BUSINESS

Recent Analysis of R&D Alliances between Firms since the 1960s Reveals a Dramatic Shift from Equity Based Partnerships, Such as Joint Ventures, to Non-Equity Based Contractual forms of Partnerships, such as Joint Development Programmes. Why do you think this Change has Occurred?



Recent Analysis of R&D Alliances between Firms since the 1960s Reveals a Dramatic Shift from Equity Based Partnerships, Such as Joint Ventures, to Non-Equity Based Contractual forms of Partnerships, such as Joint Development Programmes. Why do you think this Change has Occurred?

Introduction

The literature indicates that alliances are hardly new practices. The history of alliances goes back to the ancient Greek civilization, around 448 B.C. (Goerzen, 2010, 683). But if we limit the discussion to the evolving of organizational alliances in the last century, the structure of the global economy after the Second World War led many companies to enter international markets. The mode of entering into the markets could be through forming joint ventures with firms present locally or establish wholly owned subsidiaries (Dutta, 2009, 267). (Dhanaraj, 2009, 291) illustrate that the two decades ranging from 1960's till 1980's witnessed the evolving of real strategic alliances where the main objective was to achieve strategic advantage rather than short-term economical gains. As the pace of technological development accelerates and competition in the business environment intensifies, strategic alliances and joint ventures are becoming a vital strategic choice in enhancing the competitiveness of firms.

In international practice, there are several ways of joint ventures: a) the partners from different countries set up in one of the firms of the joint, and b) the foreign partner acquires an interest in a local company, with the saved status of the company and its former management and governance, c) foreign partner shall enter into business relationships with several local companies in the country, and d) a joint venture established with the participation of local government or public authority, and e) a joint venture established on the basis of a local company, but its shares through the sale go to many owners, former owners lose, so the opportunity to participate in the management and control.

The pressures for Global Strategic Co-ordination

Inter-firm joint ventures, such as strategic alliances and joint ventures, continue to be an important strategic tool, used by new ventures and established companies alike to get access in terms of resources, obtaining capabilities as well as skills, and acquiring knowledge found outside the boundaries of the firm. For example, it is estimated that since 1990 the number of domestic and international strategic alliances has grown by more that 25% annually (Chung, 2010, 995); other researchers have indicated that more than 20,000 alliances were created worldwide in the time period 1996-1998 (Chen, 2008, 454). While traditional uses of these inter-firm arrangements have received considerable attention in the academic and executive literatures (Chen, 2010, 935), the use of joint ventures for entrepreneurial purposes, such as the development of innovative products, has not received as much scrutiny.

Despite evidence of the growing importance of joint ventures, however, there has been little ...