INTERORGANIZATIONAL RELATIONS:
STRATEGIC ALLIANCES
At the organizational level of analysis, network theories examine
interorganizational relations (IOR). Emergent properties arise
when orgs interact, exchange, bargain, compete, collaborate, ...
Network theorists try to explain origins and consequences of IOR ties.
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Requires new theoretical concepts (e.g., governance forms)?
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Are IORs simply the aggregation of individuals’ relations?

Do organizations have motives & emotions, interests & goals?
Can orgs trust one another, or is trust only among people?

How do persons occupying role of organizational agent behave
differently than when acting as self-interest individuals?

What cross-level person-organization relations are important?
Org’s ties to employees, shareholders, customers/clients
Varieties of Interorg’l Networks
Interorg’l interactions involve many communication & exchange
relations, creating various types of interorganizational networks:
► Spot market transactions
► Relational contracting
► Mergers & acquisitions
► Interlocking board directorates
► Joint ventures & IJVs
► Strategic alliances
Network analysts examine relational contents & structural forms
among interconnected organizations. They seek to explain:
(1) Which orgs decide to form interorg’l relations & what types of ties?
(2) What are the patterns of interorg’l communication & resource
exchanges in those networks? What density, centralization, etc.?
(3) How do networks shape org’l behaviors & performance outcomes?
Where Do IOR Come From?
IOR originate in combinations of environmental constraints and
endogenous network structures that generate new social-economic
relations intended to acquire control of resources & maximize org’l
performances (profit, R&D innovation, sales,regulatory autonomy)
Gulati & Gargiulo
dynamic model
with endogenous
feedback loop
from present
network structure
(past alliances,
common 3rd
parties, joint
centralities) to
transform future
alliances:
Relational
Embeddedness
Structural
Embeddedness
Positional
Embeddedness
Structural
Differentiation
Strategic
Interdependence
NETWORK
FORMATION
Optimizing IOR Benefits
Orgs often cooperate as well as compete with the same orgs.
Which network forms optimize an org’s IOR benefits, such as
profits, market share, growth, legitimacy, political support?
Network closure – Closely knit ties among org’l set
facilitates trust, cooperative exchanges, & collective action;
safeguards against information asymmetries & opportunism
(deception; “self-interest with guile” - Williamson)
Network diversity – Sparse ties to orgs not linked to current
partners span structural holes to gain brokerage benefits,
access diverse resources, and learn innovative ideas
Contingency H: Alternative forms of IOR networks are
better suit to achieving different organizational objectives:
(1) Close-knit networks optimize benefits from collaboration
(2) Diverse networks optimize gains from competitive benefits
An Org-Field Theory
IOR analyses also focus on explaining relational structures at the
complete network level, disregarding individual persons or orgs.
Kenis & Knoke (2002) combined
organizational field with network
properties to develop a field-net
explanation of aggregate change
 Communication ties (info exchanges) are the primary IOR, a
necessary prerequisite to future interfirm collaborations
 Changes in the communication network’s formal properties
(density, centralization) alter opportunities for firms to find available
partners
 Rates of change vary nonlinearly, initially accelerating with
changes in communication network structures, then slowing with
saturation or ceiling effects
 But, given its heavy longitudinal data demands, how testable is this
so-called “theory”?
Networks Change Alliances
Changes in the formal properties of an organizational field’s
communication network generate nonlinear rates of change in
interorganizational tie-formation rates (e.g., strategic alliances):
DENSITY
RECIPROCITY
TIE CONFIRMATION
CONNECTIVTY
CENTRALIZATION
MULTIPLEXITY
SUBGROUP
COHESION
HIERARCHY
RATE OF STRATEGIC
ALLIANCE FORMATION
Strategic Alliances
Between market relations & org’l hierarchies reside several
short-lived, hybrid forms of interorganizational relationships
Strategic alliance: at least two partner firms that (1) remain
legally independent; (2) share benefits, managerial control over
performance of assigned tasks; (3) make contributions in strategic
areas, e.g., technology or products (Yoshino & Rangan 1995)
SA governance forms vary
in the types of legal and social
mechanisms that coordinate and
safeguard the alliance partners’
resource contributions, allocate
their joint administrative
responsibilities, & divide the
rewards from their collaboration
(Todeva and Knoke 2003)
Hierarchical Relations
--------------------------------------------------------JOINT VENTURES
COOPERATIVES
EQUITY INVESTMENTS
