How does partner ‘fit’ influence organizational learning in the airline alliance industry? : a case study of KLM Royal Dutch Airlines

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How does Partner ‘Fit’ influence Organizational

Learning in the Airline Alliance Industry?

A case study of KLM Royal Dutch Airlines

Master’s Thesis

MSc. Business Administration – International Management Student: Victor Gaarenstroom

Student ID: 11140224

Submission Date: 27th of January 2017 Supervisor: Dr Markus P. Paukku Second reader: Unkown

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Statement of Originality

This document is written by student Victor Gaarenstroom, who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating

it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Abstract

This research stresses the existing paradox that is currently present in the literature on strategic alliances. This paradox revolves around firms that are increasingly forming alliances in order to achieve a competitive advantage whilst these partnerships are often subject to risk and instability. Two critical success factors of strategic alliances are sifted, namely partner ‘fit’ and organizational learning. These elements are further explored in order to generate new insights in the alliance domain. Partner ‘fit’ is examined through four pillars, partner complementarity, partner compatibility, partner commitment and partner trust, and organizational learning is assessed through knowledge transfer. The research consists of a qualitative single-case study of KLM Royal Dutch Airlines in which the impact of the different components of partner ‘fit’ on knowledge transfer are examined. By means of conducting nine in-depth interviews among managers, senior managers, directors and vice-presidents across four different alliance-related departments, the influence of partner ‘fit’ on organizational learning is thoroughly investigated. The findings stress that both partner complementarity and partner trust increase both inward and outward knowledge transfer. No clear evidence was found to increase knowledge transfer when it comes to partner compatibility and partner commitment. However, all four elements have shown to be contributing indicators of partner ‘fit’. The insights generated by these results assume that managers are better able to steer and control their strategic alliances by increasing the mutual knowledge transfer. Also, instability factors such as opportunism are better manageable when both partner complementarity and partner trust are established and maintained.

Keywords: Strategic Alliances, Partnerships, Airline Industry, Strategic Airline Alliances, Organizational Learning, Partner Fit, Complementarity, Compatibility, Commitment, Trust, Knowledge, Knowledge Transfer

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Acknowledgements

This thesis could not have been performed without the continuous support and assistance of several important people to whom I wish to express my sincere gratitude.

First of all, my thesis supervisor, Dr Markus P. Paukku, who helped me throughout the entire period of writing my thesis by means of providing great support and constructive feedback. Thanks to his guidance and assistance, I was able to adequately finalize my thesis within the restricted timeframe. Secondly, I wish to thank all the people within KLM Royal Dutch Airlines that participated in the study and that contributed the necessary data to perform this research. Lastly, I also wish to thank my family and friends for their help in many ways that supported me throughout the entire process of conducting this study.

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1. Introduction ... 8 2. Literature review ... 13 2.1 Strategic Alliances ... 13 2.2 Partner ‘Fit’ ... 19 2.2.1 Partner Complementarity ... 21 2.2.2 Partner Compatibility ... 21 2.2.3 Partner Commitment ... 22 2.2.4 Partner Trust ... 23 2.3 Organizational Learning ... 24 2.3.1 Knowledge ... 28 2.4 Airline Industry ... 29 2.5 Summary ... 32 3. Conceptual Framework ... 34

3.1 Partner ‘Fit’ & Organizational Learning Constructs ... 34

3.2 Working Propositions ... 34

3.3 Conceptual Framework Visual ... 37

4. Research Design ... 38

4.1 Research Philosophy ... 38

4.2 Qualitative Single Case Study Research Design ... 39

4.3 Quality Criteria ... 40

4.4 Case Selection – KLM Royal Dutch Airlines ... 42

4.5 Data Collection ... 45

4.6 Data Analysis ... 50

5. Results ... 53

5.1 Theme 1: Partner Complementarity & Knowledge Transfer ... 53

5.1.1 Theme 1: Alliances & Joint Ventures ... 53

5.1.2 Theme 1: Network Planning ... 54

5.1.3 Theme 1: Controlling Network & Alliances ... 55

5.1.4 Theme 1: Interline ... 56

5.1.5 Theme 1: Summary ... 57

5.2 Theme 2: Partner Compatibility & Knowledge Transfer ... 61

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5.3 Theme 3: Partner Commitment & Knowledge Transfer ... 69

5.3.2. Theme 3: Network Planning ... 70

5.4 Theme 4: Partner Trust & Knowledge Transfer ... 77

6. Discussion ... 86

6.1 Theme 1: Partner Complementarity & Knowledge Transfer ... 86

6.2 Theme 2: Partner Compatibility & Knowledge Transfer ... 88

6.3 Theme 3: Partner Commitment & Knowledge Transfer ... 89

6.4 Theme 4: Partner Trust & Knowledge Transfer ... 90

7. Conclusion ... 93

7.1 Limitations & Future Research ... 95

7.2 Managerial Implications ... 96

8. References ... 98

9. Appendices ... 108

9.1 App. 1: Airline Alliance Types ... 108

9.2 App. 2: Interview Questions ... 109

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Index of Tables and Figures

Tables

1 Overview Critical Success Factors in Strategic Alliances 2 Interview Participants KLM

3 Interview Questions and Working Propositions

4 List of Themes, Departments, Codings and Working Propositions

5 Analysis Table Theme 1: Partner Complementarity and Knowledge Transfer 6 Analysis Table Theme 2: Partner Compatibility and Knowledge Transfer 7 Analysis Table Theme 3: Partner Commitment and Knowledge Transfer 8 Analysis Table Theme 4: Partner Trust and Knowledge Transfer

9 Working Proposition Outcomes Figures

1 Strategic Alliance Types

2 Theoretical Framework Organizational Learning 3 Conceptual Framework Visualisation

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1. Introduction

The formation of strategic alliances has been essential to international business for many years. This phenomenon has been evolving from the time in which joint ventures between firms were established in order to exploit natural resources (Harrigan, 1986). Over the last couple of decades, the number of strategic alliance formations has grown tremendously (Inkpen, 2009). Nowadays, alliances are considered to be paramount regarding the competitive strategies of many firms, as they allow for rapid and flexible access to new markets, development of skills and capabilities, and achievement of economies of scale (Larsson, Bengtsson, Hendriksson and Sparks, 1998).

However, strategic alliances are also known to be extremely risky as they are often unstable and have a poor success record in general (Kleymann and Seristo, 2001; Gant, 1995; Brouthers, Brouthers and Wilkinson, 1995). For these reasons, it is important to dive deeper into the topic of strategic alliances in terms of what they are as well as why and how they are established and with whom?

