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Strategic alliances in a manufacturing supply chain

Inuence of organizational culture from the manufacturers perspective
Murali Sambasivan and Ching Nget Yen
Graduate School of Management, Universiti Putra Malaysia, Serdang, Malaysia
Abstract
Purpose The basic purpose of this paper is to establish and test the relationship between organizational culture and strategic alliances in a manufacturing supply chain that consists of alliance companies (manufacturers) and alliance partners (suppliers and customers). The relationships have been analyzed from the manufacturers perspective. Design/methodology/approach This paper specically addresses: the relationship between the culture type of alliance company and the degree of integration (trust, communication, and commitment) between the alliance companies and partners; the relationship between the culture type of alliance company and value creation in the alliance company; and the relationship between the degree of integration and value creation in the alliance company. A questionnaire was constructed and distributed to 109 companies that had some form strategic alliance with their suppliers and/or customers. The data collected were tested using analysis of variance and correlation analysis. Findings The culture type of the alliance company has a signicant effect on the degree of integration and value creation. The degree of integration has a signicant relationship with value creation. Specically, the following have been found: ad hocracy culture favors a higher level of communication and commitment with the suppliers; hierarchy culture favors a higher level of commitment with suppliers and helps build a higher level of trust with customers and suppliers; and clan and ad hocracy cultures help in achieving a higher degree of value creation. Originality/value Identifying the link between the culture and strategic alliances in a supply chain can help decision makers choose the right kind of alliance partners and decide appropriate strategies that need to be adopted to form and maintain alliances. Keywords Supply chain management, Organizational culture, Strategic alliances, Manufacturing industries Paper type Research paper

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Received October 2009 Revised March 2010 Accepted March 2010

International Journal of Physical Distribution & Logistics Management Vol. 40 No. 6, 2010 pp. 456-474 q Emerald Group Publishing Limited 0960-0035 DOI 10.1108/09600031011062191

1. Introduction In a rapidly evolving world of uncertainties, the global environment has made it increasingly difcult for rms to sustain their competitive advantage on their own prompting the accelerated growth of collaborations and alliances between independent rms (Das, 2006). Strategic alliances have gradually become a signicant component of companies global strategies used by business managers to achieve various strategic goals (Judge and Dooley, 2006; Mockler, 2001; Patel, 2007). In this research, strategic alliances are dened as:
[. . .] voluntary agreements between rms involving exchange, sharing, or co-development of products, technologies, or services. They can occur as a result of a wide range of motives and goals, take a variety of forms, and occur across vertical and horizontal boundaries (Gulati, 1998, p. 293).

The alliance motives include access to technology, access to specic markets, reducing nancial and political risk, achieving or ensuring competitive advantage (Wheelen and Hungar, 2000). Much of the recent growth in the number of strategic alliances is due to both shrinking world markets and increased competition (Pett and Dibrell, 2001). Despite positive outcomes through active engagement in strategic alliances, inter-rm linkages have been frequently accompanied by problems of instability, poor performance, and termination (Parkhe, 1993). What are the factors that lead to the success and failure of a strategic alliance? Researchers have identied many factors that are responsible: strategic alliance motives (Das and Teng, 2000; Kaplan et al., 2001; Ranganathan and Lertpittayapoom, 2002; Yasuda, 2005); environment (Young-Ybarra and Wiersema, 1999); asset specify and perception of opportunistic behavior ( Judge and Dooley, 2006; Kwon and Suh, 2005; Parkhe, 1993; Young-Ybarra and Wiersema, 1999); partner selection (Robson, 2002); interdependence between alliance partners (Mohr and Spekman, 1994; Van Veijfeiken et al., 2002); trust, commitment, and communication between supply chain partners (Das and Teng, 1998; Elmuti and Kathawala, 2001; Kwon and Suh, 2005; Mohr and Spekman, 1994; Ohmea, 1992); and culture (Bamford et al., 2003; Beugelsdijk et al., 2006; Chakravarthy and Lorange, 1991). Of these factors, there is a dearth of empirical studies linking culture and strategic alliances. 2. Research objective Culture as an important factor in the study of strategic alliances is well accepted (Beugelsdijk et al., 2006; Chakravarthy and Lorange, 1991; Harrigan, 1988; Lorange and Roos, 1992). Shared cultural values between the alliance partners increases the likelihood of alliance success (Murray and Kotabe, 2005). This success comes because of the: . transparency between partners; . mutual respect between partners; and . willingness to trust one another. Successful alliances are difcult to achieve without cultural similarities and/or strategic complementarities. Is it not possible for partners with dissimilar cultures to survive? Strategic alliances between partners with dissimilar cultures can survive for a short duration, if the partnering rms emphasize the strategic domain without getting affected by the cultural dissimilarities. But for alliances to survive a long duration, the cultures should be aligned and be compatible (Rao and Swaminathan, 1995). The t between the organizational cultures of the supply chain partners is essential for alliance success (Beugelsdijk et al., 2006). Many strategic alliances transcend international boundaries. Therefore, culture can be treated as a micro (inter-organizational) variable and/or as a macro (inter-country) variable affecting strategic alliances. Patel (2007) has looked at the culture as a macro variable by analyzing the viability of international strategic alliances such as Indo-French alliances. Despite the signicance of culture in explaining strategic alliances, it has received relatively little attention. Earlier studies explained the signicance of culture (Bamford et al., 2003; Chakravarthy and Lorange, 1991) and a very few studies tested the signicance based on the western context (Beugelsdijk et al., 2006). There is a lack of studies based on the eastern context and this study attempts to address this gap. In this study, we specically address the organizational culture of the alliance company (manufacturer) and its effect on trust,

