X Jiang et al. /Journal of International Management 14(2008)173-189 achieved its set performance objectives( Geringer and Hebert, 1991; Dussauge and Garrette, 1995; Das and Teng, 2000). Traditional research has used financial performance results, such as cost reduction, sales growth and profitability, proxy for alliance success. Yet the formal financial measures of performance are subject to controversy over their potential shortcomings(Geringer and Hebert, 1991; Glaister and Buckley, 1998). Some data are usually very difficult to obtain because not all information is publicly available, and especially some private firms will decline to provide such sensitive information for reasons of confidentiality Other scholars have focused on objective measures of performance, such as the survival of an alliance or its duration (e.g, Franko, 1971; Killing, 1983; Glaister and Buckley, 1998), the assumption being that a cooperative relationship that has lasted a long time is more likely to achieve satisfying performance and meet with success. As argued earlier, however, the fact that an alliance has not been terminated does not always mean that it has achieved desirable performance outcomes More often than not, firms enter into alliances with a number of non-financial, subjective goals in mind, such as learning about a new market or gaining a new technology. If one or all of the partners havent achieved these objectives subjective measures of performance have been criticized as biased, inaccurate and fragmented(Kale et al., 20022er, even though they are satisfied with the financial results they may still consider the alliance unsuccessful. Howeve An alternative interpretation suggests stability as a measure of performance or success(for a short review, see Mohr, 2006), with the implication that a more stable alliance may survive longer and that the partners are more likely to enjoy superior performance and achieve desired objectives. In an early study on IV performance, for instance, Geringer and Hebert(1991) pointed out that stability is often one of the measures of performance. Yet we have realized that using stability as a measure of success also has limitations because it does not measure success directly and co-mingles lliance process and outcomes Instead, it is more reasonable to view stability as a determinant of performance and success ( Dussauge and Garrette, 1995; Beamish and Inkpen, 1995). For example, Sim and Ali (2000) argue that stability is a critical performance factor for equity JVs. Once an alliance is established, stability becomes"a condition to reap the competitive benefits of designed for short-term duration, stability will still be a salient factor for the achievement of the desired objectiva a strategic alliances"(Bidault and Salgado, 2001: 619). Even for those alliances(especially horizontal ones) that 3.2. Conceptualizing alliance stability The above analysis indicates that stability is a multi-faceted variable, and different partners may view it differently. To reach a comprehensive understanding of the dynamic nature of strategic alliances, a rigorous conceptualization of alliance stability is necessary. For this purpose, we should consider two critical points of view. From a relatively narrow perspective, defining stability will involve some judgments on alliance outcomes since stability provides an important condition and sometimes a useful proxy for alliance success From a broader process perspective, the definition of stability will also need to reflect the processual situation of alliance evolution and development. Viewing stability as both an input to alliance success and an output of the interactions among partners, we define alliance stability as the degree to which an alliance can run and develop successfully based on an effective collaborative relationship shared by all partners. This conceptualization indicates that stability is a dynamic, process-based and multi-dimensional construct. Here, we emphasize the importance of continuity, reciprocity, fit and"harmony"in understanding the concept. The reciprocity and harmony among partners determines the extent to which partner firms can realize anticipated synergies critical to alliance performance, which refers to the degree of partners'satisfaction with the alliance(Mjoen and Tallman, 1997) Thus, the concept of stability which points to the process aspect of alliances should be related to and distinct from alliance performance(or satisfaction ) stability is not an ultimate outcome, but a determinant of alliance performance We now shed light on some key dimensions of our stability concept ( The simultaneous existence of a certain degree of stabilization and variation in the relationship is a key ingredient in the stability concept. Stability itself is not a static status, and its level changes over time. From both organizational hange and strategic flexibility perspectives, a stable alliance needs timely and continuous adjustment, adaptation, reconfiguration and restructuring as the relationship evolves(Emst and Bamford, 2005). (i)There are no unexpected or unplanned major governance changes in the on-going relationship (Inkpen and Beamish, 1997). If no external environmental or market forces occur, the major partner(s)will not exit and the
