Strategic Technology Alliances
Prasada Reddy
Centre for Entrepreneurship
University of Oslo, Norway
Strategic Alliance: Concept
• Strategic alliance is a web of agreements whereby two
or more partners share the commitment to reach a
common goal by pooling their resources together and
coordinating their activities (Teece, 1992).
• Alliances take a variety of forms ranging from non-equity
agreements associated with one-way or two-way
licensing, through to joint venture agreements, equity
participation or a consortium.
• The activities range from pre-competitive, basic research
agreements to competitive R&D and technology
cooperation and manufacturing and marketing (i.e.
covering the whole value chain from R&D to
commercialization process (Chesnais, 1988).
Why Strategic Alliance? 1
• Two Schools of thought:
• 1) ‘Competitive forces’ school (Porter, 1980): A
firm’s performance is mainly dependent on the
structure of the industry within which it operates,
such as the forces of entry barriers, substitutes,
bargaining power of suppliers and buyers, and
intra-industry rivalry.
• A firm’s decision to form alliances is moulded by
external forces rather than by the firm’s
managerial, technical, marketing and other
resources.
Why Strategic Alliance? 2
• 2) ‘Resource-based’ analysis: It treats the firm as a
collection of sticky and difficult-to-imitate resources and
capabilities. The resources may be physical, such as
product designs and production processes, or intangible
such as brand equity and management know-how
(Mowery et al, 1998).
• The sale and acquisition of such resources through
arms-length market transactions are difficult to organize
and are vulnerable to high risks of failure (Teece, 1982).
• This school sees alliances as mechanisms designed to
combine the features of markets and intra-firm
organization and thus, facilitates the firm’s access to
capabilities (Kogut, 1988).
Types of Alliance 1
• Three groups (Forrest and Martin (1992):
• 1) Technology development alliances: to
enhance the R&D capability of the firm to ensure
its competitiveness in the rapidly evolving field of
knowledge relevant to its focus.
• 2) Commercialization alliances: to provide the
firm with and expanded manufacturing and
marketing capabilities.
• 3) Financial alliances: to help provide the firm
with the capital needed to support it technology
acquisition and commercialization strategies.
Types of Alliance 2
• Mowery (1992):Four types of technology focused
alliances:
• 1) those involving collaboration among firms in research
alone;
• 2) those relating to the exchange of ‘proven’
technologies within a single product line or across
multiple products (e.g. cross-licensing in
microelectronics);
• 3) joint development of one or more products (e.g.
common in electronics and biotechnology); and
• 4) collaboration across different functions, with one firm
providing a new product or process for marketing,
manufacture or application in a foreign market by
another.
Reasons for Technology Alliances
• The extremely high costs and risks of R&D in high-tech
industries;
• Quick pre-emption strategies on world scale, even at the
cost of loss of potential monopoly profits;
• Technology transfer and complementarity;
• Exploration of new markets and market niches;
• Reducing the time lag between discovery and market
introduction; and
• Monitoring the evolution of technologies and
opportunities (Hagedoorn and Schakenraad, 1989).
Why SAs - Decision Tree 1
• 1) How easily can one protect know-how and thus
appropriate easily the benefits of the work in the form of
rents?
• 2) Is there a dominant design?
• 3) What is the speed with which a proto-type can be
developed?
• 4) How important are complementary assets (i. e. assets
that a company needs to have access to in order to
commercialize its product, process or system)?
• 5) Are these complementary assets specialized, or
available on a competitive basis? Can the company put
the suppliers of the complementary assets in competition
with each other? (De Meyer, 1999)
Why SAs - Decision Tree 2
• Figure 1: (De Meyer, 1999)
• If one can easily protect one’s know-how and that the
DD is not yet known, the complementary assets do not
play a significant role and the innovator has time to
develop its concepts and be successful, if it is well
connected to the market.
• If DD is known, then the focus should be on
complementary assets. If they are not important, the
innovator is in driving seat. If they are important, the
innovator may have to contract for access or enter into
partnership, but he cannot do it from a position of
strength.
Why SAs - Decision Tree 2
• Figure 1: (De Meyer, 1999)
• If it is difficult to protect one’s know-how and that
the DD is not yet known, the speed of proto-type
development becomes important. If the
innovator can bring out very fast successive
proto-types, it can succeed if it has good market
contact. This is needed to develop the DD
through sequence of proto-types and pilot
products (e.g. development of Internet-based
products).
Why SAs - Decision Tree 2
• Figure 1: (De Meyer, 1999)
• Following the path of weak protection, with the
DD known, one has to consider the importance
of complementary assets and their availability. If
they are not important, the innovator is in driving
seat. If they are important, the innovator may
have to contract for access or enter into
partnership, but he cannot do it from a position
of strength.