MANAGING TECHNOLOGY-BASED STRATEGIC ALLIANCES

Managing Technology-Based Strategic Alliances Between Large And Small Firms



Managing Technology-Based Strategic Alliances between Large & Small Firms

Introduction

The topic I am interested in is how to manage technology-based strategic alliances between large and small firms. The business world is innovative, frequently experimenting with new structures and relationships. (Slowinski 2004) Traditional strategies for growth and diversification that focused on mergers and acquisitions have been supplemented by a variety of joint-venture arrangements, leveraged investments, licensing and royalty agreements, and so on. Over the last 10 years, a new business relationship has become popular: strategic alliances. Typically, strategic alliances are an attractive option when a large firm has identified a significant opportunity in one of its existing markets. In general, the large firm has most of the capacity needed to address the opportunity but lacks one critical element: technology. By teaming with a world-class small partner, the large firm hopes to participate quickly in the emerging market and gain a competitive advantage. (Berger 2001)Review of related literature

If a corporate decision is made to pursue the strategic alliance option, exploratory discussions begin. The interests of the two parties are both complementary and conflicting. (Bleeke, Joel and Ernst, David; 2005) They both want the technology, which brought them together, to succeed and become a marketable commercial product or process. (Slowinski 2004)Generally, each recognizes its own strength and weakness and the benefits of a synergistic relationship. (Doz 2005) On the other hand, there are clearly interests that are different. The small company wants various types of financial and nonfinancial assistance, yet wants to retain maximum independence. (Bernhut 2002)

The large company wants to cautiously dole out funding and maintain close monitoring if not control of the effort it is supporting. These issues must be discussed and resolved or they will threaten the alliance. (Kanter 2004)

A number of other issues are important as well. A thorough understanding and agreement by key management people of both companies on the objectives and ground rules for the alliance is a necessary prerequisite for success.(Slowinski, Gene; 2004) These discussions must deal with hard issues such as who will be in charge of R&D, production, marketing, and other functions; which decisions are to be made by each company; which decisions must be approved by both companies; and how disputes should be resolved. If there are either basic differences or too many minor differences, the whole question of whether to proceed with the alliance needs to be re-examined. (Besserglik 2004)Partnering vs. the Alternatives

It is worthwhile to review the evolution of strategic alliances. Not too many years ago when an established large company wanted to enter a new product line quickly or rapidly acquire a new technology it would "buy into" that technology by acquiring a small company that had successfully developed it. (Slowinski 2005)The process was standard and simple. The founders of the small company, who were also the key employees and owners, were made offers they couldn't refuse. (BarNir 2002)They sold their companies and became rich employees of the ...