achieved its set performance objectives (Geringer and Hebert, 1991; Dussauge and Garrette, 1995; Das and Teng, 2000). Traditional research has used financial performance results, such as cost reduction, sales growth and profitability, as a proxy for alliance success. Yet the formal financial measures of performance are subject to controversy over their potential shortcomings (Geringer and Hebert, 1991; Glaister and Buckley, 1998). Some data are usually very difficult to obtain because not all information is publicly available, and especially some private firms will decline to provide such sensitive information for reasons of confidentiality. Other scholars have focused on objective measures of performance, such as the survival of an alliance or its duration (e.g., Franko, 1971; Killing, 1983; Glaister and Buckley, 1998), the assumption being that a cooperative relationship that has lasted a long time is more likely to achieve satisfying performance and meet with success. As argued earlier, however, the fact that an alliance has not been terminated does not always mean that it has achieved desirable performance outcomes. More often than not, firms enter into alliances with a number of non-financial, subjective goals in mind, such as learning about a new market or gaining a new technology. If one or all of the partners haven't achieved these objectives, even though they are satisfied with the financial results they may still consider the alliance unsuccessful. However, subjective measures of performance have been criticized as biased, inaccurate and fragmented (Kale et al., 2002). An alternative interpretation suggests stability as a measure of performance or success (for a short review, see Mohr, 2006), with the implication that a more stable alliance may survive longer and that the partners are more likely to enjoy superior performance and achieve desired objectives. In an early study on IJV performance, for instance, Geringer and Hebert (1991) pointed out that stability is often one of the measures of performance. Yet we have realized that using stability as a measure of success also has limitations because it does not measure success directly and co-mingles alliance process and outcomes. Instead, it is more reasonable to view stability as a determinant of performance and success (Dussauge and Garrette, 1995; Beamish and Inkpen, 1995). For example, Sim and Ali (2000) argue that stability is a critical performance factor for equity JVs. Once an alliance is established, stability becomes “a condition to reap the competitive benefits of strategic alliances” (Bidault and Salgado, 2001: 619). Even for those alliances (especially horizontal ones) that are designed for short-term duration, stability will still be a salient factor for the achievement of the desired objectives. 3.2. Conceptualizing alliance stability The above analysis indicates that stability is a multi-faceted variable, and different partners may view it differently. To reach a comprehensive understanding of the dynamic nature of strategic alliances, a rigorous conceptualization of alliance stability is necessary. For this purpose, we should consider two critical points of view. From a relatively narrow perspective, defining stability will involve some judgments on alliance outcomes since stability provides an important condition and sometimes a useful proxy for alliance success. From a broader process perspective, the definition of stability will also need to reflect the processual situation of alliance evolution and development. Viewing stability as both an input to alliance success and an output of the interactions among partners, we define alliance stability as the degree to which an alliance can run and develop successfully based on an effective collaborative relationship shared by all partners. This conceptualization indicates that stability is a dynamic, process-based and multi-dimensional construct. Here, we emphasize the importance of continuity, reciprocity, fit and “harmony” in understanding the concept. The reciprocity and harmony among partners determines the extent to which partner firms can realize anticipated synergies critical to alliance performance, which refers to the degree of partners' satisfaction with the alliance (Mjoen and Tallman, 1997). Thus, the concept of stability which points to the process aspect of alliances should be related to and distinct from alliance performance (or satisfaction): stability is not an ultimate outcome, but a determinant of alliance performance. We now shed light on some key dimensions of our stability concept. (i) The simultaneous existence of a certain degree of stabilization and variation in the relationship is a key ingredient in the stability concept. Stability itself is not a static status, and its level changes over time. From both organizational change and strategic flexibility perspectives, a stable alliance needs timely and continuous adjustment, adaptation, reconfiguration and restructuring as the relationship evolves (Ernst and Bamford, 2005). (ii) There are no unexpected or unplanned major governance changes in the on-going relationship (Inkpen and Beamish, 1997). If no external environmental or market forces occur, the major partner(s) will not exit and the 178 X. Jiang et al. / Journal of International Management 14 (2008) 173–189
X Jiang et al. /Journal of International Management 14(2008)173-189 alliance will not prematurely dissolve or be terminated. Therefore, this conceptualization of alliance stability, in terms of the absence of major changes in ownership structure, differs from previous instability definitions, whose focus has been solely on static alliance outcomes (iii) The foundation of alliance stability is the maintenance and development of active and harmonious relationships among partners. If there are risks in inter-partner relationships which are perceived beyond a certain level and become the dominant threat to an alliance, the stability of the alliance will be undermined Further, the foregoing definition implies that stable alliances must have a balance of both structure rig strategic flexibilities (Das and Teng, 2000). On one hand, a stable alliance should have enough rigidity or adaptive capabilities to resist unexpected environmental contingencies and internal risks. Rigidity is a key to the avoidance of premature dissolution. On the other hand, a stable alliance should also have a certain degree of strategic flexibility order to continuously adapt to environmental changes, to adjust to the unexpected consequences of predictable changes and to respond to the changing partners needs(Young-Ybarra and w 1999: Emst and Bamford, 2005) 4. An integrated process model of alliance development Alliances evolve during their lifetime. The process and evolution of alliances underscore the importance of the developmental stages. Although researchers agree that alliances evolve in