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A Conceptual Investigation of the Relationship between a Firm’s Strategic Orientation and
Strategic Alliances
Danielle A. Chmielewski, PhD (Contact author)
dchmi@unimelb.edu.au
Department of Management and Marketing
Faculty of Economics and Commerce
The University of Melbourne
Level 10, 198 Berkeley Street
VIC 3010 Australia
Ph: +61 3 8344 1886
Fax: +61 9348 1921
Christoph Latteman, PhD
lattema@rz.uni-potsdam.de
Universität Potsdam
Bebel-Str. 89
14482 Potsdam, Germany
Ph: +49 (0) 331 977 3839
* Both authors contributed equally to this paper
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A Conceptual Investigation of the Relationship between a Firm’s Strategic Orientation and
Strategic Alliances
ABSTRACT
The principal purpose of this conceptual paper is to investigate the relationship between different
strategic orientations and the likelihood of engaging in strategic alliances. The paper also
investigates whether the dynamism of a firm’s environment moderates the relationship between
market and resource orientation and the likelihood of engaging in strategic alliances. This paper
proposes that market-oriented firms (with a greater outward-focus) are more likely to engage in
strategic alliances than more inward-focused resource-oriented firms and that the relationships will
be robust in the presence of environmental dynamism. This research is important as it helps to
understand the meaning of strategic orientation of firms in a hypercompetitive environment and to
explain different strategies in engaging in alliances. In a practical sense this research will provide
valuable insights for practitioners on implementing value-creation strategies in dynamic
competitive environments.
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INTRODUCTION
Firms are confronted by a lot of internal and external challenges within a dynamic competitive
environment, including technological change, diffusion of new innovations, globalization, and the
development of new business models (Slater, Olson and Hult 2006; Bettis and Hitt 1995). These
fiercely increasing dynamics in many industries are some of the main reasons for the increasing
number of strategic alliances such as joint ventures, virtual organizations, and loose contractual
agreements among firms (Bryan and Fraser 1999), as firms manage to cope with the often
changing market conditions and competitive intensity (Butler 2008).
Empirical research has confirmed that strategic alliances are an important source for gathering
assets, such as knowledge (Gulati 1995; Eisenhardt and Schoonhoven 1996) and contribute to firm
success (Stuart 2000).
Undoubtedly, the global hypercompetitive marketplace has modified the strategic focus of global
organizations to shift from a resource-based orientation with an exploitation of given, tangible
assets to a market orientation with agile exploration of new intangible assets. The keys to this
hypercompetitive shift are the dynamic capabilities of the firm, or the ease with which it can
create/recreate new strategic assets (Thomas 1996). However, firms are still existing in (hyper-)
competitive business environments which are not engaged in strategic alliances. Obviously, they
find alternative strategies to survive in the market not by seeking new assets outside the firm, but
still by mainly exploiting resources inside the firm.
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Both market orientation and resource orientation are two examples of a strategic orientation.
According to Morgan and Strong (1998, p 1055), a strategic orientation is “central to
organizational effectiveness in that it represents the competitive strategy implemented by a firm to
create continuing performance improvements.” A resource-oriented firm focuses inward on
exploiting existing assets as a source of value creation, whilst a market-oriented firm, which
typically has a stronger outward-focus, is intent on looking outside the firm for new ways to
engage in value creation. Hence, this seems to suggest that a firm’s strategic orientation will
influence the likelihood of a firm implementing and executing an innovative, outward-focused
strategy such as a strategic alliance.
In light of this, the purpose of this research is two-fold: First, to investigate the relationship
between different strategic orientations (namely market and resource orientation) and the
likelihood of engaging in strategic alliances; and second, to investigate whether the dynamism of a
firm’s environment moderates the relationship between market and resource orientation and the
likelihood of engaging in strategic alliances. The importance of this study is to understand the
meaning of strategic orientation of firms in a hypercompetitive environment and to identify the
impact that a firm’s strategic orientation has on the likelihood of engaging in a strategic alliance.
