PAPER VI

Paper VI

Paper VI

I agree with the statement that an IT strategy focused on maintaining a cutting-edge technology position is the most effective way to support any kind of overall business strategy. More and more companies are turning to strategic alliances for their new product and service development projects. The number of new research and development (R&D) relationships created each year increased around 50 times from 1960 to 1998 (Hagedoorn, 2002). Participating in development alliances yields many benefits for a company including increasing its innovation rate (Stuart, 2000) and facilitating its initial public stock offering (Powell, Koput, & Smith-Doerr, 1996). At the same time, these alliances have complex managerial problems such as controlling the leakage of technical knowledge, valuing the partner's contributions of technical knowledge, and coordinating joint activities. (Argyres, 1999)

Most research has dealt with bilateral development alliances or those between two organizations. Through an analysis of the various costs and benefits, the next section discusses when a company should opt for development with a partner versus going it alone. In addition to considering tangible factors, it is necessary to weigh contracting and coordination costs versus learning and flexibility benefits. The third section examines the design of a bilateral development alliance, including whether or not the partners should form a company that they would jointly own, the appropriate scope of the alliance's activities, and the uses of alliance experience. This section also looks into supplier involvement in development in terms of the extent of participation and the quality of the relationship between customer and supplier. The fourth section, which covers development when more than two companies work together, examines the special problems, opportunities, and organization of this complex arrangement. The section also looks at how a company's network of alliances influences—and in turn, is influenced by—the company's development alliances. Finally, this ...