The Role of Strategic Alliances in the International Organization of Industry

In this study the motivations for entering international strategic alliances are investigated. The reasons for alliance entry reflect the ways firms are restructuring economic activities. A theoretical basis for the study is built from the conceptual arguments of transaction-cost theory and resource-dependence theory. A partial synthesis of the two approaches suggests that alliances are especially well suited to the combined pursuit of increased efficiency and reduced uncertainty. The empirical investigation is based on a series of thirteen case studies, each involving a small Canadian firm and a foreign partner. Growth resulting from efficient access to foreign markets was an important reason for Canadian firms to enter alliances. Collaboration enabled small firms to learn about market demand. This information reduced the uncertainty of international marketing, and was used to guide the development and modification of products. Complementary abilities, where the Canadian firms offered technology and their foreign partners had marketing capabilities, were at the heart of most alliances. In general, alliances were considered necessary to protect proprietary information and to forge strong links with firms taking over important downstream functions.