An additional contribution of this conceptual paper is that it combines an analysis of the impact of
both resource-based and marked-based factors on strategic decision-making. Resource orientation
and market orientation are two strategic perspectives that prescribe the process of leveraging a
firm’s resources (i.e., firm-based factors) and competitive environment (i.e., market-based factors)
in order to successfully implement strategic decisions. Researchers have advocated the importance
of conducting strategy research that links resource-based factors with market-based factors
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(Cockburn, Henderson, and Stern 2000; Priem and Butler 2001), as both factors affect a firm’s
strategic decision-making and profitability (Doyle 2000; McGahan and Porter 1997). Ghingold
and Johnson (1998, p 72) argue that “neither external nor internal taken alone is sufficient to
ensure competitive success. They must be wedded to each other.” Consequently, combining an
analysis of resource and market orientation will help a firm to balance its resources with the
demands of the market when undertaking the decision as to whether or not to engage in a strategic
alliance.
This conceptual paper starts with the statement of research questions followed by a brief literature
review of strategic alliances, different strategic orientations, and dynamic environments. The
relationships between market and resource orientation and the engagement in alliances will be
outlined conceptually. This paper is the basis for further empirical work on the relationship
between a firm’s strategic orientation and the likelihood of engagement in strategic alliances in
competitive business environments.
RESEARCH QUESTIONS
The two broad research questions that this study is aiming to examine are diagrammatically
represented in the following conceptual model (see figure 1).
(1.) (i) Are market-oriented firms (which are typically more outward-focused) more likely to
engage in strategic alliances?
(ii) Are resource-oriented firms (which are typically more inward-focused) less likely to
engage in Strategic Alliances?
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(2.) To what extent does a firm’s external environment moderate the relationship between a
firm’s strategic orientation and its likelihood of engaging in strategic alliances?
--- Insert Figure 1 about here ---
LITERATURE REVIEW AND CONCEPTUAL BACKGROUND
Strategic alliances are defined as cooperative agreements of any form with the aim of
strengthening the partner’s position in an industry (Arino and la Torre 1998). The initialization of
alliances is a strategic option to enable an access to specific resources of other firms (Powell,
Koput, and Smith-Doerr 1996), to share risks, or to explore new markets (Arino and la Torre
1998).
Strategic orientations “are the guiding principles that influence a firm’s marketing and strategymaking activities” (Noble, Sinha, and Kumar 2002, p 25). They are a component of a firm’s
culture which helps a firm to manage its interaction with its competitive environment, customers,
and competitors (Noble, Sinha, and Kumar 2002). As identified earlier, market orientation and
resource orientation are two examples of a strategic orientation.
Narver and Slater (1990) define market orientation as the organizational culture that most
effectively and efficiently encourages the three key behaviors – (1) customer orientation, (2)
competitor orientation, and (3) interfunctional coordination – that will help an organization to
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achieve a sustainable competitive advantage by creating and providing superior value to its
customers. Market oriented firms follow a Market-Based view (MBV). They are externally
oriented, with a thorough understanding of their customers’ needs and wants, as well as a strong
awareness of present and potential competitors (Kumar, Subramanian, and Yauger 1998; Pelham and
Wilson 1999). Further, a market orientation facilitates innovative behaviour within a firm, because
it ensures a proactive mind-set within a firm, allowing firms to search for new and/or unserved
markets (Slater and Narver 1998). So, a market orientation enables a firm to respond quickly and
efficiently to changes in its external environment. Lado, Maydeu-Olivares, and Rivera (1998, p 25) see
market orientation as a “strategy used to reach a sustainable competitive advantage.” Previous research
studies have found a positive relationship between market orientation and innovation which is one
important key to succeed in hypercompetitive markets (see Gatignon and Xuereb 1997; Han, Kim,
and Srivastava 1998; Hurley and Hult 1998; Lukas and Ferrell 2000).
A resource orientation describes the degree to which a firm practices a Resource-Based View
(RBV) and is used to assess the extent to which a firm is oriented towards the development of
valuable and unique resource bundles (Paladino 2006). A resource orientation focuses on how
firms create and deploy firm-specific resources when making strategic decisions and is intent on
leveraging existing resources to enhance performance. A resource-oriented firm takes an insideout approach to strategic decision-making, in that it evaluates its existing stock of resources to
determine how well they can be used to satisfy market opportunities (Chmielewski and Paladino
2007). In other words, a resource-oriented firm ensures that an appropriate fit exists between its
resources and market opportunities before implementing strategic decisions (Paladino 2006). This
suggests that a resource-oriented firm may not be in a position to be as innovative as a market-
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oriented firm as it is more likely to “use and build on their existing knowledge base rather than
entering unfamiliar areas” (Schilling 1998, p 273).
