Managing Strategic Alliances in Good and Bad Times

Strategic alliances may end up being “good” deals (still continuing successfully) and some others (arranged with the expectation to thrive) may turn into “bad” deals requiring early termination. After briefly discussing the major risks of the (voluntary or involuntary) termination of inter-firm collaborations and the excessive focus on contract design in current alliance formation, we take an evolutionary perspective according to which any alliance should be seen as an evolving, self-correcting relationship allowing partner firms to: (1) mutually learn from their collaboration; (2) detect the sources of uncertainty affecting their business operations; (3) flexibly react to those events that may undermine cohesion and purpose. Our approach looks at flexibility of alliances that management of partner firms can exploit in “good” and “bad” times in the form of strategic options exercisable as what follows gradually occurs: (1) the complex nature of tasks undertaken unveils itself due to reciprocal learning; (2) the internal rivalry among partners shifts outside the boundaries of the partnership due to an increase in contractual completeness; (3) the uncertainty of markets and technologies is resolved due to arrival of new information. Three are the goals accomplished: (1) alliance strategy can be easily visualized; (2) alliance value creation is better measured; (3) design and implementation of an alliance entry/exit strategies are facilitated.