Strategic alliances, in its broadest sense, refer to some sort of cooperation between two or more parties in which certain information, resources, knowledge, skills and/or capabilities are exchanged between one another, in order to strengthen the competitive position of the parties involved (Hamel, Doz and Prahalad, 1989; Inkpen, 1998; Parkhe, 1991; Das and Teng, 2000). The reason for providing a rather general and broad definition of strategic alliances is because different firms also have a large variety of motives for alliance formation. In fact, Inkpen (2009, p.3) argues that these motives are driven by a combination of two fundamental questions; “what are the strategic objectives in forming an alliance?” and “why is an alliance the preferred organizational arrangement?” These strategic objectives include achievement of economies of scale, reduce investment costs and risks, gain knowledge access, increase efficiency and overall strengthen competitiveness (Inkpen, 2009; Tse, Pan and Au, 1997). In

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9 addition, Koza and Lewin (1998) contend that the choice to form a strategic alliance also depends on managerial cognition and preferences, and path dependence in terms of previous experience.

Over the last years, some of the motives for firms entering into strategic alliances have been shifting towards spreading the costs and risks for innovation as well as the access to new technological skills and capabilities. The main reason for this, is the rapid development of technology-intensive industries such as the commercial airline business (Grant and Baden-Fuller, 2004; Vilkamo and Keil, 2003; Anand and Khanna; Mowery, Oxley and Silverman, 1996; Hamel, Doz and Prahalad, 1989). As most of these technological and innovative competences are rooted into tacit knowledge and thus hard to obtain, allying with partners provides the possibility to gain access to these complex and hidden capabilities (Mowery et al., 1996). Furthermore, Serrat (2009) has identified a shift from the resource-based view towards knowledge-based capabilities as organizations are discovering that they need partners in order to survive and maintain their competitive advantage in today’s intensifying global competitive environment.

However, as stated earlier, there also is a lot of debate around the stability, effectiveness and success of strategic alliances (Bleeke and Ernst, 1993). Some researchers even argue that the performance of strategic alliances appears to be disappointing (Ariño and Doz, 2000). Inkpen (2009, p.9) for example, mentions that in the business press, international alliances are labelled as “inherently unstable”. In fact, multiple researchers even claim that between 30% to 70% of strategic alliances fail (Geringer & Herbert, 1989; Harrigan, 1985; Stratford, 1992; Noble et al., 1995; Dyer, Kale & Singh, 2001). Conversely, Kogut (1989) argues that instability cannot be determined based upon the lifespan of an alliance. Moreover, Yan (1998) suggests to let go of the assumption that stability goes hand in hand with success and that instability leads to failure. Obviously, an alliance paradox is apparent; firms need to

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10 overcome many obstacles in order to realize alliance success while the number of alliances are drastically increasing as a means of augmenting growth and competitiveness (Kale and Singh, 2009).

As firms have multiple motives and strategies to enter into an alliance, they surely have diverging definitions of an alliance as well as various perceptions on when an alliance is successful or not. Therefore, it would be useful to know what exactly is considered as success and what is considered as failure in terms of strategic alliances. More importantly, what are the different factors that contribute to either the success or failure of an alliance?

In the literature, many different explanations and drivers exist for both success and failure of strategic alliances (Brouthers et al., 1995; Beamish and Inkpen, 1995; Doz, 1996; Kale and Singh, 2009; Inkpen, 2009). One important indicator of both success and failure is the collective learning curve of alliance partners (Larsson, Bengtsson, Hendriksson and Sparks, 1998). In addition, Doz (1996) describes that evolution and interactive learning are at the core of successful alliances. Also, Inkpen (1998) states that alliances allow for unique learning opportunities when partners with different knowledge and capabilities ally. Alternatively, the embedded and tacit knowledge of firms could also be a reason for the emergence of opportunistic behaviour in strategic alliances resulting in clashes and failures (Muthusamy and White, 2005).

Furthermore, Serrat (2009) mentions that lack of trust, poor communication and conflicts between partners are consequences of misfit and often lead to alliance failure. In fact, among other things, the fit between partners is of crucial importance when it comes to either the success or failure of strategic alliances. Also, Brouthers et al. (1995) raise the importance of appropriate partner selection when forming a strategic alliance. Too often firms pick the wrong partners ending up in complete failures of the alliance because there is a misfit. Firms should not merely look at the financial contribution of a potential partner, they

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11 should also consider the fit in terms of skills, technologies and markets. Also, Cummings and Holmberg (2012) contend that proper partner selection is crucial when aiming for successful alliance evolution. Moreover, Yan and Duan (2003) refer to partner fit as the extent to which partners in a joint venture can cooperate and achieve predetermined synergies from the alliance. Consequently, throughout this study partner ‘fit’ involves both partner selection prior to the alliance, as well as the development of that fit over time.

Thus, multiple researchers have identified both alliance learning and partner ‘fit’ to be paramount when it comes to either the success or failure of a strategic alliance. However, the ambiguity of the alliance paradox remains and therefore the researcher aims to further explore this topic by focusing on both partner ‘fit’ and organizational learning in strategic alliances.

As previously mentioned, the commercial airline business is an industry in which numerous strategic alliances are being formed. The international airline field is known to be a very turbulent and dynamic environment in which both alliance success and failure is common. Examples of strategic airline alliance fiascos due to misfit include the KLM/Alitalia collapse, the dissolution of Swissair from Delta and the split up between Austrian Airlines and its European partners (Morrish & Hamilton, 2002). For these reasons, the airline industry is a challenging yet interesting field to further explore this topic.

Throughout the remainder of this research, a thorough assessment of the existing literature will be provided and a more detailed approach towards partner ‘fit’ as well as organizational learning will be outlined. This way the relevant work of previous academics is considered and taken into account in order to ensure the formulation of a new and interesting research question for the topic at hand. Subsequently, a conceptual framework will be designed in order to illustrate the different constructs and its components of the study. This will function as a structured overview of how certain factors are expected to relate to one another. Also, several working propositions will be presented in this chapter to gradually

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12 guide the study towards its end objective. Hereafter, a methodology will be devised in which a single case study will be designed of KLM Royal Dutch Airlines, after which the appropriate methods will be described in order to gather the necessary data. Thereafter, the data collection phase will commence followed by a thorough analysis of the information collected and the results of this. Lastly, an elaborate discussion of the findings will be presented closing with the final conclusions, limitations, potential future research topics and managerial implications of this thesis.

