Mode choice and performance of strategic alliances

The explosion of strategic alliance activities has been phenomenal during the past decade. When partners decide to enter an alliance, one important issue to consider is which mode the alliance should take, a contractual form or a joint venture form?; The first part of this dissertation examines the strategic choice between two alliance modes: contractual alliances (e.g., licensing agreements) and joint ventures. The major research question addressed is: What factors seem to influence the alliance mode choice, and why?; In the past, a major perspective that has been employed to study structure choice of strategic alliances is transaction cost economics (TCE). The TCE theory centers on transaction cost alone. However, this research holds that transaction cost is only one type of cost that should be considered in the decision of alliance mode choice. Another kind of cost, i.e., internalization cost caused by a firm's capability constraints, also plays an important role in the structure choice of alliances. Ignoring internalization cost can lead to very unrealistic mode choice decisions, especially in today's global economy, where most alliance partners compete in fast-paced knowledge-intensive industries. Building on a group of factors influencing transaction cost and internalization cost, this paper develops a broader theoretical framework that provides a better understanding of the issue of strategic mode choice. The proposed theoretical framework is empirically tested on 17978 joint ventures and 29602 contractual alliances, based on information from TFN Strategic Alliances Database. The unit of analysis is the strategic alliances formed between two partners between 1992 and 2000.; The second part of this dissertation is intended to provide convergent validity to the results obtained in part one through two conjoint experiments. The first experiment, the mode choice survey, was conducted to (i) obtain replications of some of the results presented in part one; (ii) augment part one's analysis with two new variables. Future managers (i.e., mostly MBA students in a major business school) were asked to choose a mode for different hypothetical alliance situations. The second experiment, the alliance performance survey, further validates a subset of the mode choice findings from part one. This experiment was conducted by surveying the same future managers about their perceptions of how various combinations of strategic variables (including mode choice) affect alliance performance.; All the three studies, i.e., one field study reported in part one and two experiments reported in part two, provide basic support for the proposed mode choice model and strong convergent validity for the predicted effects for two variables; culture distance and number of previous alliances the couple formed. The major findings are quite different from what the published literature claims. They are: (i) As the culture distance between alliance partners increases, the alliance partners will be more likely to enter the contractual mode; (ii) When the couple formed more previous alliances, they tend to enter the joint venture mode.