Knowledge transfer and learning in International Alliances : the role of trust and absorptive capacity : Nine in- depth case studies of international alliances between Emerging Market Multinational Enterprises and weste

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Knowledge Transfer & Learning in International

Alliances: The Role of Trust and Absorptive

Capacity

“ Nine in- depth case studies of international alliances between Emerging market Multinational Enterprises and Western partner firms within The Netherlands ”

MSc Business Administration International Management 1st Supervisor: Erik Dirksen MSc 2nd Supervisor: Fransesca Siulli Msc

Terence Quint Romalho 10604898

August 31, 2015

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Abstract

Emerging market Multinational Enterprises (EMNEs) increasingly invest in partnerships with Western counterparts as a means to transfer knowledge and learn. These international alliances’ Absorptive Capacity (AC) and the different dimensions of alliance trust will be studied in relation to their inter-firm knowledge transfer. The main goal of this study is to examine to what extent the AC and the different dimensions of trust affect the cross-border alliance KT and what organizational mechanisms can enhance this transfer. The Knowledge-Based view (KBV) and the Relational perspective on international alliances are drawn on to build a conceptual framework. A sample of nine partnerships between EMNEs and Western firms that reside in The Netherlands were selected and investigated on how and to what extent KT is established. Based on a multiple case study design, qualitative data are acquired through semi-structured interviews with the selected managers and secondary data sources are used to complement these data.

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Acknowledgements

I sincerely thank my supervisor Erik Dirksen MSc. His suggestions, patience and feedback were highly valuable, and provided me with the right insights and motivation to complete this thesis. Furthermore, I gratefully thank my spouse for her true support and for making this study opportunity possible through extra long hours of looking after our two baby boys. Not to forget the eternal warm support from my parents abroad, the steadily helping hand of my parents in law, my brother and his spouse for having my back, and of course, all friends and families who showed genuine interest and motivated me to finish this research project. Also, I would like to thank all the respondents for their time and valuable contributions. Their participation has been of utmost importance.

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Index of Tables and Figures

Table 1.a. Profiles of the studied Western firms with EMNEs alliance partners...41

Table 1.b. Profiles of studied EMNEs with Western alliance partners...41

Table 2. Links between the interview questions and working propositions...43

Table 3. Within case analysis Western firms...54

Table 4. Within case analysis EMNE perspectives...62

Table 5. Cross-case analysis between Western firms and EMNEs...66

Table 8. Results on working propositions...75

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1. Introduction

1.1 Motivation

Nowadays, it is well accepted that organizational knowledge is perhaps the most valuable firm resource and an organization’s ability to learn is crucial for its competitive advantage (Grant, 1996; Argote & Ingram, 2000). Scholars widely acknowledge that such an advantage may be derived from the difficulty for competitors to imitate or to purchase certain knowledge on the market, since knowledge itself can be protected or can be tacit by nature (Argote & Ingram, 2000; Das & Teng, 2000). Mentioned earlier, learning alliances may serve as an instrument to transfer tacit knowledge and overcome this difficulty. When a set of relevant knowledge and capacities are effectively transferred, firms can gain competitive advantage through innovation and the improvement of existing capacities (Inkpen & Tsang, 2007). For example, Inkpen (2008) stated that NUMMI, a JV between GM and Toyota, is an excellent case where alliance learning and knowledge transfer led to the improvement in manufacturing productivity and product quality at GM. However, at the same time, empirical research indicates various difficulties or failures of partnerships. The sources of difficulty ranged from distrust between partners, to the misuse of bargaining power once the desired knowledge was adopted by a partner (Hamel, 1991; Inkpen & Beamish, 1997).

