chapter  2
19 Pages

Alliance strategy formulation

WithBrian Tjemkes, Pepijn Vos, Koen Burgers

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.