stages, there is no consensus on the specific stages that alliances go through. Following Das and Teng(1999), we consider four stages in this paper: partner selection, structuring/negotiation, implementation and performance evaluation. Fig. I illustrates the theoretical framework of the paper and the conceptual orientation. The positive arrows indicate that alliances generally evolve along the four developmental stages, whereas the dashed left-pointing arrows suggest some of the reversals that might occur at any moment in the life span of the alliance. Specifically, each alliance is a repetitive sequence of the four stages, and some stages may repeatedly occur as the lliance evolves(Ring and Van de Ven, 1994; Doz, 1996; Arino and de la Torre, 1998). For example, after an alliance has formed, the criteria for partner selection will be reconsidered when a new partner enters into the current alliance The initial alliance conditions(e.g, joint scope or division of labor) may have to be renegotiated in the event of unforeseen changes in the environment and in the relationship status. In some alliances, performance evaluation will recur regularly over time Despite increasing interest in the alliance developmental process, research has failed to consider the stability issue in the process. Researchers have usually investigated the many factors underlying alliance stability just a few at a time And few of these researchers have examined the possible impact of individual factors on stability across the four stages In addressing this gap, we propose a process model in which the main antecedents of alliance stability are examined. In the following we identify, review and integrate a number of factors underlying alliance stability in each stage. From this discussion, we generate specific propositions Certainly, our purpose is not to develop an exhaustive list of factors in this framework. Instead, we focus on the critical factors endogenous to the alliance relationship. Those factors exogenous to alliances (e. g, envir Partner Structuring/ Implementation Performance Selection Negotiation Evaluation Resource Governance Alliance Risks Evaluation Endowments Structure Management Reputation Alliance Scope Evaluation Division of Contro Prior tie Mechanisms Fig. 1. Process model of alliance development: critical factors and managerial actions
alliance will not prematurely dissolve or be terminated. Therefore, this conceptualization of alliance stability, in terms of the absence of major changes in ownership structure, differs from previous instability definitions, whose focus has been solely on static alliance outcomes. (iii) The foundation of alliance stability is the maintenance and development of active and harmonious relationships among partners. If there are risks in inter-partner relationships which are perceived beyond a certain level and become the dominant threat to an alliance, the stability of the alliance will be undermined. Further, the foregoing definition implies that stable alliances must have a balance of both structure rigidity and strategic flexibilities (Das and Teng, 2000). On one hand, a stable alliance should have enough rigidity or adaptive capabilities to resist unexpected environmental contingencies and internal risks. Rigidity is a key to the avoidance of premature dissolution. On the other hand, a stable alliance should also have a certain degree of strategic flexibility in order to continuously adapt to environmental changes, to adjust to the unexpected consequences of predictable changes and to respond to the changing partners' needs (Young-Ybarra and Wiersema, 1999; Ernst and Bamford, 2005). 4. An integrated process model of alliance development Alliances evolve during their lifetime. The process and evolution of alliances underscore the importance of the developmental stages. Although researchers agree that alliances evolve in stages, there is no consensus on the specific stages that alliances go through. Following Das and Teng (1999), we consider four stages in this paper: partner selection, structuring/negotiation, implementation and performance evaluation. Fig. 1 illustrates the theoretical framework of the paper and the conceptual orientation. The positive arrows indicate that alliances generally evolve along the four developmental stages, whereas the dashed left-pointing arrows suggest some of the reversals that might occur at any moment in the life span of the alliance. Specifically, each alliance is a repetitive sequence of the four stages, and some stages may repeatedly occur as the alliance evolves (Ring and Van de Ven, 1994; Doz, 1996; Ariño and de la Torre, 1998). For example, after an alliance has formed, the criteria for partner selection will be reconsidered when a new partner enters into the current alliance. The initial alliance conditions (e.g., joint scope or division of labor) may have to be renegotiated in the event of unforeseen changes in the environment and in the relationship status. In some alliances, performance evaluation will recur regularly over time. Despite increasing interest in the alliance developmental process, research has failed to consider the stability issue in the process. Researchers have usually investigated the many factors underlying alliance stability just a few at a time. And few of these researchers have examined the possible impact of individual factors on stability across the four stages. In addressing this gap, we propose a process model in which the main antecedents of alliance stability are examined. In the following we identify, review and integrate a number of factors underlying alliance stability in each stage. From this discussion, we generate specific propositions. Certainly, our purpose is not to develop an exhaustive list of factors in this framework. Instead, we focus on the critical factors endogenous to the alliance relationship. Those factors exogenous to alliances (e.g., environmental Fig. 1. Process model of alliance development: critical factors and managerial actions. X. Jiang et al. / Journal of International Management 14 (2008) 173–189 179