Hence, as resource oriented firms are taking an inside-out perspective and market-oriented firms
are taking an outside-in perspective, it can be proposed that market-oriented firms are seeking
resources (for exploration or exploitation) by (strategic) alliancing instead of thinking of
strengthening their own internal resources in a first place. Our research question 1 (i) (are marketoriented firms more likely to engage in Strategic Alliances) addresses this line of argument.
According to the approaches of the Market- and Resource-Based View, a resource-oriented firm is
thus less likely to engage in outward-oriented strategic alliances to seek business opportunities. It
first tries to achieve an appropriate fit between its own internal resources and market opportunities,
before looking externally for new resources. This links in with research question 1 (ii) (are
resource-oriented firms less likely to engage in Strategic Alliances?).
Contemporary researchers have described global competition and environmental dynamism as
worldwide interactions requiring major resource commitments (i.e., through cross-border mergers
and acquisitions, networks, and alliances) and the development of dynamic cross-border (on a firm
and country level) capabilities, wherein companies achieve competitive advantage through acts of
innovation and reformulation of existing strategies (D’Aveni 1999).
Regarding environmental dynamism, the strategic marketing and management literature has long
argued that a firm’s external environment affects the linkage between strategy and performance
(Miller 1987; Tan and Litschert 1994). In order for a firm to be successful, strategic decisionmaking needs to revolve around analysing and responding to changes in a firm’s external
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environment, such as competitors’ actions (Cockburn, Henderson, and Stern 2000; Spanos and
Lioukas 2001). This in turn helps a firm to position itself in an industry in such a way as to best
defend itself from competitive actions (Teece, Pisano, and Shuen 1997). Conducting an analysis of
a firm’s external competitive environment enables a firm to better understand and measure “the
attractiveness of industries for long-term profitability and the factors that determine it” (Porter
1985, p 1). The implication of this is that different environmental contexts require firms to make
different strategic choices. Innovation and change have become inextricably linked together and
must be addressed proactively by management.
As a consequence, the competitiveness of an industry should positively influence the likelihood of
strategic alliances of outward/market-oriented firms. As resource-oriented firms ensure that an
appropriate fit exists between its resources and market opportunities before implementing strategic
decisions (Paladino 2006), these companies are inward orientated, and the dynamism of the
environment should have less impact on their alliancing decisions. Rather, with a resource
orientation, the internal fit or misfit of a firm’s resources should have a higher impact on the
engagement in strategic alliances than the degree of competitiveness of the environment. These
implications are addressed by research question 2 (To what extent does a firm’s external
environment moderate the relationship between a firm’s strategic orientation and its likelihood of
engaging in Strategic Alliances?).
CONCLUSION
Since the mid 1990s there has been an increasing trend toward the engagement of strategic
alliances in competitive environments. Previous research found a positive relationship between
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market orientation and innovation which is one important key to succeed in hypercompetitive
markets. Here, the choice of the strategic orientation is key to reach sustainable competitive
advantages (Lado, Maydeu-Olivares, and Rivera 1998). Global competition and environmental
dynamism require major resource commitments e.g. through cross-border alliances and the
development of dynamic cross-border capabilities to achieve competitive advantage (D’Aveni
1999). These arguments leads us the still not raised research question about the relationship
between different strategic orientations (namely market and resource orientation) and the
likelihood of engaging in strategic alliances, in particular in hyper competitive markets.
This extends the existing body of research by linking together two strategically important
concepts, that of strategic orientation and its impact on strategic alliancing. This research also has
practical applications in that it will provide valuable insights for practitioners on implementing
value-creation strategies in different levels of competitive environments.
As this is a conceptual paper further empirical research is necessary. The research questions will
be further formulated as hypothesis. They will be validated by quantitative (ANOVA) analyses.
The data for the analyses will gathered by a survey based on a questionnaire developed by
Chmielewski (2005). Firms will be asked about their engagements in strategic alliances during the
last ten or so years as a measurement for the dependent variable. The independent variables are the
degree of resource orientation, the degree of market orientation, the market attractiveness, and
technological orientation of the firm. Moderating variables are the competitiveness of the market.
Control variables will be, for example, the size and the international orientation of the firm.
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Figure 1: Conceptual Model
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