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commitment, and communication with alliance partners (suppliers and customers), and perceived alliance outcome. The alliance outcome, in this research, is measured by value creation. Value creation refers to the value that is captured or created by the strategic alliance (Arino, 2003; Yan and Zheng, 1999). In this research, we do not address the organizational culture of the alliance partners. This is because the responding companies were not willing to divulge information about who their suppliers and customers. 3. Culture and strategic alliance Kroeber and Kluckhohn (1952) dene culture, from an anthropological viewpoint, as values and beliefs shared by members in a society and include patterns of behaving, feeling and reacting, and the premises underlying behavior and ways of thinking. Deshpande and Webster (1989) dene culture, from an organizational viewpoint, as a pattern of shared values and beliefs that help individuals understand organizational functioning and thus provide them norms for behavior in organizations. The introduction of culture into organizational literature came with the realization that there exist differences in performances of culturally different rms although there are only a few differences in the structural characteristics of the rms (Rao and Swaminathan, 1995). The culture, in the organizational literature, has been addressed from two perspectives: organizational level (micro) and national level (macro). Culture, both at the micro and macro levels, impacts strategic alliances. McKenna (2000) provides an extensive description of organizational cultures based on Scheins (1990) denition where organizational culture is described as:
[. . .] a pattern of basic assumptions, invented, discovered, or developed by a given group as it learns to cope with its problems of external adaptation and internal integration, that have worked well enough to be considered valid and, therefore, is to be taught to new members as the correct way to perceive, think, and feel in relation to those problems (p. 471).

According to Chakravarthy and Lorange (1991), organizational culture can be an important construct that has impact on the alliance performance. According to Rao and Swaminathan (1995), organizational culture is internal strategic, a setting that is contextual, prevailing norms and mindsets, distinct norms or procedures within the managerial functioning of the rm. If the alliance partners have a sense of openness, mutual respect, trust, and strategic complementarities, such alliances can succeed even if the cultures are dissimilar but compatible. Researchers from competencies school of thought suggest that strategic alliances enhance the core competencies of the partnering rms thus, contributing to the short-term and long-term strategic leverage (Hamel et al., 1989). According to Murray and Siehl (1989), match between the alliance partners cultures and competencies play a vital role in alliance success. An empirical study in Netherlands by Beugelsdijk et al. (2006) tested the relationship between organizational culture and relationship skills. They conducted a test on a sample of 102 sample rms and concluded that:
[. . .] rms with organizational cultures characterized by an orientation towards stability and predictability, a positive orientation towards innovation, and not characterized by a strong focus on immediate results, score high on relationship skills (p. 833).

The inter-rm relationships are inuenced by the rm-level characteristics and predispositions such as culture.

