CROSS CULTURAL ISSUES IN STRATEGIC ALLIANCES AMONG

INTERNATIONAL FIRMS

ISHA SHARMA (RESEARCH SCHOLAR)

JAMMU UNIVERSITY

Cooperative activity has become an important element of strategic behavior and, with

increasing globalization; many alliances are being formed across national boundaries,

with the attendant challenges of surmounting linguistic and other cultural barriers.

Alliance is a broad term that captures many forms of interorganizational cooperative

arrangements, including equity joint ventures, strategic supplier arrangements, research

and development partnerships, and so forth. One of the fundamental problems alliances

face, especially those alliances involving multiple partners, is the inherent tension

between cooperation and competition. On the one hand, an alliance is formed to achieve

certain objectives, when doing so is more effective than if any one partner operated

independently or through acquisitions. Therefore, without cooperation, partners are

unlikely to realize the potential of an alliance. On the other hand, the benefits of alliances

are shared among partners, and each partner has a strong incentive to compete for a larger

portion of the resultant profit. As a result, alliance partners face a constant tension

between cooperation and competition. Hybrid organizational arrangements, in which two

or more sovereign organizations combine to pursue common interests, raise significant

questions for both scholars and managers. Observers of the corporate landscape are

witnessing an increase in the variety and complexity of organizational forms, many of

which represent strategic alliances between organizations, for example, acquisitions, joint

ventures, license agreements, research and development (R & D) partnerships, and so

forth. These alliances result from strategic and operating moves by firms that have

adapted to emerging opportunities as well as those that are repositioning themselves

within existing industrial frameworks. The hybrid arrangements represented by these

strategic alliances command our attention for several reasons. From a managerial

perspective they are important because they represent alternative ways of expanding a

firm's capabilities or bringing about strategic renewal, yet they present different

management challenges than those found in a conventional organization. From a

theoretical perspective, hybrids are of interest because they have unique characteristics

that challenge the capabilities to both describe and explain their causes and operation.

The purpose of this paper is to explore the uniqueness of these organizational

arrangements and to construct a theoretical basis for analyzing them in terms of various

cultural paradigms that impact their success and functioning. We propose an in-depth

conceptual analysis of cultural differences and international alliance performance to

explain the ambiguous findings regarding the influence of culture differences on alliance

performance. Amalgamation of distinct organizational and national cultures generates

distinct managerial coalitions, distinct psychological characteristics, relationship

conflicts, behavioral disintegration among the groups. These harmful processes further

interact reciprocally with any tensions that might exist between the IJV parents, leading

to a strategic failure of alliance.

A social dilemma exists in managing multiparty alliances. Managing the inherent tension

between cooperation and competition in alliances is essentially a social dilemma, where

an individually rational but socially defecting choice may lead to a higher payoff for an

individual partner but where, once all partners adopt such a strategy, the alliance will fail.

The article assesses the role played by culture in shaping the success of international

strategic alliances and how the partners manage process and outcome discrepancies that

may emerge during the course of an alliance. This article also assesses that national

culture affects alliance evolution by influencing partners’ sensitivity to discrepancy

detection, shaping the nature of attributions they make, and by affecting the partners’

reactions to discrepancies. International business failures because of lack of cross-

cultural competence on the part of business practitioners, lack of an adequate

conceptualization and analysis of various paradigms of cross cultural competence has led

to further investigate the cultural issues that impact the effective functioning of strategic

alliances.