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2. Literature review

In this chapter of the study, the existing literature of the topic at hand will be assessed. First, an elaborate outline of the general topic of strategic alliances will be provided focusing on the various definitions that exist across industries followed by explaining the multiple motives that firms have to enter into strategic alliances. Subsequently, the different types of strategic alliances are discussed and thereafter the review is funnelled down towards the critical success factors of strategic alliances. Afterwards, the researcher will narrow down to the two crucial aspects of partner ‘fit’ and organizational learning and its determinants in strategic alliances resulting in the gap of this thesis. Hereafter, the focus industry of the research will be presented and lastly, a summary will be provided in which an interesting research question is formulated as the guiding principle of this study.

2.1 Strategic Alliances

Primarily, it is important to dig deeper into the concept of strategic alliances itself as apparently there seems to be a paradox when it comes to strategic alliances across different industries. Therefore, it is important to first compare and contrast the numerous definitions provided by different scholars. Based on the work of Doz et al. (1990), Rhoades and Lush (1997, p. 107) defined strategic alliances as “a distinct form of entry mode that have been used as a low-cost means of gaining access to new markets and local infrastructure”. Whereas Parkhe (1991, p.581) describes strategic alliances as “relatively enduring inter-firm cooperative arrangements, involving flows and linkages that utilize resources and/or governance structures from autonomous organizations, for the joint accomplishment of individual goals”. A more recent definition by Serrat (2009, p.2) explains a strategic alliance as “a voluntary, formal arrangement between two or more parties to pool resources to achieve a common set of objectives that meet critical needs while remaining independent entities”.

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14 Similarly, Das and Teng (2000, p.33) describe strategic alliances as “voluntary cooperative inter-firm agreements aimed at achieving competitive advantage for the partners”. Even though all of these definitions mention several important points of a strategic alliance, there are also less applicable components notable. For example, Rhoades and Lush (1997) mention strategic alliances to be a “low-cost means of gaining access”, this is largely dependent on the collaboration between the allied partners. In fact, when there is imbalance between partners in terms of equal contribution, it could turn out to be an extremely expensive way of entering a new market as conflict costs might arise. Besides this, Parkhe (1991) uses the word ‘enduring’, whilst simultaneously 60% of strategic alliances dissolve within four years (Doorley, 1993). Therefore, the term ‘enduring’ might not be applicable when talking about strategic alliances as they often are not. Moreover, both Serrat (2009) and Das and Teng (2000), start with the term ‘voluntary’, which is a debatable word to use these days as firms are increasingly entering into alliances to get access to the necessary resources to become globally competitive (Brouthers et al., 1995). More importantly, if firms choose to go at it alone, chances are that they will be outperformed by competitors that are part of an alliance (Serrat, 2009). Therefore, nowadays being in a strategic alliance might not be so ‘voluntary’ anymore as “alliances are no longer a peripheral activity but a mainstay of competitive strategy” (Inkpen, 1998, p. 71). Thus, today it seems that participating in strategic alliances is an essential criterion for maintaining a competitive position. If not, firms are likely to loose from its rivals as they miss out on the many advantages of being in an alliance. Furthermore, Serrat (2009) includes ‘a common set of objectives’ in defining strategic alliances while firms do not always have the same strategic objectives within an alliance. In fact, an alliance is considered by some companies as a means to reach individual goals (Inkpen, 2009). Therefore, it could very well be that strategic alliances are set up while the parties involved may have diverging objectives. To conclude, after examining the various existing definitions

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15 on strategic alliances, the researcher defines the following formulation as leading throughout this study; a strategic alliance is a distinct form of entry mode in the form of an inter-firm cooperative arrangement between multiple parties to pool resources in order to achieve a competitive position.

Having outlined and contrasted the various definitions on strategic alliances, it is essential to explore more about why this particular topic should be subject to further investigation. As a matter of fact, the existing paradox that was mentioned earlier, is the trigger behind this research. On the one hand, firms partner up in alliances because this is the way to go to achieve competitiveness, whereas on the other hand, achieving a successful alliance is highly dependent on risky yet crucial factors. This existing ambiguity of strategic alliances is a reason why to further explore this concept. Another reason why strategic alliances should be further researched, is the lack of literature in terms of evolution in alliances (Inkpen, 2009). Especially since the success or failure of strategic alliances is largely dependent on the evolution of the partnership, which is yet another critical factor. However, first it is important to uncover more regarding the motives that firms have to enter into alliances.

Naturally, the motives of firms to enter into strategic alliances differ as these are highly dependent on the industry and on the firm itself. Hamel, Doz and Prahalad (1989, p.133), contend that one of the most important reasons to form a strategic alliance is that it “can strengthen both companies against outsiders even as it weakens one partner vis-à-vis the other”. In addition, Serrat (2009) states that the generic motive for strategic alliances has shifted towards creating a sustained competitive advantage. Kale and Singh (2009) state that alliances serve as a means of realizing strategies for growth and competitiveness. Furthermore, Kogut (1991) argues that alliances aid in enhancing market power through reinforcing the competitive position of a firm whereas Ahuja (2000) stresses efficiency

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increase as a result of alliance formation. Another important motive addressed by Rothaermel and Boeker (2008), is the access to certain key resources and capabilities. Additionally, access to new markets is also considered to be an important reason for firms to engage in alliances (Koza and Lewin, 2000). Moreover, a study among Fortune 1000 firms’ CEO’s has indicated that revenues between 2007 and 2008 of these companies are for approximately 26% attributable to alliances (Kale, Singh and Bell, 2009). These above-mentioned motives all contribute to the explanation why an enormous increase in alliance formations is apparent.

Consequently, countless types of alliances exist across different industries and these are again dependent on the specific motives as well as the strategic objectives that firms have to form strategic alliances. A broad scope of organizational forms of strategic alliances exist such as industry consortium, technical training, supplier/buyback arrangement, production/assembly arrangement, patents licensing, franchising, know-how licensing, management/marketing service arrangement, non-equity cooperative arrangements and equity joint ventures. These numerous forms are distinguished among multiple categories in figure 1.

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17 More importantly, these different types of strategic alliances all have varying degrees of involvement and interaction between the allied partners (Kale and Singh, 2009; Contractor and Lorange, 1988). Considering the fact that firms have many different motives to start an alliance, in combination with the numerous alliance types and formations that exist, makes this area extremely complex and volatile. Also in terms of alliance management, it is extremely difficult to successfully manage such a partnership as it is often subject to; “instability, poor communication, incompatible objectives, inability to share risks, opportunism, low flexibility and poor performance, lack of trust, disagreement on control and ownership arrangements, conflict and even premature dissolution” (Parkhe, 1993; Serrat, 2009). More importantly, these events are all consequences of the misfit between allied partners (Arino and Doz, 2000; Bierly and Gallagher, 2007). As a result, major difficulties and even termination of an alliance could occur. Thus, an ongoing debate is obvious within the existing literature in terms of the benefits and risks generated by strategic alliances. Moreover, as mentioned before, previous scholars have reported high alliance failure rates (Geringer & Herbert, 1989; Harrigan, 1985; Stratford, 1992; Noble et al., 1995). Even though the reliability of these failure rates are debatable due to the diverging motives and objectives of firms in alliances (Inkpen, 2009), it would be contributory to further explore the underlying key factors driving either the success or failure in an alliance.

