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Long Range Planning

36/3 June 2003



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Charles Baden-Fuller  Editorial

    Co-operation and Relationships
    How can firms build better relationships with other firms?  When is it better to co-operate and when is it better to compete, and how do these interact?  This issue brings new strategy insights into this old conundrum in the context of how to build better relationships with customers, with competitors and with joint-venture partners. 

    We begin this issue with Leonidas Leonidou and Contstantine Katsikeas examining how SMEs can build better relationships with foreign customers.  They note that foreign customers exercise influence over the exporter in a variety of ways, such as using conflict and mediation in both legalistic and non-legalistic settings.  They show how the effectiveness of these strategies varies greatly and how exporters in their turn can chose among export strategies to achieve better relationship outcomes. 

    Our second piece by Simona Spedale examines the newly emerging Fibre-optics industry.  It explores and contrasts the strategies of incumbent old-technology copper-based firms, which had to respond to the new technological threats from newcomers and which threatened the old incumbents' positions.  In conclusion the paper suggests that in markets where there is discontinuous technical change, both incumbent and entrant face similar choices.  Firms should choose between structured co-operation and unstructured co-operation.  Both of these strategies represent a possible route to deal with the dangers that emanate from the turbulence of new competition, and urges that the choice depends on the firm's resources and strategic intent.

    Our third and fourth papers deal with two aspects of alliances and alliance making.  Nitin Pangarkar examines the determinants of the life of alliances in biotechnology.  Alliance duration is one measure of success, but not the only one.  Surprisingly, he finds that failed science is rarely the cause of alliance dissolution, more likely the cause is managerial failure.  Probing deeper, he finds that longevity is related to prior experience with alliances, suggesting that alliance management is something that can be learned perhaps with experience.  Related to this topic, Paul Beamish and Iris Berdrow examine the outcomes of many international joint ventures.  They find that whilst most IJVs are not set up to generate learning for the parent companies, this is often an important beneficial outcome especially for production-based IJVs.

    In Memoriam
    Finally, we remember the life of Roland Calori, a strong supporter of LRP over the years contributing many articles.  Roland was a board member, active in the research community and one dedicated to building bridges between the old and the new and between theory and practice.  There are few non-Anglo Saxons (by both birth and choice of where to live) who have made such a mark on the Anglo-Saxon community of academia and practice.

Co-operation and Relationships

Leonidas Leonidou and Constantine Katsikeas  The Role of Foreign Customer Influences in Building Relationships with US Exporting SMEs  Katsikeas@cardiff.ac.uk

    While managing business relationships is recognized as important by managers and academics alike, the dynamics of international business relationships have received little attention. This article examines the effects of the various strategies of influence exerted by foreign customers of a sample of US SME exporters. It analyses explicit, mediated strategies, finding them used rather less than non-mediated, implicit strategies, and finds both being used at low-to-moderate levels, the actual mix significantly affecting various dimensions of the exporter-importer working relationship. Four types of exporting firms - inert complacents, problematic satisfiers, collaborative aimers, and hazardous agitators - are characterized according to the greater or less than average use by their customers of mediated and non-mediated influence strategies.  The authors offer arguments as to which structural balance produces the most satisfying and efficient relationship.

    The study also looks at both the latent and manifest atmospheres as well as the behavioural and financial satisfaction resulting from the use of mixes of power and influence levels, concluding that non-mediated influences make for a less tense relationship than mediated influences. The authors encourage managers to recognize and take an active role in trying to affect the types and levels of influence overseas customers may seek to use, and to realize that financial transactions are inseparable from behavioural interactions with overseas trading partners.

Simona Spedale  Technological Discontinuities: Is Co-operation an Option?  sspedale@fbk.eur.nl

    This study of the development of the UK fibre-optics industry from the 1960s-1990s follows the story of how the traditional copper-wire and revolutionary new opto-electronics companies faced up to each other, and how the promise of substitution became a reality through complementary technologies. In this classic example of discontinuous technological change, both incumbents and new-entrants chose co-operation as a viable strategy. The author illustrates how adopted strategy must be consistent with the firm's fundamental stance as a market-pull and generalist, reacting to customers' needs, or as technology-push and specialist, driven by scientific invention, as well as being accurate to the firm's levels of organizational and technological flexibility.