For Emerging Market MultiNational Enterprises (EMNEs), entering the international business arena through partnerships with Western firms is even more challenging, because compared to Western firms, EMNEs lack global experience, and managerial competence (Luo & Tung, 2007; Inkpen & Tsang, 2007; Narteh, 2008). Geographic distance and cultural differences adds to the challenges alliance managers face in an international collaboration (Inkpen & Tsang, 2008; Narteh, 2007). Clearly, there are multiple barriers whether cognitively or

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culturally risking the successful transfer of knowledge and, these could have major negative implications for the aimed competitive advantage of the partnership (Inkpen & Tsang, 2005; Narteh, 2008). Thus, enhancing the ability to successfully manage inter-firm knowledge transfer can be fruitful, but carries with it major challenges especially between EMNEs and their Western partners (Lane, Salk & Lyles, 2001; Inkpen & Tsang, 2007; Narteh, 2008).

1.2 Review and Gap in Literature

As it is broadly accepted that EMNE’s lack of global expertise and cultural difference compared with their Western partners could hamper the alliance knowledge transfer (KT), we now turn to perspectives on these issues offered in the academic literature with the aim to spot a weakness.

Before a firm can leverage on its partners assets it requires a comprehensive understanding of what is detrimental to effective KT and how to overcome transfer barriers (Lyles & Salk, 1996; Lane et al., 2001). An organization’s ability to understand, assimilate and apply new external knowledge was coined as Absorptive Capacity (AC) (Cohen & Levinthal, 1990) and stands out as the most significant determinant of knowledge transfer in a number of other studies (e.g. Lane & Lubatkin, 1998; Gupta & Govindarajan, 2000; Szulanski, 2000). While AC was initially constructed as a firm level construct (Zahra & George, 2002), others conceptualized it as a dyad-level construct with the strong argument that AC should be understood in its context (Lyles & Salk, 1996; Lane & Lubatkin, 1998; Lane et al., 2001). The theory of relative absorptive capacity was born and posits that the similarities between firms’ knowledge bases, culture and organisational structures can help predict if a partnership is feasible (Lyles & Salk; Lane & Lubatkin, 1998). Empirically this concept proved to have great explanatory power, especially in cross-cultural alliance settings (Inkpen & Tsang, 2007).

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Lane et al., (2001) extended this concept by including trust, and this has been acknowledged as important when partners exchange knowledge (Dyer & Singh, 1998; Levin & Cross, 2004; Muthusamy & White, 2005; Becerra, Lunnan, & Huemer, 2008). Levin & Cross (2004) argued that trust is based on two factors, namely competence and benevolence. The first is associated with an economic approach to trust and is calculative in nature, and the latter is the socio-psychological approach, reflecting the expectation of reciprocity and affection (Levin & Cross 2004; Muthusamy & White, 2005; Seppänen, Blomqvist, & Sundqvist, 2007). Overall, it is evident that the relationship between the two types of trust between business partners is likely to be reciprocal and positive in nature (Jiang, Chua, Kotabe, & Murray, 2011). Chua, Morris & Ingram (2009) have shown empirically that managers’ affect-based trust has positive effects on competence-based trust, and vice versa. This multidimensionality of trust is found to be a source of inconsistent findings when studying trust and knowledge transfer (Inkpen & Currall, 2002; Seppänen et al., 2007). For example, in their study on the role of absorptive capacity and trust on IJV learning, Lane et al. (2001) admitted that they captured trust as a one dimensional construct, therefore suggest to improve this matter in future research. Moreover, Yli-Renko, Autio & Sapienza (2001) stated that even though most researchers agree that trust facilitates KT, some have concluded that a high degree of trust could decrease the effectiveness of KT, since it might lead to “collective blindness”. Based on this evidence, it is proposed that a combination of social and economic approaches may offer the most comprehensive view on the phenomenon of trust in inter-organizational relationships and its performance (Seppänen et al., 2007; Inkpen & Currall, 2004). In addition, because of the difficulty to quantify the concept of trust, it seems obvious that qualitative empirical studies on trust and international alliances need to be replicated, and extended to different types of contexts –i.e. different cultures, industries, and relationships– in order to improve their validity and generalizability (Seppänen et al., 2007). In sum, relative AC provides a solid

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framework to study how the relatedness of international alliance partners’ characteristics impacts the process of their inter-firm KT (Lane et al., 2001; Foss & Pedersen, 2002). Additionally, the importance of the quality of the relationship (trust) between partners also has been broadly acknowledged in learning and KT, therefore it complements the notion of relative absorptive capacity (Dyer & Singh, 1998; Lane et al., 2001; Muthusamy & White, 2005). This thesis will extend above insights by including the multiple construct of trust to the theory of relative AC, since many scholars acknowledge its importance when examining learning and KT in an alliance.

