ABSTRACT
During alliance strategy formulation, firms must decide which governance mode fits their objectives and situation. This chapter presents three prototypical types: 'make', such that firms gather resources internally through inter-unit exchanges or through mergers and acquisitions; 'buy', which means firms procure resources through discrete market transactions organized by simple contracts; and 'ally', which refers to alliance arrangements organized through complex contracts with external parties to procure resources. It provides a set of decision-making steps, a summary for alliance strategy formulation and a case illustration. Numerous theoretical perspectives permeate alliance literature, providing rationales for cooperative strategies and governance mode decisions. Governance mode decisions are complex, because firms confront a plethora of reasons, occasionally opposing, that provide support for a specific governance mode. Extending beyond more established theoretical perspectives, such as transaction cost economics, resource-based view and institutional theory, other theoretical perspectives have been introduced to the alliance field. The chapter suggests that alliance strategy formulation overall comprises several sequential decision-making steps.
