Value Chain Analysis

STRATEGIC ALLIANCES IN TECHNOLOGICAL INNOVATIONS

1.0 INTRODUCTION 3

1.1 BACK GROUND OF THE STUDY 3

1.2 PURPOSE 4

1.3 SCOPE OF THE STUDY 4

2.0 TYPES OF STRATEGIC ALLIANCES 5

2.1 JOINT VENTURES 5

2.2 COLLABORATION 6

2.3 MERGERS AND ACQUISITIONS. (M&A) 7

2.4 R&D CONSORTIA. 8

3.0 STRATEGIC ROLES OF STRATEGIC ALLIANCES 8

3.1 TECHNOLOGICAL SOPHISTICATION 9

3.2 TRAINING 9

3.3 MARKET ENTRY. 9

3.4 SHARING RISKS AND EXPENSES. 9

3.5 SYNERGISTIC EFFECTS OF SHARED KNOWLEDGE AND EXPERTISE. 10

3.6 GAINING COMPETITIVE ADVANTAGE. 10

3.7 REDUCE POLITICAL RISKS WHEN ENTERING NEW MARKETS. 10

4.0 DRAW BACKS OF STRATEGIC ALLIANCES 11

4.1 COMPETING INTEREST. 11

4.2 DEDICATION OF RESOURCES. 12

4.3 ATTENDING TO GOVERNANCE 12

5.0 STRATEGIC ALLIANCE PROCESS IN TECHNOLOGIVAL INNOVATIONS 13

5.1 STRATEGY DEVELOPMENT 14

5.2 PARTNER ASSESSMENT 14

5.3 CONTRACT NEGOTIATION 14

5.4 MANAGEMENT AND EVALUATION OF THE ALLIANCE 15

5.5 ALLIANCE TERMINATION 15

5.6 ALLIANCE PORTFOLIO 15

6.0 THEORIES TO ANALYSE STRATEGIC ALLIANCES. 15

6.1 GAME THEORY 16

6.2 STRATEGIC BEHAVIORAL THEORY 16

6.3 TRANSACTIONAL COST ECONOMIES (WILLIAMSON, 1985) 16

7.0 ANALYSIS AND CONCLUSION 18

7.1 ANALYSIS 18

7.2 CONCLUSION 18

REFERENCES 19

1.0 INTRODUCTION

1.1 BACK GROUND OF THE STUDY

Strategic Alliances is defined as a formal relationship formed between two or more parties in order to pursue a set of agreed goals or to meet a critical business need while they remain independent firms. It can take many forms in terms of exclusive supply arrangements, joint research and development, purchasing or marketing among many others Kolasky (1997).

According to Dutta Weiss (1997), technology innovativeness is defined as "the extend to which a firm creates technologies which are technologically significant." The innovative performance of a company and its innovative output are what determine the innovativeness of a firm. The innovativeness of a product can be looked at in terms of its newness to the market or newness to the firm (Katobe &Swan 1995).

Innovation is about creating and implementing effective ideas that achieve either a firm or market needs (Soderlund 2006). The faster the innovation the better as the world is very dynamic and the turbulence levels are high.

Strategic alliances have become increasing popular over the years. Many companies now have more that one strategic partner an example being IBM who has over 10,000 alliances Kolasky, Jr. (1997).The study on Strategic Alliances in Technological Innovations is important as an important source contributing to the innovative capabilities of companies. It brings about potential action for sharing the risk related to product development as well as expansion of the knowledge base by various companies thus giving them a better strategic edge in the industry.

There are many factors that have contributed to the greater need for cooperation;

Globalization;

Organizations are no longer competing locally for market share but are now looking at global expansion. To compete globally firms require a much larger scope of operations. Local firms usually have the advantage as they understand their market better and at times even governments can be an obstacle to global expansion as a result many organizations form alliances to help them over come these obstacles.

Increasing economies of scale and scope;

According to Kolasky, Jr. (1997) the scale and scope of the optimal-sized firm is expanding dramatically due to technological change. Strategic alliances enable firms to compete on a larger scale through networking of firms. It also enables them to specialize in their core competencies as they can form strategic alliances with firms on whom they shall depend on for their important functions.

Jack Welch, CEO of GE says that "If you think you can go it alone in today's global economy, you are highly mistaken" (Bryce J. 2002). Welch is telling us that strategic alliances have become a necessary tool in business to ensure success.

The market is changing very fast as a result many organizations have started research and development facilities to enable them develop products that will meet the needs of their customers. Alliances enable organizations adapt to the rapid changing markets faster and is fairly cheaper as any costs incurred are shared among the alliance partners.

1.2 PURPOSE

The purpose of this study is to discuss strategic alliances in technological innovations.

1.3 SCOPE OF THE STUDY

This study tries to explain how strategic alliances affect technological innovations using various organizations all over the world. There are different types of alliances that exist like mergers, acquisitions, joint ventures. This paper will look at each highlighting their benefits and disadvantages. The paper will also look at the roles that strategic alliances play and why they are important in technological development.

The different theories like the game and

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