1.3 Research Aim and Research Question

With a gap spotted on the interplay of trust, AC and KT, the aim here is to articulate this weakness into a research question to guide this study and try to contribute to the literature on international KT. Specifically, examining to what extent the relatedness of international partner firms’ characteristics, known as relative absorptive capacity, and the different dimensions of trust come to affect their inter-firm KT. In addition, this research will investigate what organizational structures and processes enhance the transfer of knowledge between these partnerships. On the one hand we have the EMNEs’ relative lack of capabilities and international experience and on the other hand the goal to transfer knowledge from its’ more affluent Western partner. Conversely, the literature on KT and international alliances emphasizes the importance of trust and capabilities to absorb knowledge when partners form alliances. Thus, enormous uncertainty and risks are inherent to the seemingly logic step for the EMNEs to internationalize through partnering with the more affluent Western firms. To mitigate these risks, alliances have several structuring and processing mechanisms (assimilation) at hand to help reach their learning objectives. Mechanisms as formalization and management involvement is believed to converge values and beliefs among partner firms

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and enhance the transfer of knowledge in an international alliance. Together these variables provide a fruitful research topic and contribute to the literature on KT and learning within international alliances between EMNEs and Western firms. To direct and guide this study, the following research questions are formulated:

 To what extent does relative AC and the different dimensions of trust in international alliances between EMNEs and Western firms affect KT and learning?

 What organizational mechanisms (assimilation) enhance the transfer of knowledge within such international partnerships?

1.4 Research Outline

The remainder of this thesis is organized as follows: First, the theoretical foundations of this study will be laid by discussing the knowledge based view and the relation based view on international alliances. Based on these theoretical frameworks, multiple working propositions are composed to investigate various international alliances’ KT and learning processes. Specifically, the impact of trust and the similarity of partners’ characteristics on alliances’ KT and learning will be investigated. And it will be conceptually determined what organizational mechanisms enhances KT and learning in alliances formed by EMNEs and Western firms. Second, the paper will describe the research methodology where an in-depth case study design is utilized. Here the proposed insights will be tested by conducting an in-depth qualitative case analysis of nine different EMNEs that partnered with Western firms in the Netherlands. The collection of qualitative data will be done through semi-structured interviews with leading alliance managers to gain more insight in their KT and learning practices. Finally, the last section of the thesis will conclude with key findings, theoretical relevance, managerial implications and research limitations as a basis future research.

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2. Theories of International Alliances

In contrast to institution-based theories that emphasize country-level factors effects on foreign entry mode choices, there are different firm-level strategies to explain the various phenomena of international alliances. Strategy theories, such as resource- (Barney, Wright & Ketchen, 2001), knowledge-based (Kogut & Zander, 1993), and relational views (Dyer & Singh, 1998). Basically, the resource-based theory is developed to understand how the relative outstanding performance of a firm can be generated by a unique bundle of resources within the firm. Das & Teng (2000) argued that international strategic alliances are more likely to be formed if a firm’s resources are characterised by imperfect mobility, imperfect imitability, and imperfect substitutability (Barney et al., 2001). However the resource-based view theory has not been able to specify which critical resources encouraged firms to share between each other through cross-border cooperation (McEvily & Chakravarthy, 2002). The knowledge-based theory and the relational perspective on international alliances complement this space (McEvily & Chakravarthy, 2002; Dyer & Singh, 1998).