Assessing the current literature, many elements are derived that are stated to be CSF’s (critical success factors) when it comes to the success or failure in a strategic alliance. A structured overview of these factors are provided in table 1 below. Subsequently, the researcher will funnel down the study to the most applicable components that will serve as the building blocks throughout the remainder of this research.

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18 Critical Success Factors of Alliances Existing Literature

Complementarity Skills Brouthers et al. (1995), Inkpen (2009), Kale and Singh (2009)

Compatibility of Goals Brouthers et al. (1995), Kale and Singh (2009), Whipple and Frankel (2000), Wahyuni, Ghauri and Kartsen (2007)

Partner Fit Brouthers et al. (1995), Serrat (2009),

Inkpen (2009), Bierly and Gallagher (2007), Cummings and Holmberg (2012)

Cooperative Cultures Brouthers et al. (1995), Serrat (2009), Inkpen (2009), Hughes and Weiss (2007) Embedment of Management Capabilities Serrat (2009), Whipple and Frankel (2000)

Communication Cummings and Holmberg (2012), Wahyuni,

Ghauri and Karsten (2007)

Commitment Brouthers et al. (1995)), Kale and Singh

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Control Wahyuni, Ghauri and Karsten (2007)

Trust Koza and Lewin (1998), Bierly and

Gallagher (2007), Inkpen (1998), Kale and Singh (2009), Whipple and Frankel (2000)

Evolutionary Serrat (2009), Doz (1996)

Organizational Learning Brouthers et al. (1995), Serrat (2009), Doz (1996), Hamel (1991), Mowery, Oxley and Silverman (1996), Inkpen (1998)

Commensurate Levels of Risk Brouthers et al. (1995)

Openness to Change Serrat (2009)

Leadership Involvement Serrat (2009), Inkpen (1998), Whipple and Frankel (2000)

Table 1: Overview Critical Success Factors in Strategic Alliances (Source: Author)

From the table above, the critical success factors of partner fit and organizational learning are selected to be further investigated throughout this study. There are multiple reasons for narrowing down the focus on these two elements. Firstly, it is important to elaborate on partner fit and organizational learning, as multiple researchers have highlighted the potential of conflict between partners in an alliance due to misfit. The misfit in for example motives and strategic objectives of partners could trigger learning races, which could subsequently lead to opportunistic behaviour (Ireland, Hitt and Vaidyanath, 2002). Learning races occur when firms primarily focus on the rapid learning from the capabilities of its

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19 partners in an alliance and thereafter underinvest in the partnership after this learning is accomplished (Alvarez and Barney, 2001). As a result, partners could clash and the alliance might dissolve in the end. For this reason, it would be contributory to further explore partner fit and organizational learning, in order to generate new insights that could clarify critical phenomenons as such. Secondly, both elements are frequently mentioned by different researchers as a topic for future research in the alliance literature (Whipple and Frankel, 2000; Cullen, Johnson and Sakano, 2000; Kale and Singh, 2009; Brouthers et al. 1995; Das and Teng, 1998; Cummings and Holmberg, 2012) Thirdly, both partner fit and organizational learning are broad constructs of which valuable new insights would be a contribution to the existing literature. In fact, most research done in this area stress either the influence of partner fit or organizational learning on the success of strategic alliances however no literature is to be found on the effects of partner fit on organizational learning (Cummings and Holmberg, 2012; Hamel, Doz and Prahalad, 1989; Kale and Singh, 2009; Bierly and Gallagher, 2007). This would be an interesting study, considering that this different approach could generate valuable insights that could clarify the paradox that was mentioned earlier in a way that helps managers in understanding how strategic alliances work. Consequently, this may benefit firms in managing their partnerships successfully, which is evermore important in the global economy of today.

Therefore, the scope of this study is narrowed down towards these two influential aspects of partner fit and organizational learning. In the next section, these two overarching elements will be funnelled down to several comprehensive components.

2.2 Partner ‘Fit’

According to the existing literature, partner selection is a critical aspect of strategic alliances (Cummings and Holberg, 2012; Brouthers et al., 1995; Bierly and Gallagher, 2007: Hitt et al., 2000). As partner selection is only applicable at the stage of forming a strategic

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20 alliance, a more complete concept is adopted in this study, namely partner ‘fit’, that also takes the development of fit between partners over time into account. This is important to consider as fit could change over time as a result of alliance development (Das and Teng, 2002). An overview of the different components and their relevance to the topic is provided below.

Brouthers et al. (1995) stress the importance of firms choosing the right partner for an alliance as it would be more expensive and risky to work with an inappropriate partner than to operate alone. Moreover, also Cummings and Holmberg (2012) point out that partner selection for a strategic alliance is crucial for prosperous alliance evolution. In fact, even superior management of an alliance might not be enough to repair the damage caused by inappropriate initial partner assessment. Furthermore, Bierly and Gallagher (2007) contend that of the many possible causes for alliance failure, several are definitely related to the selection process of potential partners. Therefore, it is paramount for companies to develop a good understanding of the partner selection procedure and provide managers with well-founded recommendations to minimize the chance of inappropriate selection of alliance partners. Next to the importance of initially selecting a suitable partner to ally with, firms should also pay attention to how partner ‘fit’ evolves over time (Doz, 1996). Coming back to Brouthers et al. (1995), four important considerations are suggested in strategic alliances. The first is ‘complementary skills’, which refers to the contribution of the partners in terms of skills, knowledge and experience. The second consideration is ‘cooperative cultures’, that strengthen each other and in which management creates learning opportunities for both parties. The third is ‘compatible goals’, meaning that firms should have suitable strategic objectives that can only be fulfilled by the alliance. The fourth and last is ‘commensurate levels of risk’, referring to the consideration of the risks involved and the equal division of this. These four considerations all have a connection with appropriate partner selection and aim to uncover the right ‘fit’ between partners. In addition, Kale and Singh (2009) propose

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21 three drivers of alliance success when it comes to ‘fit’. ‘Partner complementarity’; the contribution of those resources and capabilities that the other firm lacks. ‘Partner compatibility’; the unity of culture and work style and ‘partner commitment’; the willingness and input of the partners to achieve the desired outcomes.

