|Book Review: Non-Cooperation|
Non-cooperation: The Dark Side of Strategic Alliances
Written by: Wilma W. Suen. New York: Palgrave Macmillan, 2004. 212+xv pages.
Strategic alliances have been widely touted by both business researchers and practitioners. Ranging from short-term projects (e.g., new product development) to long-term, open-ended collaborations (e.g., alliances in the airline industry), strategic alliances are often presented as a means of decreasing the level of risk, accessing new resources, focusing on one's core competence, and increasing flexibility. However, as is often the case, there is no free lunch when it comes to capturing these benefits. Strategic alliances also mean reduced control of a firm's own resources, and they introduce the risk of imitating a firm's expertise. Nonetheless, most literature has focused on the benefits of strategic alliances, focusing primarily on the activities that favor building and maintaining alliances. However, as far as the disadvantages are concerned, there is surprisingly little written about why nearly half of strategic alliances fail.
Wilma Suen, a consultant in the technology and airline industries and directly engaged in corporate alliance issues since 1998, sheds light on lack of cooperation in alliances that can result in the failure of an alliance or a firm. Dubbing the noncooperation phenomenon as the dark side of the strategic alliances, she explores the causes of noncooperative behavior in collaborating firms.
This book presents an important perspective for new product development professionals involved in planning, managing, and supporting development alliances. Though not a how-to book like The Strongest Link (Slowinski and Sagal, 2003) or a strategy book like Alliance Strategy (Bamford, Gomes Cassares, and Robinson, 2003), both of which were reviewed in JPIM 22:1, it provides insight into the environmental factors that will always be at work, changing the basis on which an alliance is established initially. Although the examples are more about business alliances than about specific development alliances, the big lesson learned is that important and legitimate reasons exist for alliance partners not to partner once a deal is done. Understanding these motivations is essential in structuring and managing alliances. For instance, following best practice at the day-to-day management level to cultivate an alliance will likely be ineffective in preserving an alliance if certain underlying forces work against the alliance.
In probing the dark side of the strategic alliances, Suen bases her arguments primarily on transaction–cost economics: She posits strategic alliances as a form of interfirm collaboration on the continuum between markets and hierarchies; the alliances entail sharing of the benefits from, and control of, the alliance via continuous contributions of partners. An important contribution is her use of international relations literature to support her ideas. These examples provide the reader with a new viewpoint, since strategic alliance at the firm and the country levels share similar motivations and dynamics.
Associating alliances with double-edged swords, she appreciates the motivation behind forming them and acknowledges them as a useful means to overcome perplexities due to incomplete contracts—stemming from the impossibility both to predict all future contingencies and to incorporate them into a contract beforehand—as well as how they enable firms to share risks and to reach their goals faster than they could on their own. Suen emphasizes the trade-offs intrinsic to such interfirm collaborations. She submits that firms do not always understand that alliances may require them to give up control, to accept constraints on their freedom to act, to commit to a set of partners, and to forego some opportunities. She criticizes the view that regards strategic alliances as a paradigm shift in interfirm relations or as a panacea to increase firm competitiveness. Instead, she draws attention to the fact that each firm has its own goals and interests to pursue, which may change over time. Therefore, she regards alliances as “temporary commitments,” since the conditions that necessitate collaboration may change, and as residual options, “adopted in the absence of other acceptable choices at a given point in time and under certain conditions” (p. 6).
Suen focuses on why firms change their attitude and choose not to cooperate despite all good intentions in forming and managing their alliance. In doing so, she identifies several factors and describes the relationships among them, as well as presenting power and interdependence as the means with which firms act to manipulate such noncooperative intentions of their partners. She argues that a firm may still want to defect from an alliance even though the alliance might have met or have surpassed predetermined objectives. This might sound counterintuitive if we approach the issue from an alliance perspective. However, taking the firm as the unit of analysis, we can easily see how it can be imperative for a firm to defect from the alliance.
This book provides a perspective to analyze the factors that may alter firms' attitudes toward an alliance. Moreover, Suen presents a framework to evaluate the extent to which partners actually need each other and to determine which firms are more likely to defect from an alliance. She also presents her framework as a means for partner selection and for assessing each firm's contribution to an alliance, which may be used as an indicator of natural interdependence among prospective partners.
Though approaching a widely supported view in the literature from a contrary perspective, the arguments in this book are well defined and supported with theory and case studies. In chapter 2, the author presents the underlying reasons for noncooperation and addresses the question, If the alliances are beneficial, why does noncooperation occur? She further illuminates these reasons for noncooperation in chapter 3 and also introduces power and interdependence as “barometers of a firm's ability to pursue its interests independently of its partners” (p. 9). In chapters 4–6, Suen provides readers with real-life evidence on how power and interdependence affect the firm's attitudes toward an alliance. The Microsoft case, using materials from the U.S. antitrust trial, is presented to underscore the impact of power on avoiding defection and enabling a firm to behave opportunistically, whereas the Ballard Power and airline alliance cases show how the dynamic nature of power and interdependence may alter partners' attitude toward the alliance, as well as how interdependence affects the existence of an alliance but also can lead to unintended consequences. These cases show how the ties among alliance partners can be manipulated by formal and informal structures.
Suen believes that the limited number of case studies and practitioners' reticence are why the book is devoid of a conclusive analysis of the dynamics of noncooperation in strategic alliances. However, despite these limitations the book still provides the readers with a thought-provoking counterperspective to existing views on alliances. The Ballard case study will probably be the most relevant to product development professionals. Not only does it describe a successful technology development alliance, but it also demonstrates how alliance structure can change over time to accommodate the macroneeds of the partners.
In summary, we believe that both business scholars and practitioners can benefit from this book, for it provides the reader with a perspective of the other side of the coin. In spite of the fact that the essence of the book could be presented more concisely, Suen uses existing theories of interfirm collaborations effectively, and she approaches the issue from a controversial perspective with a mellifluous style. Her novel ideas may be a source of inspiration for further studies in interfirm collaboration research, and the case studies provide practitioners—managers and consultants—with insightful real-life examples of how to manage noncooperative behaviors in alliances.