2.1 Knowledge-based Theory

The knowledge-based theory specifies knowledge-based resources as the most strategically distinctive resources of the firm to create and sustain competitive advantage because they are inherently difficult to imitate, mobile and substitute by other firms, and thus facilitate strategic differentiation and superior performance of the firm (McEvily & Chakravarthy, 2002). Nonaka (1994) distinguished two types of knowledge-based resources: explicit knowledge and tacit knowledge. The first refers to the knowledge that is codified and transmittable via formal and systematic communication, whereas the latter is often ‘rooted in action, commitment, and involvement in a specific context’ making it completely outside the

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routine (Nonaka,1994), and thus makes it difficult to formalise and communicate. Nonaka & Takeuchi (1995) further argued that organisational knowledge is an ongoing spiral process from tacit to explicit and then from explicit to tacit. The importance of knowledge also has its roots in the internationalisation process theory, which suggests that the internationalisation of the firm often follows a sequence of stages, and that the firm accumulates knowledge through experience (Hollensen, 2007). International strategic alliances can be conceptualized as a form of this internationalisation processes initiated by firms to acquire crucial knowledge from their partners if they are incapable of or due to time and cost constraints, to generate such knowledge based on their own experience (Reus, Ranft, Lamont & Adams, 2009). In addition, the knowledge gained from experienced partners may function as a fundament for the firm to make rational decisions, necessary to expand international business operations, capture foreign market opportunities and better its international competitive position (Massingham, 2004). Thus, the existence of the multinational depends on its superior ability to integrate and apply multiple knowledge streams and even create new knowledge (Grant, 1996). With this insight, knowledge-based theorists explain the nature of international alliances as instruments for cross-border KT and learning between the partner firms for the sake of cooperative objectives (Reus et al., 2009). Ultimately, the knowledge-based view considers knowledge-based resources as competitive advantage and suggests KT and learning as the main motives for alliance formation. Related to this learning and KT from one entity to the other, the relational view gained ground.

2.2 Relational Perspective

Growing attention has been paid to examining the impacts of relational factors on inter organizational KT and learning. Scholars adopting the relational view stated that the focus of enquiry should be on the process of knowing and the capability to act, and considered

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knowledge as being processual, provisional and highly context dependent. Dyer & Singh (1998) suggest that inter-firm linkages (extended beyond firm boundaries as opposed to RBV) may be a source of relational rents and can be constructed as dyad/network routines and processes for understanding competitive advantage. They asserted that relation specific assets, knowledge-sharing routines, complementary resources or capabilities and effective governance may function as sources of inter-organisational competitive advantage. As such, the relational perspective indicates that the relationship quality, such as tie strength and trust between firms, positively influences KT and organisational learning (Reagans & McEvily, 2003; Narteh, 2008). This trust-based theory emphasizes the fair investment of relational-specific resources and the development and governance of knowledge sharing routines for cooperation (Dyer & Singh, 1998). Without trustworthy relationships between firms, knowledge would not be able to be created and amplified (Nonaka and Takeuchi, 1995). The relational perspective regards international alliances as a devise to accumulate relational specific resources and the developments of knowledge sharing routines between foreign firms.

The knowledge-based and relational theories recognise knowledge sharing routines between firms as the main rationales of alliance formation which are most applicable to examine the research questions. Therefore, this research combines the knowledge-based and relational perspective to unfold the underlying mechanisms of international alliance knowledge transfer and learning between EMNEs and their Western partner.

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3. Theoretical Model & Working Propositions

3.1 Alliance Partners’ Characteristics in Cross-border KT

Transfer of knowledge is a complex phenomenon and difficult to successfully achieve (Szulanski, 2000). International strategic alliances add to the challenge, because of different cultures and contexts which determine how partners process, interpret, and make sense and use of knowledge (Lane et. al , 2001; Easterby-Smith, Lyles & Tsang, 2008). To address this challenge, the majority of researchers have focused on the nature of knowledge and conceptualised KT as process-dependent models (Szulanski, 2000; Sarala & Vaara, 2010). Critics responded to this view by adopting the ‘source-recipient’ generic models, stating that the underlying mechanisms between the source and recipient of knowledge were ignored by previous models (Sarala & Vaara, 2010). Conversely, the ‘source-recipient’ model emphasises the need to distinguish and compare the alliance partners’ cognitions towards cross-border KT (Easterby-Smith et. al, 2008). The theory of absorptive capacity (AC) is based on this insights and suits the research question well. Additionally, the role of trust will be examined in relation to KT and learning in international alliances.

