Global alliances are usually very slow in the making but they are best mechanisms to implement strategies in global markets. Alliances present a faster and less risky route to globalisation in a highly competitive environment. It is extremely complex to fashion such linkages, however, especially where many interconnecting systems are involved, forming intricate networks.
Alliances generally fail for complex reasons. Many also end up in a takeover in which one partner swallows the other. Problems with differences in national cultures, shared ownership the integration of vastly different structures and systems, the distribution of power between the companies involved, and conflicts in their relative locus of decision making and control are some of the organisational issues that must be worked out.
Often, the form of governance chosen for multinational firm alliances greatly influences their success, particularly in technologically intense fields such as pharmaceuticals, computers, and semiconductors. Thus, joint ventures are often the chosen form for such alliances because they provide greater control of proprietary technology as well as providing increased coordination in high-technology industries.
All too often, cross-border allies have difficulty collaborating effectively, especially in competitively sensitive areas; this creates mistrust and secrecy, which then undermine the purpose of the alliance. The difficulty that they are dealing with is the dual nature of strategic alliances the benefits of cooperation versus the dangers of introducing new competition through sharing their knowledge and technological skills about their mutual product or the manufacturing process.
Managers feel that they will lose the competitive advantage of the company’s proprietary technology or the specific skills that their personnel possess. Cross-border partnerships, in particular, often become a “race to learn,” with the faster learner later dominating the alliance and rewriting its terms.
The cumulative learning that a partner attains through the alliance could potentially be applied to other products or even other industries that are beyond the scope of the alliance, and therefore would hold no benefit to the partner holding the original knowledge. The alliance shows the tricky risk-and-reward calculations American corporations must increasingly make in their pursuit of the lucrative markets in countries such as China and India.