Globalization has paved the way for many organizations to transcend national boundaries and many companies, across continents, form strategic alliances. This has forced organizations to learn to cope with national and organizational cultures. Cross-cultural differences (macro level) have impact on the alliance formation and success (Rao and Swaminathan, 1995). To decide on the appropriate mechanism for governance of partnerships, researchers allude to the concept of socio-cultural distance (Hofstede, 1984). According to Rao and Swaminathan (1995), we can use the typology proposed by Deshpande et al. (1993) to determine the cultural compatibility between organizations and the typology proposed by Hofstede (1984) to determine the compatibilities between the national cultures. According to Sirmon and Lane (2004, p. 311), organizational culture provides more proximal cues for organization members behavior than does national culture because it provides members with an organizational identity, and facilitates collective commitments. Therefore, this research deals specically with the impact of organizational culture on strategic alliances. According to Day (1995), 70 percent of the alliances fail to meet partner expectations or have been terminated. Fralicx and Bolster (1997) have pointed out that culture could make or break an alliance. Hapeslagh and Jamison (1991) argue that organizations should understand each others culture and people in both the organizations must be willing to work together after the formation of the strategic alliance. This can be achieved with socio-cultural integration and communication between the alliance partners. Gimba (1996) states that managers of strategic alliances must create and maintain an environment of trust and this leads to commitment between the alliance partners to succeed. Bamford et al. (2003) urge partners to screen for the culture t when establishing a strategic alliance. According to Douma et al. (2000), the successful alliance partners are those who are capable to balance the interests of all the members, maximize the potential of the network, and understand the difference between collaboration and competition. The competing values framework (CVF) proposed by Deshpande et al. (1993) was used to classify the rms as belonging to a culture type. CVF model has become dominant in the quantitative research on organizational culture (Yu and Wu, 2009). We consider four different classications of organizational culture: Clan (internal focus and exibility), Adhocracy (external focus and exibility), Hierarchy (internal focus and control), and Market (external focus and control). The characteristics of each culture type can be identied based on the following ve criteria (Quinn and Rohrbaugh, 1983): dominant organizational characteristics, leadership style, organizational glue, strategic emphasis, and criteria for success. Table I gives the criteria for each culture type. According to Yu and Wu (2009), Clan culture puts emphasis on human relations; Hierarchy culture places emphasis on internal process; Adhocracy culture puts emphasis on openness and innovation; and Market culture places emphasis on rational goal setting. 4. Theoretical framework and hypotheses development The theoretical framework used in this study is given in Figure 1. The framework for this study is based on the following theoretical foundations: social exchange theory, theory of complementary resources and organizational culture. The classication of culture types comes from the theory based on organizational culture (Deshpande and Farley, 1999); the link between culture and degree of integration is based on the social

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Category 1. Dominant organizational characteristics

Style A. Personal like a family B. Entrepreneurial, risk taking C. Competitive, achievement oriented D. Controlled and structured A. Mentoring, facilitating, nurturing B. Entrepreneurial, innovative, risk taking C. No-nonsense, aggressive, result oriented D. Coordinating, organizing, efciency oriented A. Loyalty and mutual trust B. Commitment to innovation, development C. Emphasis on achievement and goal accomplishment D. Formal rules and policy A. Human development, high trust, openness B. Acquisition of resources, creating new challenges C. Competitive actions and winning D. Permanence and stability A. Development of human resources, teamwork, concern for people B. Unique and new products and services C. Winning in the marketplace, outpacing the competition D. Dependable, efcient, low cost

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2. Leadership style

3. Organizational glue

4. Strategic emphasis

5. Criteria for success

Table I. OCAI Instrument to assess culture type

Notes: Type A style Clan culture; Type B style Adhocracy culture; Type C style Market culture; Type D style Hierarchy culture

Degree of integration Communication Commitment Trust H1 H3

Organizational culture type

Alliance outcome H2 Value creation

Figure 1. Conceptual framework for the research

Clan Adhocracy Hierarchy Market

exchange theory (Thibaut and Kelley, 1959); the links between culture and alliance outcome and between degree of integration and alliance outcome come from the theory of complementary resources (Das and Teng, 2000; Harrison et al., 2001). In this research, an alliance company is a manufacturer and the alliance partner refers to a supplier or a customer in a typical supply chain.

