Michael_A._Hitt,_R._Duane_Ireland,_Robert_E._Hosk

Chapter 9: Cooperative Strategy 295

among multiple companies is foundational to achieving the objectives Apple and IBM
seek through their partnership.
In dynamic alliance networks, partners typically explore new ideas and possibili-
ties with the potential to lead to product innovations, entries to new markets, and the
development of new markets. These are outcomes sought by Apple and IBM through
the collaboration described above. Research suggests that firms that help to broker rela-
tionships between companies remain important network participants as these networks
change.^94 Often, large firms in industries such as software and pharmaceuticals create
networks of relationships with smaller entrepreneurial startup firms in their search for
innovation-based outcomes.^95 An important outcome for small firms successfully part-
nering with larger firms in an alliance network is the credibility they build by being
associated with their larger collaborators.^96

9-6 Competitive Risks with Cooperative Strategies

Stated simply, many cooperative strategies fail. In fact, evidence shows that two-thirds
of cooperative strategies have serious problems in their first two years and that as many
as 50 percent of them fail. This failure rate suggests that even when the partnership has
potential complementarities and synergies, alliance success is elusive.^97 Although failure
is undesirable, it can be a valuable learning experience, meaning that firms should care-
fully study a cooperative strategy’s failure to gain insights with respect to how to form
and manage future cooperative arrangements.^98 We show prominent cooperative strategy
risks in Figure 9.5. We discuss a few cooperative strategies that have failed and possible
reasons for those failures in the Strategic Focus.
One cooperative strategy risk is that a firm may act in a way that its partner
thinks is opportunistic. BP plc and OAO Rosneft developed a joint venture to explore
Russia’s Arctic Ocean in search of oil. However, the investment by minority part-
ners of this joint venture was driven down in value at one point by 50 percent over
concern that the Russian government, Rosneft’s dominant owner, would expropriate
value from the deal.^99 In general, opportunistic behaviors surface either when formal
contracts fail to prevent them or when an alliance is based on a false perception of

Figure 9.5 Managing Competitive Risks in Cooperative Strategies

Competitive

Risks

Risk and

Asset

Management

Approaches

Desired

Outcome

• Inadequate
  contracts


• Misrepresentation
  of competencies


• Partners fail to use
  their complementary
  resources


• Holding alliance
  partners’ specific
  investments
  hostage
  
  
  • Detailed
    contracts
    and monitoring
  
  
  • Developing
    trusting
    relationships
  
  
  
  

Creating value