From the literature described above, one could derive the relevance and importance of partner ‘fit’ in relation to the success or failure in strategic alliances. Therefore, the following key components are selected as indicators of partner ‘fit’ in this study; Partner Complementarity, Partner Compatibility, Partner Commitment and Partner Trust.

2.2.1 Partner Complementarity

In the alliance literature, partner complementarity refers to the contribution of both partners in terms of resources and capabilities. These should not overlap each other as the lack of certain knowledge, skills, routines and other value-adding resources and/or capabilities of one partner is covered by the other and vice versa (Kale and Singh, 2009; Dyer and Singh, 1998; Harrigan, 1988; Mowery et al., 1996). Partner complementarity is said to have an effective influence on the relationship between partners. It can even be argued that resource complementarity should be required in every alliance context and thus function as a must-have criterion for allying (Shah and Swaminathan, 2008). It could be argued that this component adds an important aspect to partner ‘fit’ in terms of certain resources and capabilities provided by partners that complement each other.

2.2.2 Partner Compatibility

The second component that contributes to the concept of partner ‘fit’ is partner compatibility, which refers to the fit between partners in terms of culture and working structures and styles (Kale and Singh, 2009). Another definition reads the match in skills and resources between two partners (Mazloomi, Khamseh and Jolly, 2008). Narrowing down, a distinction is made between cultural compatibility, such as norms, values, goals and

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22 objectives, and operational compatibility in terms of the working relationship (Das and Teng, 1998). In fact, social incompatibility could prevent partners from developing a fruitful relationship, which might have a negative impact on the collaboration (Sarkar et al., 2001). Whereas corresponding norms and values reduce coordination costs between partners. In addition, Cheah-Liaw, Petzall and Selvarajah (2003) points out that the greater the cultural similarity is between partners, the better the performance of that alliance. For these reasons, it is paramount to consider this critical aspect when it comes to partner ‘fit’, especially when looking at the culturally and operationally diverse international environment of for example the airline industry.

2.2.3 Partner Commitment

Partner commitment refers to the pledge of partners in a strategic alliance to perform the necessary actions in order to reach the desired goals and objectives, and it also is a crucial determinant of prosperous relationships (Shah and Swaminathan, 2008). Actually, Gundlach, Achrol and Mentzer (1995), point out that it is not only the willingness of partners to deliver the necessary actions, it also includes the sacrifices on the short-term in order to be able to achieve the benefits on the long run. Moreover, Cullen, Johnson and Sakano (2000) argue that commitment could be distinguished between calculative commitment, which entails the economical benefit gained from a successful relationship as well as attitudinal commitment, meaning the willingness to put effort in the alliance and make it work. Another critical condition in terms of commitment, is that it is reciprocal and that both partners are on the same page, otherwise difficulties are likely to appear. Especially in strategic alliances in which revenues and costs are involved, continuous commitment is paramount (Lu, 2000). For these reasons, the item of partner commitment is also selected as an important contributor to partner ‘fit’ throughout this study.

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2.2.4 Partner Trust

Trust is considered a critical social norm in the management of strategic alliances (Anand and Khanna, 2000). Therefore, trust is considered to be another crucial aspect of partner ‘fit’ throughout this research. In addition, Inkpen (2009) mentioned that a more in-depth understanding of both trust and learning should generate valuable new insights in the alliance area.

Trust is defined as “the mutual confidence that no party to an exchange will exploit another’s vulnerabilities, because opportunistic behaviour would violate values, principles and standards of behaviour that have been internalised by parties to an exchange” (Bierly and Gallagher, 2007, p.138). In more detail, Shah and Swaminathan (2008) consider two elements on which trust is based, benevolence and competence. Benevolence trust refers to the behaviour of alliance partners in terms of reliance on each other’s goodwill and the avoidance of opportunistic behaviour. In addition, competence trust builds on a partner’s competencies and credibility in an alliance, referring to the reliance on each other’s skills and expertise. In fact, trust is argued to be the primary basis to assess the suitability of a partner in an alliance. Moreover, the more trust among partners, the more confidence in one another, which decreases the chances of opportunistic behaviour. Also firms that are known to be trustworthy could gain a competitive advantage in terms of being a preferred partner for future alliances (Bierly and Gallagher, 2007). Thus, partner trust is a highly relevant factor for partner ‘fit’ mainly because it serves as the fundament on which an alliance relationship is build.

Besides partner ‘fit’ and its associated components, there is another critical part of strategic alliances that contributes to either success or failure, which is organizational learning and will be discussed in the subsequent section.

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2.3 Organizational Learning

In addition to partner ‘fit’, another prevailing component of strategic alliances will be further explored in this thesis, which is the concept of organizational learning. As previously described, this element is another critical concept in the existing literature (Brouthers et al., 1995; Serrat, 2009; Doz, 1996; Hamel, 1991; Mowery et al., 1996; Inkpen, 1998). Moreover organizational learning also serves as a motive for firms to enter alliances as it allows for access to new knowledge (Inkpen, 2009). As a consequence, partners sometimes use an alliance opportunistically to acquire tacit knowledge of its partner, which often results in clashes and alliance dissolution (Das and Rahman, 2010; Muthusamy and White, 2005). Referring back to the alliance paradox (Kale and Singh, 2009) that is present in the literature, opportunistic learning makes it extremely difficult to successfully manage an alliance and brings along considerable risk. In addition, multiple researchers have indicated organizational learning in strategic alliances a topic for further investigation and therefore this concept is selected to be further explored (Simonin, 2004; Mowery et al., 1996; Larsson et al., 1998). For these reasons, it is contributory to further investigate the topic of organizational learning.

As discussed previously, organizational learning is a commonly used and well-researched phenomenon in the literature however, a large variety exists in defining this construct (March, 1991; Huber, 1991; Kogut and Zander, 1992; Nonaka, 1994; Gherardi, 2006). What does organizational learning actually mean? A broad definition on which most academics agree is “a change in the organization’s knowledge that occurs as a function of experience” (Argote, 2013, p. 31). In more detail, Pérez López, Manual Montes Peón and José Vazquez Ordás (2005, p.228) define organizational learning as “a dynamic process of creation, acquisition and integration of knowledge aimed at the development of resources and capabilities that contribute to better organizational performance”. In fact, organizational learning is seen as one of the crucial drivers of creating a competitive advantage. Child (2006)

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25 points out that some firms perform better than others, simply because of the fact that they have superior knowledge and are able to adapt to changes more easily, which is also referred to as organizational learning.

