Introduction

After briefly describing the strategic motives underlying alliance formation and their theoretical roots and the variety of taxonomies suggested for understanding the phenomenon of cooperative arrangements established among firms in the real business world, we classify strategic alliances into three categories (complementary, shared-supply, quasi-concentration alliances) based on the work of Dussauge and Garrette (1999). We then highlight that the basic inadequacy of the main theories of the firm so far developed in the strategic management literature (Porter’s 5 forces, resource-based and dynamic capabilities view of the firm) for addressing the key issues of strategic alliance-making lies in the fact that they cannot properly capture management’s flexibility to adapt and revise the alliance strategy over time. In particular, we believe that the need for running a symmetric alliance stressed by such theories does not reflect the reality of dynamic cooperative arrangements in search for sufficient adaptive properties built into them to be able to cope with evolutionary pressures. We thus propose a real options approach to alliance-making aiming at both capturing the evolutionary nature of alliances and advancing our knowledge of alliance performance measurement. In addressing the issue of the intimate connection between alliance evolution and performance, our model conceptualizes and quantifies the option value (or flexibility/adaptability component) of a strategic alliance (value).