Culture vs trust, communication and commitment Social exchange theory proposes that parties in an exchange relationship will act in a manner that maximizes their positive outcomes and minimizes their negative outcomes (Thibaut and Kelley, 1959). In social exchange, one rm voluntarily provides benets to the partner. This act provokes an obligation on the part of the partner to provide some benet in return, that is, the act of giving inspires reciprocity (Whitener et al., 1998). Morgan and Hunt (1994) have used social exchange as a foundation for their commitment-trust theory of relational exchange based on a reciprocity concept. Organizational culture plays a crucial role in the exchange relationship (Schlict, 2004). The effects of organizational cultures have been examined in order to understand how shared meanings and values held by groups in a society inuence the business practices (Lau and Ngo, 1996). They conceptualize organizational culture as a common understanding and things that are shared among organizational members and these shared things include, but are not limited to, philosophies, ideologies, values, assumptions, expectations, perceptions, norms, saying, behavior, heroes, and traditions. Often, good business relationships are formed not on the basis of explicit rules and regulations but out of a set of ethical habits and reciprocal moral obligations that are internalized by each of the business partners; these rules or habits play a very important role for the business partners to trust each other; and the trust leads to commitment (Fukuyama, 1995). Repeated engagements and frequent communication in strategic alliances allow partnering rms to create codied routines, policies, and procedures for managing the alliance relationship (Rothaermel and Deeds, 2006). However, cultural dissimilarity is found to impede the development of trust; and cultural difference brings more problems than benets in an alliance or collaboration (Anderson and Weitz, 1989; Davenport et al., 1998). Bamford et al. (2003, p. 170) identify culture clash as the invisible eight-hundred-pound gorilla in alliances. Cultural dissimilarities can occur between the partnering organizations and therefore, need to be addressed. Strategic alliance partners must understand that success of a strategic alliance is based on a good interdependent relationship; and that trust, communication and commitment are needed to establish such a relationship (Elmuti and Kathawala, 2001). Interpersonal interactions can reduce the cultural difference, improve the understanding of each other (Bamford et al., 2003) and build a necessary foundation for creating future value (Kanter, 1994). Thus, culture is related to the building of a strategic alliance relationship and hence promote or hinder formation of strong network ties. In this research, we collectively term trust, communication, and commitment as degree of integration. This is because the degree or extent of integration between the members in the supply chain is the product of trust, communication, and commitment between them. According to Cullen et al. (2000), the soft side of strategic alliance management is critical to the success of strategic alliances. The soft side refers to trust, commitment, and communication. Many researchers have argued that these components as the most important in forging strong relationship and integration between the partners (Burt, 1997; Cullen et al., 2000; Elmuti and Kathawala, 2001; Hosmer, 1995). A relevant question at this point is: which culture type favors integration more than the other types? To address this question, we look at the culture types and their basic characteristics. Based on the characteristics, we argue that ad hocracy culture favors the integration more than the others. This is because the features of ad hocracy culture are: innovative,

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entrepreneurial, risk-taking, acquisition of resources, creating new challenges, and development of new products and services. These features make ad hocracy culture more open to strategic alliances and therefore, the degree of integration will be much higher. According to Beugelsdijk et al. (2006), the rms that have innovative orientation have stronger alliance capabilities and the employees in these rms are motivated to develop strong relationships with partner rms. Based on the above comments, we posit the following hypothesis: H1. The degree of integration between the alliance company and the alliance partners (suppliers and customers) differs according to the culture type of the alliance company; alliance companies with ad hocracy culture have a stronger degree of integration with alliance partners than other culture types. Culture vs alliance outcome Culture is often cited as a cause for alliances not accomplishing their goals and a large barrier to alliance success (Whipple and Frankel, 2000). Pothukuchi et al. (2002) and Sirmon and Lane (2004) have suggested that partners cultural differences have more inuence on alliance performance (outcome) as these differences are more directly related to the alliances value creating activities. Sirmon and Lane (2004) have argued that resource complementarity between alliance partners as a necessary condition to optimize value creation. They have suggested that in order to share and leverage complementary resources, the partners must interact effectively and the effective interaction is facilitated and inhibited by the organizational culture differences. Studies by Hofstede (1990) and Smircich (1983) suggest that organizational cultures matter greatly to the outcomes of alliances. We use value creation as a construct to measure alliance outcome. As indicated earlier, value creation refers to the value that is captured or created by the strategic alliance (Arino, 2003; Yan and Zheng, 1999). Strategic alliances create values by: . building new businesses when the risks are high, skills incomplete or speed is essential; . allowing a company to remain focussed in its core product or service while reaching a large number of customers; . creating skills and learning the building blocks of future competitive advantage; . helping rms gain scale through traditional mergers or acquisitions; . transforming the relationship between a company and its suppliers; . creating networks; . cutting down costs; . improving productivity; and . improving protability (Bamford et al., 2003). A logical question at this point is: which culture type favors value creation more than the other types? To address this question, we look at the culture types and their basic characteristics and compare them with different ways the strategic alliances create value. Adhocracy culture favors entrepreneurship and innovation and the rms that have innovative orientation achieve higher value creation (Beugelsdijk et al., 2006).