    Further examining these two drivers, the author offers evidence that managers faced with the need to co-operate chose between two ideal types of co-operation: structured co-operation (with highly engineered inter-organizational partnerships), designed to facilitate the commercialisation of the new technology for standard applications in the wider market, or unstructured co-operation (relying on informal relationships between individuals in separate organizations), aiming to produce innovative applications for specialist market niches.

    The author reports how these definitions affected both manufacturers and installers, whether incumbent or new-entrant, but that neither necessarily explained the type of co-operation adopted. However firms with market-pull, generalist strategies and lower levels of technological and organizational flexibility were associated with structured co-operation, whereas those with technology-push, specialist strategies and higher levels of flexibility tended to adopt more unstructured co-operative strategies. Firms attempting to change horses in mid-stream found the conflicting demands of different roles and co-operations strategies produced tensions which led to poor performance and morale.

Nitin Pangarkar Determinants of Alliance Duration in Uncertain Environments: The Case of the Biotechnology Sector  bizpn@nus.edu.sg

    The rapidly changing business environment of the Biotechnology sector is the setting for this study which aims to discover the factors influencing alliance longevity. Based on the argument that with limited opportunities for achieving synergies, shorter-duration alliances will exhibit inferior performance than longer-lasting partnerships, the author examines the hypotheses that prior experience of both alliance formation and termination, previous relationships between alliance partners and the presence of equity will be the key drivers of alliance longevity.

    Working on a sample of 83 alliances formed and terminated between 1980 and 1996, he finds that only 17% of the alliances in the sample were terminated because of scientific problems: the vast majority suffered from management difficulties. He finds that alliances where partners had previous alliance experience, or where the purchase of an equity stake was involved did indeed tend to last longer. However, previous relationships between the partners, or previous experience of alliance terminations appeared not to be correlated with longevity. Examining further variables, he finds that dissimilarities of size, type or culture/nationality of the partners (as in alliances between small entrepreneurial biotech firms and large general pharmaceutical firms, or between commercial and academic partners) appeared not to provide barriers to success. The managerial implications of these findings are discussed, with particular stress being laid on the need for adequate planning of alliances, and of not assuming that similarity between partners, which may offer little synergies, will necessarily betoken success.

Paul W. Beamish & Iris Berdrow  Learning from IJVs: The Unintended Outcome  pbeamish@ivey.uwo.ca

    What can firms learn from international joint ventures? Do they enter such partnerships intending to learn? How and where in the partnership does learning occur - and does it pay off in financial outcomes? This article examines how firms access and develop knowledge, and whether they recognize and value learning as an outcome. The authors measure the motivation and intent for learning in their sample of 75 US/Canadian firms involved in production-based equity IJVs, as well as the learning processes in transferring existing knowledge to the IJV and between partners.  The author examines how the transformation of knowledge through IJV activities can create new knowledge, and how the harvesting of newly created knowledge from the IJV can deliver back to partner firms.

    The results tell a mixed story. Typically learning outcomes did not motivate partnerships: access new geographic markets, pre-empting competitors, sharing risks and gaining a strategic hold in the competitors' markets being far more popular motivations. Reported knowledge outcomes included firm-specific and market-specific knowledge, and particularly partnering knowledge, while resource contributions and partner choice were seen as strong facilitators, and business practice differences as strong inhibitors. There was no conclusive evidence of a direct relationship between learning and performance, and the authors suggest that, while this may be true, there may be other explanations to do with understanding how, and how long the learning process might take. But a significant minority of firms, did report strong indirect learning outcomes (particularly partnering and market knowledge) and the most important insight from this study is that while IJVs may not be formed under a learning imperative, important skills and knowledge can be gained.

In Memoriam

Charles Baden-Fuller et al  Roland Calori: A Special Tribute 

    Roland Calori received his Ph.D. from the University of Aix en Provence in 1983 and joined EM Lyon later that same year, where he soon became department head.  Later, as the director of research he helped transform that school into one of France's top schools of commerce. Roland co-authored 5 books and was involved in the writing of over 50 journal articles. He organized the 2001 EGOS colloquium in Lyon and was preparing to assume the editor-in-chief responsibilities of Organization Studies in 2003.  Roland was also known for his active interest in companies and for the help he gave to executives in consulting and training sessions.  Roland was also a tremendous supporter of LRP.Book Reviews

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