Argote and Miron-Spektor (2011) describe organizational learning as an inherently and interdisciplinary concept as it draws upon various areas such as strategic management, economics and social and cognitive psychology. On a more practical level, organizational learning also entails the ability of firms to learn and adapt, and how that influences success and performance. Another important aspect concerns the transfer of knowledge in inter-organizational settings such as strategic alliances. In fact, firms that are active in alliances, aim to learn through the experiences of other firms, and according to March and Levitt (1988) this is one of the most productive ways of organizational learning. Lane and Lubatkin (1998) even suggest that this way of organizational learning often has a higher chance of obtaining a competitive advantage as it allows for the transfer of tacit knowledge.

Inkpen (2009; 1998) argues that strategic alliances serve as an ideal tool for organizational learning and that the acquisition of new knowledge serves as the foundation for new skills and capabilities leading to competitive success. Thus, through the exchange of certain skills, knowledge, capabilities and other resources with alliance partners, firms stimulate organizational learning in the form of knowledge transfer. Especially in the fast-paced, innovative and continuously changing international environment of today, it is evermore important for firms to have dynamic capabilities in order to maintain a competitive position. In fact, Serrat (2009) states that learning through alliances is a necessary ability in order to ensure continued existence. Also, Berg and Hamilton (1998) mention that in alliances, the learning process determines the future development of the partnership whereas Doz (1996) describes the evolutionary process of learning to be paramount among well-performing alliances.

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26 Yet, despite the relevance and importance of organizational learning in strategic alliances, existing literature has stressed this topic to be a subject for further research. Although a lot of research has been done in the field of organizational learning in general, only little is known about specifically learning in alliances (Kleymann and Seristö, 2001; Inkpen, 1998; Larsson, Bengtsson, Henriksson and Sparks, 1998; Hamel, Doz and Prahalad, 1989). Considering both facts, that organizational learning is such a crucial aspect in alliance evolution, and that learning in alliances is still relatively under-researched, it would be highly contributory to generate new insights in this field.

As previously mentioned, organizational learning is a rather broad construct, therefore a clear framework of organizational learning by Argote and Miron-Spektor (2011) is presented below in figure 2 to illustrate a clear overview. As could be derived from this visual, there are three key factors, namely experience, knowledge and context that interact with each other. As per Argote and Miron-Spektor (2011), organizational learning is continuous process that occurs over time and is an ongoing cycle in which experience and knowledge come together, influenced by the particular context.

Figure 2: Theoretical Framework Organizational Learning (Source: Argote and Miron-Spektor, 2011)

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27 Subsequently, the study will emphasize the concept of knowledge in this study for the following reasons. First of all, Serrat (2009) has identified a shift from the resource-based view towards knowledge-based capabilities, as organizations are discovering that they need partners in order to survive and maintain their competitive advantage in today’s intensifying global competitive environment. More specifically, as outlined in the introduction, a radical shift has made its way in changing some of the motives to enter into strategic alliances. One of this motives concerns the accessibility of certain skills and capabilities as a result of the rapid development of technology-intensive industries (Yasuda, 2005; Grant and Baden-fuller, 2004; Vilkamo and Keil, 2003) Considering the fact that these competences are rooted in tacit knowledge, and thus hard to obtain, strategic alliances provide the opportunity to gain access to these hidden capabilities (Mowery et al., 1996). Moreover, Anand and Khanna (2000) explain that these information and knowledge transfers are subject to multiple studies that focus on the learning process in alliances. In fact, in these studies a certain tension is identified between cooperation and competition in strategic alliances (Hamel, 1991). This is in line with the previously explained learning races between alliance partners that often lead to opportunistic learning. Therefore, it would be interesting to further explore learning in terms of knowledge, and specifically knowledge transfer, to uncover how the different components of partner ‘fit’ impact learning in this way. More importantly, it would be valuable to know how the aspects of partner ‘fit’ influence knowledge transfer, because this might enlighten new insights in terms of the alliance paradox that was explained earlier. Consequently, the focus of this research in terms of organizational learning will be narrowed down to the concept of knowledge, which will be further elaborated in the next section.

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2.3.1 Knowledge

Inkpen (1998) argues that through acquiring new knowledge, firms are able to learn about new skills and capabilities, which could lead to achieving competitive advantage. Moreover, international strategic alliances are considered to be the gateway towards accessing embedded knowledge (Doz, 1996; Inkpen, 1998).

Knowledge is a broad term that could be distinguished between three different types namely, knowledge creation, knowledge retention and knowledge transfer (Argote and Miron-Spektor, 2011). Knowledge creation, is the generation of new knowledge by an organization, knowledge retention, relates to the flow and stock of knowledge in an organization’s memory, and knowledge transfer concerns organizational learning through the indirect experience of other organizations and the direct experience of the organization itself (Argote and Miron-Spektor, 2011; Levitt and March, 1988). Due to the fact that this study aims at exploring new insights with regard to partner ‘fit’ and organizational learning in combination with the existing instabilities of the alliance paradox such as learning races and opportunistic partners, it makes sense to further emphasize the aspect of knowledge transfer throughout this research.

A more elaborate definition of knowledge transfer concerns the process through which organizations exchange, receive and are influenced by the knowledge and experience of other organizations (Van Wijk, Jansen and Lyles, 2008). In addition, Argote and Ingram (2000) explain knowledge transfer in a similar way as Levitt and March (1988), namely the indirect learning through the experience of others, also known as vicarious learning (Bandura, 1977). Moreover, a topical theme in the current literature is the driving factors that facilitate knowledge transfer and thus either stimulate or withhold this phenomenon. These include factors such as causal ambiguity, absorptive capacity, expertise, motivational, emotional, similarity, location and the quality of the relationship (Argote and Miron-Spektor, 2011). Throughout this study, the focus will be on the transfer of knowledge between partners in a

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29 strategic alliance and how these are influenced by the different dimensions of partner ‘fit’ that were presented earlier in this chapter. In the next section the focus industry of this research will be introduced.

2.4 Airline Industry

In the introductory chapter, it was briefly mentioned that the scope of this study will be narrowed down towards the dynamic and international airline industry, mainly because alliances in this particular field have become so ubiquitous. The formation of strategic alliances helps airlines to maintain a competitive position instead of being outperformed by other larger airlines such as the gulf carriers (Participant 7, 2016). In addition, the airline business is known for both great successes and also for disastrous failures when it comes to alliances. As previously outlined, both partner fit and organizational learning are two critical factors when it comes to these successes or failures, especially in the international airline industry. In fact, the most important objective of airlines is to gain competitive advantage through the network that they offer their passengers (Participant 1, 2016). The only way of achieving a worldwide network, is to work together with partners because one airline cannot cover the globe all by itself (Participant 1, 2016). For this reason, airlines need to work together, which requires partner ‘fit’, and airlines need to learn from one another as they all are specialised in distinct areas of the world. Besides, Shah and Swaminathan (2008) have mentioned partner ‘fit’, and Kleymann and Seristö (2001) have indicated learning to be an interesting topic for future research in the domain of airline alliances. Therefore, this is a suitable focus area for the study at hand.