Based on the above comments, we propose the following hypothesis: H2. Value creation in the alliance company differs according to the culture type of the alliance company; alliance companies with ad hocracy culture have a higher value creation, because of alliances, than other culture types. Degree of integration (trust, commitment, and communication) and alliance outcome Inter-rm trust has been found to be a critical factor in partner satisfaction and has a direct link to performance (Kanter, 1994; Zaheer et al., 1998). Without communication quality and participation, it is very difcult to achieve successful partnership since communication is critical in signalling future intentions of the partner rms (Mohr and Spekman, 1994). Companies with a high level of information sharing and strong communication across functions have more productive external relationships (Kanter, 1994). Parkhe (1993) argues that frequent interactions strengthen reciprocity between partners, develop trust and commitment thereby, increasing the robustness of cooperation. A number of studies have examined the effects of trust and commitment on performance related outcomes (Cravens et al., 2000; Lohtia et al., 2005; Narasimhan and Nair, 2005; Sarkar et al., 2001; Skarmeas et al., 2002). All these studies have reported a positive relationship between trust, commitment, and alliance outcomes. Based on the above comments, we posit the following hypothesis: H3. The degree of integration between the alliance company and the alliance partners (suppliers and customers) has a positive relationship with value creation in the alliance company. 5. Methodology The emphasis of this research is on addressing the research questions/hypotheses through an empirical study. The data for the study were collected through a questionnaire. The sampling frame for this study was the list of companies in the FMMs (Federation of Malaysian Manufacturers) directory. The list consists of more than 3,000 companies in different industries such as construction, electronics, engineering, food and beverage, plastic, telecommunication, chemical, and metalwork. Initially, 1,000 companies were chosen at random and contacted through email and telephone to check if they were interested in participating in the study. After about three months, out of 1,000 companies, only 200 companies from different industries showed inclination to participate in the study and they were asked if they had strategic alliances with their suppliers and/or customers. Out of 200 companies, it turned out that 109 companies had had strategic alliances for at least one year and these companies were chosen as respondents to the questionnaire survey. A period of one year of experience with strategic alliances was chosen because it takes at least a year for a company to realize the alliance outcome of value creation. The questionnaires were sent to the respondents via email. The questionnaire had ve sections. Section 1 dealt with the company prole such as company type, company size, number of years the company has been in existence, number of years of strategic alliance with the supplier and customer, and the number of employees. Section 2 dealt with items pertaining to organizational culture. We used the organizational culture assessment instrument (OCAI) developed by Quinn and Rohrbaugh (1983) and later on used by Deshpande and Farley (1999) and Cameron and

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Quinn (1999). This section had ve sub-sections and these sub-sections along with the items are given in Table I. This section had 20 items and the scale used was a Likert-type scale ranging from 1 strongly agree to 5 strongly disagree. Section 3 had items to assess the degree of integration (communication, commitment, and trust). The items were adapted based on the studies by Hoffmann and Schlosser (2001), Kwon and Suh (2005), Mohr and Spekman (1994), and Spekman et al. (1998). This section had 24 items to capture communication, commitment, and trust. The scale used was a Likert-type scale ranging from 1 Low to 5 High. The communication construct was measured based on three dimensions: information quality, information participation, and information sharing. Some sample items in this section were: . We actively seek advice and information from our partner. . We participate in the partner rms planning and goal setting activities that are relevant to the alliance. . We share our proprietary information with our partner. . Our partner shares proprietary information with us. . There is a periodic review to assess the alliance goals. . We inform our partner rm in advance of changing needs. . We have found our partner rm to be dependable. . We are committed to the relationship with our partner rm. Section 4 had items to measure alliance outcome namely, value creation. The items were adapted based on the studies by Arino (2003), Bamford et al. (2003), and Yan and Zheng (1999). This section had nine items and the scale used was a Likert-type scale ranging from 1 Strongly agree to 5 Strongly disagree. Some sample items in this section were: . The strategic alliances help us build new business opportunities or new products. . The strategic alliances help us cut down costs. . The strategic alliances help us improve our productivity. . The strategic alliances help us improve our protability. Section 5 captured information about the respondent such as job position, age, gender, number of years of experience, and area of responsibility in the company. 6. Results Reliability and validity We measured the reliability of each construct using Cronbach alpha and the validity using conrmatory factor analysis (CFA). The results of the tests are given in Table II. The reliability values of all the constructs fell between 0.80 and 0.90. From the table, it can be seen that the values are close to the threshold levels prescribed by Hair et al. (2006). The prescribed threshold level for Cronbach a is 0.70. The prescribed threshold levels for CFA are: goodness-of-t index (GFI) must be at least 0.90; root mean square error approximation (RMSEA) must be less than 0.08; p-value for the chi-square test must be more than 0.05. According to Yu and Wu (2009), many researchers have used the