R&D CONSORTIA
STRATEGIC COOP. AGREEMENTS
CARTELS
FRANCHISING
LICENSING
SUBCONTRACTOR NETWORKS
INDUSTRY STANDARDS GROUPS
ACTION SETS
--------------------------------------------------------Market Relations
Micro-Managing Alliances
Evolutionary processes induce IOR as repeated experiences raise
partners’ familiarity. Growing trust [among org agents?] lowers transaction
costs by eliminating the need for written contracts as safeguards against
opportunism (Ring & Van de Ven 1994; Gulati 1995)
Communication networks can facilitate flows of
information among potential partners about alliance
opportunities. CEO friendships, board interlocks,
professional ties can all serve as intelligencegathering channels. Because trust among partners
is so crucial for success, communicating with
partners-of-partners can help to verify past
performance or misconduct.
o
NYC dress firms used embedded social ties to conduct business transactions
requiring coordinated, nonmarket problem-solving (Uzzi 1997)
o
Cellular firms found potential new partners through interpersonal contacts of
their managers participating in technical committees (Rosenkopf et al. 2001)
o
In alliance implementation, institutionalized procedures build trust and mutual
obligations vital for success of projects governed jointly by autonomous firms
(Larson 1982)
Strategic Alliance Networks
Repeated alliances among orgs create strategic alliance networks
Strategic alliance network “set of orgs connected
through their overlapping partnerships in different
strategic alliances” (Knoke 2001:128; Todeva &
Knoke 2002). Firms are closely tied to one another
through many direct alliances or many indirect ties
through third firms (i.e., partners-of-partners).
A firm’s strategic alliance network ties increases probability of accessing
and using valuable resources held by the firm’s partners, including their:
 Financial resources, credit extensions
 Knowledge, information, technologies and patents
 Marketing expertise, country/culture penetration
 Organizational status, corporate, & brand reputations
 Trustworthiness & lower risk (but also moral hazards)
Global Information Sector
Basic CSC concepts could help to explain the evolution of the
strategic alliance network in the Global Information Sector (GIS).
This sector increased collaborative agreements exponentially
1990-2000, creating a complex web of overlapping partnerships.
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
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Five NAICS info subsectors (publishing; motion pictures & sound
recording; broadcasting & telecomms; info services & data processing)
plus computer, telecomm, semiconductor manufacturing industries
145 multinational corporations: 66% USA, 16% Europe, 15% Asia
Alliance & venture announcements in news media, 1989 to 2000
Total of 3,569 alliances involving two or more GIS organizations
Next two figures show mean strategic alliances among 30 most-active
firms & MDS distances/clusters on dyads’ # of annual partnerships.
Altho Japanese firms have higher probability of mobilizing
resources from compatriots, what difficulties may they be
creating for themselves by concentrating their strategic
alliances so heavily among other Japanese firm partners?
GIS Core Alliances in the Triad
6
5
4
3
2
YR91
1
YR95
YR00
0
USA
Europe
Japan
Europe-USA
USA-Japan
Japan-Europe
1991 GIS (MDS Stress = 0.102)
1.0
SAMSUNG
ERICSSON
TI
BS
BCE
INTEL
BT
SUN
HP
0.0
NECSIEMENS
CISCO
NOVELL
HITACHI
ATT
IBM
COMPAQ MICROSOFT
FUJITSU
MOTOROLA
ORACLE
APPLE
MITSUBISHI
TOSHIBA
NTT
MATSUSHITA
FT
PHILIPS
SONY
-1.0
-1.5
-.5
.5
1.5
1995 GIS (MDS stress = 0.142)
1.5
PHILIPS
1.0
BCE
BT
CISCO
.5
SIEMENS
TI
ERICSSON
FUJITSU
HP
SUN
HITACHI
MITSUBISHI
COMPAQ
0.0
TOSHIBA
NEC
IBM
ATT
NOVELL
MATSUSHITA
SAMSUNG
MICROSOFT
MOTOROLA
INTEL
-.5
AOL
APPLE
SONY
FT
ORACLE
-1.0
BS
NTT
-1.5
-2.3
-2.0
-1.8
-1.5
-1.3
-1.0
-.8
-.5
-.3
.0
.3
.5
.8
1.0
1.3
1.5
1.8
2000 GIS (MDS stress = 0.137)
2.0
BS
1.5
BT
1.0
TI
ATT
FT
BCE
.5
MOTOROLA
AOL
ERICSSON
PHILIPS
0.0
NOVELL
SUN CISCO
MATSUSHITA
MICROSOFT
IBM
NTT
HP
TOSHIBA
SONY
INTEL
HITACHI
-.5
FUJITSU
ORACLE
COMPAQ
APPLE
NEC
MITSUBISHI
-1.0
SIEMENS
SAMSUNG
-1.5
-2.0
-1.5
-1.0
-.5
0.0
.5
1.0
1.5
2.0
References
Gulati, Ranjay and Martin Gargiulo. 1999. “Where Do Networks Come From?” American
Journal of Sociology 104:1439-1493.
Kenis, Patrick and David Knoke. 2002. “How Organizational Field Networks Shape
Interorganizational Tie-Formation Rates.” Academy of Management Review 27:275-293.
Knoke, David. 2001. Changing Organizations: Business Networks in the New Political Economy.
Boulder, CO: Westview.
Todeva, Emanuela and David Knoke. 2002. “Strategische Allianzen und Sozialkapital von
Unternehmen.” (“Strategic Alliances and Corporate Social Capital”) Kölner Zeitschrift für
Sociologie und Sozialpsychologie. Sonderheft 42:345-380.
Yoshino, Michael Y. and U. Srinivasa Rangan. 1995. Strategic Alliances: An Entrepreneurial
Approach to Globalization. Cambridge, MA: Harvard University Press.