitment to alliance was found to be
there strongest determinant of both
satisfaction and continuity by partners in the
alliance.
INTER-ORGANISATIONAL TRUST
 H3: The level of trust that a member
has of its partner is positively related to
the perceived effectiveness of the
alliance.

 Trust is the willingness to rely on an

exchange partner in whom one has
confidence (Morgan & Hunt, 1994).
 Trust of a member of an alliance about their
partner exist when the member has
confidence in the partner’s reliability and
integrity.
DYSFUNCTIONAL CONFLICT
 H4: Excessive dysfunctional conflicts
between the partners are negatively
related to a partner’s perceived
effectiveness of their alliance.

 Dysfunctional conflicts are disagreements

between the alliance partners that could not
be resolved (Morgan & Junt, 1994).
 Dysfunctional conflicts can affect the
effectiveness of the alliance (Bucklin &
Sengupta, 1993).
INTER-ORGANISATIONAL
COMMUNICATION
 H5: Inter-organisational communication
is positively related to a partner’s
perceived effectiveness of their
alliance.

 Inter-organisational communication is
defined as formal as well as informal sharing
of meaningful information between firms
(Anderson & Narus, 1990).
 Partners when kept informed of each other’s
role, will lead to less misunderstanding and
improves their perception of their
collaboration.
FINDINGS OF THE STUDY
 The study involved a final list of 500 firms
selected at random but the response rate
was only 32% (164 firms).
 Findings showed that “access to resources”
and “access to markets” are some of the
most common reasons for entering into a
strategic alliance.
 The findings are also found to be in support
of the 5 hypotheses. It is also similar with the
findings of another study of the American
computer industry by Bucklin and Senupta
(1993).
CONCLUSION AND THOUGHTS
 Managers would improve the overall success of
existing/ proposed strategic alliances if they take
the 5 factors into consideration.
 Of these 5 factors, I feel that trust and
communication is most important as while power
imbalances tend to be more difficult to prevent,
trust and communication on the other hand can
be fosters which will in turn lead to higher
commitment as well as reduce conflicts.
 The 5 factors although very relevant to the
perceived effectiveness of strategic alliances, are
not the only few main factors. There can be many
other factors such as human resources,
management styles, cultural differences, etc that
could be further examined.