First of all, as the scope will be solely on the airline industry, it is important to compare and contrast some existing definitions from both general strategic alliances and strategic airline alliances. The International Air Transport Association defines a strategic airline alliance as:

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30 [T]hree or more airlines participating in commercial relationship or joint venture, where a joint and commonly identifiable product is marketed under a single commercial name or brand; and this commercial name or brand is promoted to the public through the airlines participating in the alliance and its agents; and the commercial name or brand is used to identify the alliance services at airports and other service delivery points in situations where bilateral agreements exist, e.g. code share agreement.

(IATA, 2001) In addition, Iatrou and Alamdari (2005, p.127) state that “a strategic airline alliance is a long-term partnership of multiple airliners who attempt to enhance advantages collectively vis-à-vis their competitors by sharing scarce resources including brand assets and market access capability, enhancing service quality, and thereby improving profitability”. Morrish and Hamilton (2002, p.401) describe a strategic airline alliance as “any collaborative arrangement between two or more carriers involving joint operations with the declared intention of improving competitiveness and thereby enhancing overall performance”. Coming back to the point that was made in chapter 2.1 ‘Strategic Alliances’ on the term ‘enduring’, Iatrou and Alamdari (2005) use the word ‘long-term partnership’, which suggests that an alliance always is for a long period of time. As this might be the intention of the allying partners, it is very often not the case and therefore unsuitable in the definition of alliances as it could very well be a short-term alliance as well. Furthermore, although the definition by Morrish and Hamilton (2002), is accurate and comprehensive in terms of its motive, it uses the word ‘collaborative’, which does not always apply. Mainly because of factors such as learning races, opportunism or firms having incompatible objectives (Serrat, 2009).

Contrasting the multiple definitions for both strategic alliances in general and airline alliances, the different motives for allying reappear. Firms have different objectives to form strategic airline alliances and thus academics in this field have explored various aspects within alliances such as its effect on performance (Park & Cho, 1997), the risks and benefits attached

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31 (Morrish & Hamilton, 2002; Kleymann & Seristo, 2001) and the dynamics (Agusdinata & de Klein, 2002). These all relate to the different motives that drive companies whether to enter into an alliance or not. Another key motive in the airline industry mentioned by Iatrou and Alamdari (2005) is that the participation in alliances has become a defensive strategy for airliners not to stay behind and lose business to competitors being part of alliance groupings. Moreover, these authors also argue that the relationship of an alliance is highly complex and ever-changing and thus interesting to further explore. Also, Button, Haynes and Stough (1998), offer a number of explanations why alliance formation increases, mainly due to cost reductions, market retention and penetration, financial boosts, infrastructure limitedness, avoiding institutional restrictions and creating stability.

Naturally, specific reasons for entering into alliances exist depending on the industry. However, what comes back in every definition is the inter-firm arrangement geared towards the achievement of individual ends. These ends diverge per firm due to their different motives. In terms of the airline industry, an alliance involves joint operations in various forms aimed at achieving a competitive advantage. These forms appear in multiple distinct types of partnerships that airliners enter into, Rhoades and Lush (1997) distinguish code sharing, blocked space agreements, revenue sharing, ‘wet’ lease, franchising, computer reservation systems, insurance and parts pooling, joint service, management contract, baggage handling, ground maintenance, facility sharing, joint marketing and equity/governance. The focus in this study will be on the strategic joint venture equity partnerships, as these are the long-term strategic alliances of which partner ‘fit’ and organizational learning curves can be better assessed than short-term tactical partnerships. For an overview of the different levels and degrees of partnerships, please refer to appendix 1.

Until today, there is still indistinctness and diverging perspectives on the gains and losses of being in a strategic alliance in the turbulent airline industry. In the next section a

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32 brief recapitulation is provided of how the discussed components come together in this study, followed by the gap that has been identified. Hereafter, the main research question will be formulated that will function as the guiding principle of this study and will uncover new insights in the conclusions of this thesis.

2.5 Summary

Strategic alliances are highly topical nowadays and a lot of academics have elaborated upon this subject however, as previously described, an obvious paradox is still notable and asks for further investigation. On the one hand, MNE’s (multinational enterprises) must continue to form alliances in order to obtain the necessary resources and capabilities to be truly competitive, whereas on the other hand, large risks exist in forming alliances that could result in obstacles and even alliance dissolution.

Both the concepts of partner ‘fit consisting of complementarity, compatibility, commitment and trust, and organizational learning in the form of knowledge transfer, are outlined and further explained in terms of the existing literature. Consequently, a clear gap remains that needs to be addressed and sifted throughout the remainder of this study. Organizational learning is a fundamental aspect when it comes to developing the right capabilities within a firm (Lopez, Peon and Ordaz, 20205) and evermore important in the competitive global economy of today. Forming strategic alliances allows for this organizational learning however, simultaneously it is also a critical challenge to balance the needs and wants of two or more partners and the risk exists that one or the other uses the alliance opportunistically for its own success. By means of exploring how partner ‘fit’ has an influence on organizational learning, firms could better manage the working relationship with partners in an alliance in order to optimize knowledge transfer on both sides, while simultaneously minimizing the chances of partners behaving opportunistically.

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33 A lot of literature exists when it comes to the topics of partner ‘fit’ and alliance success, and also organizational learning and alliance success however, the influence of partner ‘fit’ on organizational learning in strategic airline alliances has not yet been examined. Therefore, it would be contributory and interesting to find out how the ‘fit’ between partners has an influence on the organizational learning of firms. Consequently, the following research question is formulated in order to fill the gap that was identified earlier.

How does partner ‘fit’ influence organizational learning in strategic airline

alliances?

In the subsequent chapter on ‘Conceptual Framework’, a structured overview will be presented in terms of how the different aspects of both partner ‘fit’ and organizational learning come together in this study. Moreover, multiple working propositions will be formulated in order to guide the research and come up with an answer on the main research question of the study that is comprehensive and well-underpinned.

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3. Conceptual Framework

In the previous chapter, a thorough overview was presented covering the existing relevant literature of strategic alliances, with a focus on both partner ‘fit’ and organizational learning coming together in the airline industry. The subsequent step is to build a deeper understanding of the various constructs and its relevant components that come into play during this research translated into several working propositions that will aid in working towards the end objective of this thesis. Also, a visual will be presented to illustrate the corresponding framework.

