Chapter 9: Cooperative Strategy 293
Limited domestic growth opportunities and foreign government economic poli-
cies are key reasons firms use cross-border alliances. As discussed in Chapter 8, local
ownership is an important national policy objective in some nations. In India and
China, for example, governmental policies reflect a strong preference to license local
companies. Thus, in some countries, the full range of entry mode choices we described
in Chapter 8 may not be available to firms seeking to geographically diversify. Indeed,
investment by foreign firms in these instances may be allowed only through a part-
nership with a local firm, such as in a cross-border alliance. Important too is the fact
that strategic alliances with local partners can help firms overcome certain liabilities
of moving into a foreign country, including those related to a lack of knowledge of
the local culture or institutional norms.^79 A cross-border strategic alliance can also
help foreign partners from an operational perspective because the local partner has
significantly more information about factors contributing to competitive success
such as local markets, sources of capital, legal procedures, and politics.^80 Interestingly,
research results suggest that firms with foreign operations have longer survival rates
than domestic-only firms, although this is reduced if there are competition problems
between foreign subsidiaries.^81
In general, cross-border strategic alliances are more complex and risky than domestic
strategic alliances. Complexity and, perhaps, risk may be factors associated with the alli-
ance recently completed between Airbus Group NV and Korea Aerospace Industries Ltd.
These firms are partnering to build at least 300 military and civilian helicopters in South
Korea.^82 Complexity is suggested by the fact that the partners are committed to designing
and producing “next-generation light civilian and military helicopters” that will satisfy
South Korean customers. Risks include those of relying on unique, firm-specific cultures
and practices as the foundation for designing next generation products in an acceptable
time period and producing those products at acceptable costs. In spite of the risks, firms,
such as Airbus and Korea Aerospace, choose to form and operate cross-border strate-
gic alliances partly because companies competing internationally tend to outperform
domestic-only competitors.
9-5 Network Cooperative Strategy
In addition to forming their own alliances with individual companies, an increasing
number of firms are collaborating in multiple alliances called networks.^83 A network
cooperative strategy is a strategy where several firms agree to form multiple partner-
ships to achieve shared objectives.
Through its Global Partner Network, Cisco has formed alliances with a host of com-
panies including IBM, Emerson, Hitachi, CA Technologies Fujitsu, Intel, Nokia, and
Wipro. Cisco uses alliances to drive its growth, differentiate itself from competitors,
enter new businesses areas, and create competitive advantages. Recently, Cisco’s annual
revenues earned from its alliances exceeded $5 billion. Sometimes, several of the firms
with which Cisco has formed individual alliances partner together to form a network to
achieve shared objectives.^84
Demonstrating the complexity of network cooperative strategies is the fact that Cisco
also competes against a number of the firms with whom it has formed cooperative agree-
ments, including network strategies. For example, Cisco is competing against IBM when
selling and servicing its servers. At the same time, Cisco and IBM’s alliance is very active
as the two firms help organizations “find better ways to connect people, share critical
data, and create analytic insights to improve”^85 their ability to earn above-average returns.
Overall, the example of the simultaneous “cooperative and competitive” relationships
between Cisco and IBM demonstrates how firms use network cooperative strategies
A network cooperative
strategy is a strategy where
several firms agree to form
multiple partnerships to
achieve shared objectives.