3.1.1 Absorptive Capacity, Trust and Knowledge Transfer

The ability to understand, assimilate and apply new external knowledge was coined as the receiving unit’s AC (Cohen & Levinthal, 1990) and stands out as the most significant determinant of KT and learning in a number of other studies (Lane & Lubatkin, 1998; Gupta & Govindarajan, 2000; Szulanski, 2000). Cohen & Levinthal (1990) assumed that a firm’s AC is an organization-level construct that resides with its employees, tends to develop cumulatively and is path dependent. Lyles & Salk (1996) refined the concept of AC and proposed that the first two components, the ability to understand external knowledge and the

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ability to assimilate it, are interdependent but distinct from the third component, the ability to apply the knowledge. This notion of distinction is important for this thesis, because only the EMNEs’ ability to understand and assimilate knowledge from its Western partner are highlighted. Thus, the ability to apply the knowledge will not be investigated.

Lane & Lubatkin (1998) shed light on how the characteristics of the knowledge source and knowledge recipient are related and impacted an alliance learning process and performance. Here they suggest that alliance partners need to have a standard set of norms existing between each other that facilitate information sharing. With this perspective they established the term relative AC and proved that the ability of a firm to learn from another firm could be related to the characteristics of the firms (Narteh, 2008). AC is thus conceptualized as a dyad-level construct and should be understood in its context rather than an absolute firm level construct. In particular, the context specificity of the knowledge has an effect on the extent of KT, both because the more context specific the knowledge is, the smaller the AC of the received, making it harder to absorb and utilize (Foss &Pedersen, 2002). In this line of thinking Lane et al., (2001) argued that relative AC and learning depended on three cognitive factors: prior learning from partner, business relatedness and cultural compatibility. These factors will be discussed later. In addition, trust was incorporated in their theory and broadly acknowledged to be very important when partners exchange knowledge (Narteh, 2008; Lane et. al, 2001; Szulanski, 2000; Levin et al., 2004) . The more trust a firm has in its alliance partner, the more likely it is that information will be shared (Muthusamy et al., 2005). While trust is important in developing alliances, at the same time it encourages alliance partners to be aware of the information and knowledge of one another (Lane, Salk and Lyles, 2001; Inkpen & Curral, 2004 ). Thus, relative AC and trust are crucial and interrelated concepts when independent partners exchange knowledge (Lane & Lubatkin, 1998; Lane et al., 2001; Easterby-Smith et al., 2008). Before explaining these

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concepts in detail and its relation to the inter-firm transfer of knowledge, let us first define KT and learning.

Literature reveals that some call knowledge transfer (KT), others define as knowledge combination, or learning (Nonaka & Takeuchi, 1995). As it is not the purpose of this research to address the conceptual difference of the exact interpretation of the terminology, from this point forward the term “Knowledge Transfer and learning” will be exploited and used interchangeably. In line with Kogut & Zander (1993) and Argote & Ingram (2000) it will be argued that successful KT and learning is a crucial prerequisite for financial success, that it can be qualified as a dependent variable. Argote & Ingram (2000, p. 151) state that KT and learning has occurred when changes in the “knowledge or performance of the recipient units” can actually be measured. In other words KT and learning results in the receiving unit accumulating or assimilating new knowledge (Kogut & Zander, 1993). Here, KT and learning is defined as ‘the process through which a knowledge recipient is affected by the experience

of a knowledge source and manifests itself through changes in knowledge or performance of the recipient unit’ (Argote & Ingram, 2000; Inkpen & Tsang, 2005). Thus, in this context

firms acquire knowledge from an alliance partner by gaining access to their skills and competencies the partner brings to the alliance, thereby provide opportunities to create re-deployable knowledge, such as technical knowledge or market knowledge (Inkpen & Tsang, 2005).