3.1 Partner ‘Fit’ & Organizational Learning Constructs

As described in the previous chapter on ‘Literature Review’, multiple important dimensions were mentioned by various researchers when it comes to the constructs of partner ‘fit’ and organizational learning. For partner ‘fit’ these variables include; ‘Partner Complementarity’, ‘Partner Compatibility’, ‘Partner Commitment’ and ‘Partner Trust’ whereas for organizational learning this involves Knowledge Transfer. For this study it would be contributory to explore how these various factors of partner ‘fit’ influence organizational learning in the form of knowledge transfer. As illustrated in the visual in figure 3, the direction of knowledge transfer is interpreted in both ways, meaning both inward and outward transfer, due to the fact that a single-case study will be performed. Therefore, multiple working propositions are formulated underpinned by their relevance to the study.

3.2 Working Propositions

First of all, the aspect of Partner Complementarity, being one of the pillars under the concept of partner ‘fit’, refers to the non-overlapping contribution of resources and capabilities of both partners in the alliance (Kale and Singh, 2009). As these skills and resources are non-overlapping, it means that the other party does not possess these skills, or at least to a lesser extent. This in combination with the motive of airlines to ally in order to

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35 access certain resources and or capabilities that contributes to realizing a competitive advantage has led the researcher to believe that when partners in an alliance are complementary to each other, they are able to learn through the indirect experience of the other partner, which is also referred to as knowledge transfer (Argote and Ingram, 2000). Therefore, the first working proposition is formulated as follows.

WP 1: Partner Complementarity is expected to increase knowledge transfer in strategic airline alliances

Secondly, the aspect of Partner Compatibility, another pillar under the concept of partner ‘fit’, relates to the fit between partners in an alliance regarding culture and working styles and structures (Kale and Singh, 2009). This concept consists of cultural compatibility, the fit with reference to norms, values and objectives, and operational compatibility, the fit with regard to working together (Das and Teng, 1998). Considering two partners in an alliance that are compatible, both in terms of culture and working styles, are likely to work good together because they understand each other well due to their similarity. Also, Norman (2002) argues that a partner, which is highly similar, could more easily detect valuable knowledge and has a better ability to transfer this knowledge. Consequently, resource overlap between partners could positively influence knowledge transfer and therefore the following working proposition is determined.

WP 2: Partner Compatibility is expected to increase knowledge transfer in strategic airline alliances

The third component in reference to partner ‘fit’ is Partner Commitment, which relates to the pledge of the partners in a strategic alliance to perform the required actions to reach the agreement, as explained in the literature review (Shah and Swaminathan, 2008). Also, this pillar is divided among calculative commitment, which entails the economic gain from a

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36 successful partnership, and attitudinal commitment, referring to the willingness to put effort to make the alliance work. Taking into account that the commitment is reciprocal (Lu, 2000) and that both partners are willing to sacrifice on the short-term (Gundlach, Achrol and Mentzer, 1995), the researcher expects that partner commitment will enhance organizational learning. Mainly because when partners are willing to give something to each other, they are willing to share information, resources or knowledge and this will stimulate organizational learning in terms of knowledge transfer. Therefore, the following working proposition is formulated.

WP 3: Partner Commitment is expected to increase knowledge transfer in strategic airline alliances

The fourth and last factor that adds to partner ‘fit’ is Partner Trust, which is defined as the mutual confidence of both partners that none of the parties will exploit another’s vulnerabilities by behaving opportunistically as this would violate the values, standards and principles of the relationship (Bierly and Gallagher, 2007). As previously described, there is benevolence trust, which is the reliance on each other’s goodwill and avoidance of opportunistic behaviour, and competence trust, which is the reliance of partners on each other’s skills and capabilities (Shah and Swaminathan, 2008). Consequently, the researcher expects that when partners trust each other, and thus rely on both their goodwill and their expertise, they will learn from each other. More specifically, when partners trust each other, they will more easily exchange information and knowledge, which stimulates knowledge transfer. Therefore, the following working proposition is determined.

WP 4: Partner Trust is expected to increase knowledge transfer in strategic airline alliances

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3.3 Conceptual Framework Visual

Now that the working propositions have been formulated, a visualisation of how these come together in the study will be illustrated below in figure 3. This visual will aid in creating a clear picture of the study and how the working propositions cover the scope of the project.

Figure 3: Conceptual Framework Visualisation (Source: Author)

This visualisation represents the different constructs and working propositions that come together in this study. To briefly explain the process, first the partner ‘fit’ is assessed in terms of four pillars, namely partner complementarity, partner compatibility, partner commitment and partner trust. Subsequently, the researcher seeks to detect learning with reference to knowledge transfer among the various respondents in the study. Thereafter, each of the partner ‘fit’ dimensions are examined in terms of whether it increases the degree of knowledge transfer, both inward and outward.

In the following chapter, the research design of the study will be outlined consisting of the research philosophy, the methodology, the quality criteria, the case selection, the data collection and lastly, the data analysis process.

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4. Research Design

Throughout the following chapter, the research design of this thesis will be presented. Firstly, the appropriate research philisophy that is adopted in this study will be outlined. Hereafter, an explanation will be provided underpinning the design of the case study followed by the justification of certain quality criteria. Subsequently, the case selection will be described as well as the data collection process. Lastly, the chapter will be concluded with an explanation of the suitable data analysis methods.

4.1 Research Philosophy

As stated by Saunders and Lewis (2012), the research philosophy contains underlying assumptions with regard to the worldview of the researcher. Therefore, the philosophical position of the researcher will have an influence on the choices made in terms of the research design. In terms of research philosophy, a distinction could be made between ontology and epistemology. Ontology refers to the the nature of what is reality, which is further distinguished between objectivism; which refers to the independent existence of natural and social reality (Brannick and Coghlan, 2007) and subjectivism; which considers reality as the outcome of human cognitive processes (Johnson and Duberley, 2000).

In addition to ontology, there is epistemology, which concerns the nature of what is acceptable knowledge (Saunders and Lewis, 2012) and also the justification of how this knowledge could be acquired and by whom (Brannick and Coghlan, 2007). Multiple epistemological views exist such as positivism, realism, interpretivism and pragmatism (Saunders and Lewis, 2012). Considering the fact that throughout this study the aim is to uncover how partner ‘fit’ relates to organizational learning, the researcher seeks to analyze and contrast the data gathered from experts in the field of strategic airline alliances.

How does partner ‘fit’ influence organizational learning in the airline alliance industry? : a case study of KLM Royal Dutch Airlines