chapter  5
21 Pages

Alliance design

WithBrian Tjemkes, Pepijn Vos, Koen Burgers

In the alliance design stage, partner firms confront the challenge of designing an alliance structure that provides them with sufficient control to realize their objectives. Alliance partners are motivated to create an alliance design that fulfils the following objectives: to increase the likelihood of attaining individual and collective objectives; to create safeguards to reduce the impact of potential exchange hazards; and to increase their ability to respond to unforeseen circumstances. Managers must understand the primary function of governance forms, alliance contracts, and management control. The chapter discusses how these design elements interrelate, and provide a systematic, five-step framework to assist alliance managers in their alliance design decisions. A non-equity arrangement implies that the alliance agreement is organized through an alliance contract, without any transfer of equity between the partners. The chapter concludes with a summary and a case illustration.