OCAI questionnaire and have reported very high scores on reliability and validity measures. It is not surprising that our study reported high scores. Descriptive statistics prole of the respondents Among the 109 companies surveyed, 40 percent came from the food and beverage sector, 27 percent came from the manufacturing sector, 18 percent came from the engineering and telecommunication sector, and the remaining 15 percent came from other sectors. Based on the company size, 32 percent of the companies belonged to the large category (more than 500 employees), 40 percent belonged to the medium category (100-500 employees), and the remaining 28 percent fell into the small category (less than 100 employees). Among the surveyed companies, 37 percent of the companies had strategic alliances with the supplier/customer for less than ve years, 47 percent had alliances between ve and ten years, and 16 percent had alliances for more than ten years. On further analysis of the companies that had strategic alliances for less than ve years, only four companies had strategic alliances for one year. The selection of alliances with suppliers and customers were left to the surveyed companies. Out of 109 companies, 84 companies had strategic alliances with their suppliers and 63 companies had strategic alliances with their customers. Nearly 60 percent of the questionnaires were lled by an employee at the top management level (CEO/President/Vice-President/General Manager) and the remaining 40 percent were lled by employees at the managerial level. The questionnaires were mailed to the CEO and it was left to him/her to decide the appropriate person to ll the questionnaire. Assessment of culture type As indicated in Table I, OCAI was used to assess the culture type of each respondent organization. According to Deshpande and Farley (1999), these four types of culture are modal rather than mutually exclusive. That is, in every organization multiple cultures co-exist, with one type being dominant than the others. It is rare to nd a company that has only one type of culture. The dominant type is identied by the highest score. We summed the scores for each of the styles (type A-D). The style that had the highest score was used as the culture type of the respondent organization. For example, if the type C score was highest then the corresponding culture type of the organization is Market culture. Based on the assessment of the 109 companies that responded, 21 percent (23 companies) belonged to the Clan culture, 23 percent (25 companies) belonged to the Adhocracy culture, 39 percent (43 companies) belonged to the Market culture, and the remaining 17 percent (18 companies) belonged to the Hierarchy culture. In our sample, there were no cases of ties for the highest score and therefore, identication of dominant culture type was simple.

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Construct Culture type Degree of integration (with supplier) Degree of integration (with customer) Value creation (with supplier) Value creation (with customer)

Reliability Cronbach a 0.80 0.85 0.86 0.80 0.90

GFI 0.91 0.92 0.92 0.90 0.94

Validity test CFA RMSEA x2 0.045 0.030 0.032 0.055 0.045 2.82 2.5 2.6 3.0 2.4

p-value 0.12 0.24 0.20 0.06 0.18

Table II. Reliability and validity of different constructs

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Descriptive statistics degree of integration (communication, trust, and commitment ) of alliance company with suppliers and customers Mean scores were computed for communication, trust, commitment for the supplier and the customer across all the culture types. The mean scores for degree of integration with suppliers are: 3.54 for communication, 3.29 for trust, and 3.45 for commitment. Table III gives the mean scores for suppliers in detail. The mean scores for degree of integration with customers are: 3.63 for communication, 3.22 for trust, and 3.80 for commitment. Table IV gives the mean scores for customers in detail. In general, the scores indicate that the degree of integration between the alliance company and the partners (supplier and customer) is above the average level (average score 3). Between the alliance company and the suppliers, the communication level is high and between the alliance company and customers, the commitment level is high. It is interesting to note that the trust level between the alliance company and the partners (supplier and customers) is low indicating that there is some skepticism between the members in the supply chain. It is not unusual since the alliance companies are always wary of opportunistic behavior ( Judge and Dooley, 2006) by other partners in the supply chain. Descriptive statistics value creation for the alliance company The mean scores of value creation by having an alliance with the supplier is 3.43 and with the customer is 3.34. Table V gives the mean scores for value creation in detail.

Culture type Clan Adhocracy Market Hierarchy Total

Communication 3.73 3.79 3.41 3.24 3.54

SD 0.67 0.61 0.65 0.60 0.66

Trust 3.24 3.43 3.00 3.73 3.29

SD 0.64 0.74 0.76 0.57 0.74

Commitment 3.31 3.79 3.14 3.79 3.45

SD 0.65 0.57 0.85 0.56 0.75

Table III. Mean scores for degree of integration with suppliers

Culture type Table IV. Mean scores for degree of integration with customers Clan Adhocracy Market Hierarchy Total

