Pooling of Resources in Housing Development Through Strategic Alliances: Theoretical Framework and Options for the Swedish Market

Since the early 1980s there has been a large growth in strategic alliances between organizations in many different branches and industries. One major motivation for organizations to establish strategic alliances is to reach sustainable competitive advantages in rapidly changing environments in combination with heightened level of uncertainty. Based on the general literate on strategic alliances, we discuss how housing developers and other actors involved in the development process may realize the large number of potential benefits of alliance activity. From the perspective of housing development in Sweden, we identify specific advantages of forming alliances such as cost leadership, differentiation and risk management. Developers can establish a different type of strategic alliances with large number of partnering organizations in order to pool both financial and non-financial resources. Basically developers can form two types of alliances: (1) non-equity or contractually based alliances, and (2) equity-based alliances. Contractually based alliances may involve learning, knowledge and marketing alliances between a developer and local public authorities, land owners, contractors, professional service firms like architects, planning consultants and estate agents, as well as other developers. In order to pool financial resources or reduce financial risks, developers can establish equity joint ventures with capital providers, landowners, and institutional buyers of the completed building. Furthermore capital providers can syndicate investments. We also recognize that in many cases a combination of formal contracts and a broader informal alliance create advantages for both parties. It is well-known that a large number of strategic alliances fail: upside performance risks comes at a cost of higher relationships risks. Therefore we also discuss the potential pitfalls of collaborative arrangements that the partnering firms may face, and how such relationship risks may be mitigaged.