3.2 Trust

Trust has been viewed from a wide range of different perspectives, which led to fragmentation in its conceptualization (Inkpen & Currall, 2004). This made it difficult to reconcile because, these perspectives reflect the context-dependent nature of trust (McEvily & Tortoriello, 2011).

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Nevertheless, trust has been widely identified as a positive factor in diverse collaborative relationships. For example, helping entrepreneurial actors overcome the risk and uncertainty (Welter, 2012), limiting opportunistic behaviour and reduce inter partner conflicts (Inkpen & Tsang, 2005) and, reducing monitoring costs by overcoming the information asymmetry (Payne, Davis, Moore & Bell, 2009). Simmilarly, with regard to inter-firm KT and learning, Becerra et al. (2008) documented that researchers have reported the positive role of trust. It increases the partners’ willingness to assist each other to understand external knowledge thereby facilitating its transfer (Lane et al., 2001; Inkpen & Tsang, 2005). Park (2011), suggest that the role of trust in IJVs is “paramount”, since it has an impact on the opportunistic behaviour that is common in IJVs. With limited trust, the knowledge source would establish explicit and implicit safe guards against inadvertent leakage of its knowledge (Tsang, 1999). On the side of the recipient, Narteh (2005) found that the equipment supplied by Danish partners to their Ghanaian counterparts as part of their equity contributions created problems in terms of their worth and value. Thus, in general sense trust functions as an ongoing social control mechanism and risk reducing device (Gulati, 1995), hence influences the extent of knowledge exchanged in partnerships (Inkpen & Curral, 2004) and the efficiency with which it is exchanged (Lane et al., 2001). However, this study is specifically curious about how the different dimensions of trust interact with KT and learning across partner firms.

Most experts believe that trust in alliances is rooted in two distinct bases, one rational and the other emotional (Cullen et al., 2000). In this vein, explanations of trust in the inter-organizational relational context have revolved around two major concepts: (1) reliance and (2) risk (Muthusamy & White, 2005). Trust in an alliance is often defined as reliance on another party under conditions of risk (Nooteboom, 1996). The concept of ‘reliance’ includes two dimensions of trust. First, confidence or predictability: at a minimum level, alliance partners will fulfil their duties (Johnson, Cullen, Sakano & Takenouchi, 1996). Second,

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fairness or goodwill: at a maximum level, trust equates to risk taking activity (Makino & Delios, 1996). At this extreme, a firm can fully trust its partner, making extensive control of the partner’s behaviour needless (Inkpen & Curral, 2004). Consistent with these arguments, this study posits that trust is based on two factors: competence and benevolence (Levin et al., 2004).

3.2.1 Competence-based Trust

The existence of an international alliance is based on the idea that an alliance partner possesses the useful knowledge and capabilities (Muthusamy & White, 2005). Once an alliance is formed, each partner must assess the other’s competence, then decide how tasks will be jointly performed (Inkpen & Curral, 2004). That is, partners enter alliances to gain some form of economic reward. Expectations, and concerns about the future potential for gaining rewards in and from an alliance relationship drives instrumental trust. Lewicki & Bunker (1996) argue that this trust has basically a calculative nature where trusting beliefs may form quickly because of social categorization, reputation, or out of the need to immediately cooperate on a task (McKnight & Chervany, 2001). It refers to the acceptance of a certain level of vulnerability based on the calculated costs of maintaining or severing a relationship (Williamson, 1993). This means that if one firm leads the other to believe it can perform certain tasks when it cannot, achievement of joint venture objectives may be impossible (Inkpen & Curral, 2004). Once the equity split has been established, the interface between the partners must be clarified in terms of control mechanisms for the partnership. Lin (2005) maintained that control is a vehicle for foreign partners used to transfer knowledge to their local counterparts and found supporting evidence that U.S. management control had a direct positive impact on knowledge acquisition by Chinese partners. Contracts narrow the domain and severity of risk to which an exchange is exposed (Poppo & Zenger, 2002). Li, Poppo & Zhou (2010) argued that contracts provide an institutional basis of assurance for