Communication 3.65 3.86 3.52 3.49 3.63

SD 0.75 0.70 0.70 0.32 0.68

Trust 3.21 3.08 3.24 3.56 3.22

SD 0.84 0.51 0.99 0.62 0.81

Commitment 3.5 3.58 4.05 4.11 3.79

SD 0.75 1.14 0.91 0.69 0.94

Culture type Clan Adhocracy Market Hierarchy Total

Value creation with supplier 3.75 3.64 3.17 3.30 3.43

SD 0.61 0.61 0.78 0.77 0.74

Value creation with customer 3.39 3.57 3.02 3.92 3.34

SD 0.79 1.29 1.07 0.75 1.07

Table V. Mean Scores for value creation

The perceived value creation by the alliance companies due to strategic alliances with suppliers and customers is above the average level (average score 3). This gives an indication that the companies in Malaysia feel that they benet from having strategic alliances with suppliers and customers. The proponents of strategic alliances argue their case by sighting the value that alliances can add to the partnering rms (Narasimhan and Nair, 2005; Park and Ungson, 2001). Hypothesis testing Analysis of variance (ANOVA) was used to test H1 and H2 and correlation to test H3. The hypotheses were tested for each alliance partner (supplier and customer), separately. The results of the tests are as follows: H1 deals with the effect of organizational culture on the degree of integration (H1). The ANOVA test (Table VI) partially supports the hypothesis with suppliers ( p-value 0.03 for communication, p-value 0.01 for trust, and p-value 0.037 for commitment) but not with customers ( p-value 0.437 for communication, p-value 0.695 for trust, and p-value 0.174 for commitment) as the alliance partners. Post-hoc test was performed to identify the link between the culture type and the dimensions of degree of integration (communication, trust, and commitment) with the suppliers. Based on the test: . The organizations with Adhocracy culture score the highest in terms of communication with the suppliers and there are no signicant differences in scores for the other culture types.

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Sum of squares Communication with supplier Between groups 3.84 Within groups 32.62 Total 36.46 Trust with supplier Between groups 5.96 Within groups 39.33 Total 45.29 Commitment with supplier Between groups 7.3 Within groups 39.32 Total 46.62 Communication with customer Between groups 1.30 Within groups 27.79 Total 29.19 Trust with customer Between groups 0.99 Within groups 40.13 Total 41.12 Commitment with customer Between groups 4.38 Within groups 50.19 Total 54.57

Df 3 80 83 3 80 83 3 80 83 3 59 62 3 59 62 3 59 62

Mean square 1.28 0.41 1.99 0.49 2.43 0.49 0.43 0.47 0.33 0.68 1.46 0.85

F-value 3.14

p-value 0.03

4.04

0.01

4.95

0.003

0.92

0.437

0.48

0.695 Table VI. Organizational culture vs degree of integration ANOVA test

1.72

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The organizations with Hierarchy culture score the highest in terms of trusting the suppliers followed by organizations with ad hocracy, market, and clan cultures. The organizations with ad hocracy culture score the highest in terms of commitment in the relationship with suppliers followed by organizations with hierarchy, clan and market culture types.

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With customers as the alliance partners there are no signicant differences in scores between the various culture types. Hypothesis 2 deals with the effect of culture type on value creation (H2). The ANOVA test (Table VII) partially supports the hypothesis with the suppliers ( p-value 0.022) but not with the customers ( p-value 0.187) as the alliance partners. Post-hoc test was performed to identify the dominant culture types that affect value creation in the alliance company. Based on the test with suppliers as the alliance partners: (1) Organizations with the clan culture score the highest in terms of value creation followed by organizations with ad hocracy, hierarchy, and market cultures. This result is interesting. A classical example of the clan culture is the Japanese companies. These companies have a more team-centered approach and respect relationships with employees, suppliers, customers, community, and the environment. The clan culture encourages a win-win situation to the members in the supply chain. The Malaysian culture like Japanese culture is based on collectivism (Hofstede, 1984) and therefore, it is plausible that the respondents perceive rms with clan culture to add more value and (2) there are no signicant differences in scores between the clan and ad hocracy cultures and between market and clan cultures. H3 tests the relationship between the degree of integration and value creation (H3). The correlation test supports the hypothesis for both the suppliers and the customers. Based on the test: (1) The three dimensions of degree of integration (communication, trust, and commitment) with suppliers has a positive correlation with value creation in the alliance company (r 0.701 for communication, r 0.252 for trust, and r 0.519 for communication). The correlation coefcient for trust is low and according to Judge and Dooley (2006), this is not unusual since the manufacturers are always wary of the opportunistic behavior of the suppliers, and The three dimensions of degree of integration (communication, trust, and commitment) with customers have a positive correlation with value creation in the alliance company (r 0.539 for communication, r 0.314 for trust, and r 0.262 for communication).Table VIII gives the correlation values. The correlations between the three dimensions of degree of integration were tested and it was found that communication, trust, and commitment were strongly correlated with one another.

Sum of squares Value creation with supplier Between groups 5.10 Within groups 40.04 Total 45.14 Value creation with customer Between groups 5.47 Within groups 65.03 Total 70.50

Df 3 80 83 3 59 62

Mean square 1.70 0.5 1.82 1.10

F-value 3.40

p-value 0.022

Table VII. Organizational culture vs value creation ANOVA test

1.65

0.187

Communication With supplier Value creation Communication Trust Commitment With customer Value creation Communication Trust Commitment 0.701 * * 1.000 0.225 * 0.601 * * 0.539 * * 1.000 0.276 * 0.631 * *

Trust 0.252 * 0.225 * 1.000 0.297 * * 0.314 * 0.276 * 1.000 0.463 * *

Commitment 0.519 * * 0.601 * * 0.297 * * 1.000 0.262 * 0.631 * * 0.463 * * 1.000

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Table VIII. Correlation between degree of integration and value creation

Note: Signicant at: *0.05 and * *0.01 levels

7. Discussion The ndings of this research contribute to our understanding of the effect of organizational culture of the alliance company (manufacturer) on the degree of integration (communication, trust, and commitment) with alliance partners (suppliers and customers) and alliance outcome (value addition to the alliance company). The entire research has been conducted from the manufacturers perspective. Few researchers have alluded to the role of culture in the formation and maintenance of strategic alliances (Bamford et al., 2003; Chakravarthy and Lorange, 1991) and very little empirical work (Beugelsdijk et al., 2006) is available to support this view. Through this research we have attempted to address this gap. We have identied the organizational culture types that relate to the degree of integration and the alliance outcome. Specically, we have found the following: . Ad hocracy culture of the alliance company favors a higher level of communication and commitment with suppliers (Beugelsdijk et al., 2006). . Hierarchy culture of the alliance company helps to build a higher level of trust with customers and suppliers. This result stems from the fact that this culture promotes stability and control. When the alliance partners recognize the alliance company as a stable company, the trust level increases (Yu and Wu, 2009). . Clan, market, and ad hocracy cultures of the alliance companies help in achieving a higher degree of value creation. . Communication, commitment, and trust between the members in the supply chain are essential to achieve value creation in the alliance company. What are the implications of the research ndings? First, the alliance companies cannot ignore the inuence of organizational culture on the value creation. Specically, the alliance company must understand its own culture and the cultures of its suppliers and customers. This is in line with what has been proposed by Chakravarthy and Lorange (1991), Harrigan (1988), Lorange and Roos (1992), and Rao and Swaminathan (1995). Secondly, the culture of the alliance company relates to degree of integration (communication, trust, and commitment) between the alliance partners and the higher the degree of integration the higher the value creation. This implies that the alliance companies and their partners must constantly engage

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in communication and trust-building measures and must be strongly committed to alliance success. This nding supports the arguments by Anderson and Weitz (1989), Davenport et al. (1998), and Schlict (2004) that organizational culture plays a crucial role in the exchange relationship. Thirdly, a high correlation between the three dimensions of degree of integration indicate that all of them must co-exist for the success of strategic alliances. Ohmea (1992) notes that a strategic alliance is very much like a marriage; and marriages are successful because of trust, commitment, and communication between the partners. The managers handling the alliance relationships must communicate on a regular basis and share information. The consistent engagement helps to build trust and become committed to the alliance relationships. According to Kelley and Thibaut (1978), relationships between organizations ourish because of people who manage those relationships. Fourthly, the culture type of the alliance company is strongly related to the degree of integration and value creation. Adhocracy and hierarchy cultures are perceived to result in higher degree of integration and clan, market, and ad hocracy cultures are perceived to result in higher value creation. The alliance managers must study and understand the culture type of the alliance company. This can help them formulate appropriate strategies to enhance the degree of integration with alliance partners and value creation. As noted by Rao and Swaminathan (1995) and Beugelsdijk et al. (2006), the cultures of the partnering rms have to be compatible for alliances to ourish. Fifthly, the literature on strategic alliances is enriched by the inclusion of culture as an important determinant of success of strategic alliances in a supply chain. As indicated earlier, previous studies have alluded to this fact but have not empirically tested the role of culture in strategic alliances. We believe that the culture of partnering rms must become one of the focal factors in the formation of strategic alliances and future efforts in the formation of alliances must not overlook the impact of organizational culture. 8. Conclusions and limitations of the study The study was carried out to understand the effect of culture on strategic alliances in a manufacturing supply chain. We studied the manufacturing companies from different sectors in Malaysia. One hundred and nine companies that had strategic alliances with their partners (suppliers or customers) participated in the study. The research looked at the effect of organizational culture on the degree of integration between the alliance partners and value creation in the alliance company. The research also studied the relationship between degree of integration and value creation. Based on the ndings we suggest that: . culture type of the alliance company has a strong impact on the degree of integration between alliance partners and value creation; and . degree of integration has a positive relationship with value creation. In this research, we studied only the manufacturing sector. The study can be extended to include the service sector. The sample size used in this study is small and therefore, generalization has to be done with caution. Our research did not study the suppliers and customers of each rm that responded. This was because the responding rms refused to divulge information about the suppliers and the customers. Better insights could be drawn if suppliers and customers were included. The study conducted was cross-sectional. A longitudinal study can give a better justication to the causal and effect relationships between variables.

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