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mutual trust and cooperation making it more likely to transfer tacit knowledge. These operational routines create a structure for coordination, facilitating processes, and establishing safe boundaries for knowledge flows. Since localized, tacit knowledge can leak out of the company, formal operating procedures are necessary to preserve and improve the efficient use of such resources (Li et al., 2010). It is obvious that formal trust complements the social mechanism of trust (Das & Teng, 1998), and promotes greater acquisition of tacit knowledge (Li et al., 2010). If alliance partners ought to stay interested in the benefits of the alliance, partners must be willing to keep on sharing crucial knowledge and expertise in order to maintain confidence in each other’s competencies (Hamel, 1991). Conversely, if partners cannot fulfil assigned objectives on a consistent basis, the benefits of the alliance would be doubted making it less likely to be willing to spend their valuable time and effort on the alliance (Muthusamy & White, 2005). Perceived expertise is an essential part of trust. Some scholars refer to this as credibility trust (Johnson, Cullen, Sakano, & Takenouchi, 1996). Ko, Kirsch & King ( 2005) found that when source credibility is high, the knowledge presented by the source is perceived to be useful, thereby facilitating the transfer of knowledge and learning. When the source lacked credibility, a recipient will perceive a source's knowledge to be less persuasive and will discount that knowledge making the knowledge transfer less effective. Knowledge seekers who trust a source’s competence in a specific domain to make suggestions and influence their thinking are more likely to listen to, absorb, and take action on that knowledge (Levin & Cross 2004). This likely leads to positive and frequent interactions which may enhance the creation and transfer of tacit knowledge between partners (Liu, 2012). Lewicki & Bunker (1996) propose that the calculative nature of trust may develop to the knowledge level as the parties assess the rate of previous successes and move on to the level of identification or benevolence (Levin & Cross, 2004) where trust would be at its highest.

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3.2.2 Benevolence-based Trust

Benevolent-based trust is defined by the degree to which a party identifies with the exchange partner because it believes that they share similar values, preferences and needs (Lewicki & Bunker, 1996; Levin & Cross, 2004). This trust is based on the expectation that another individual or group will not take excessive advantage of the other party even when the opportunity is available, or at least will not knowingly hurt the other’s interests (Levin & Cross, 2004). In an international strategic alliance it means that partners, to a high degree, internalize the alliance relationship (Cullen et al., 2000). This type of trust is similar to what Lewicki & Bunker (1996) call identification-based trust and is reciprocal in nature. Here a deep mutual understanding of the needs of another exists, where each party will protect and promote the interests of another, even in the other’s absence. Contracts are minimal at this level where there is no urge to monitor the other party’s actions as loyalty is unquestionable at this level (Lewicki & Bunker, 1996). Applied to international alliances, Das & Teng (1996) called it “relational risk”, whereby firms that refrain from acting opportunistically are said to forbear. In a successful joint venture (i.e., one that achieves the partners’ alliance objectives), mutual forbearance is a central feature of the relationship (Inkpen & Curral, 2004). This higher level of trust has an impact on the way partners work together (Dyer & Singh, 1998) and increases the scope of joint planning and action (Zaheer & Venkatraman, 1995) . Park (2011) also concluded that high levels of trust has a strong impact on knowledge acquisition, since it facilitates the exchange of information and resources and leads to common problem solving. Further, it can enhance openness and accessibility toward each other in an alliance and motivates the partners to be much more transparent, increases the scope of the relationship, and enhances mutual knowledge transfer between firms in the alliance (Muthusamy & White, 2005). When knowledge seekers ask for information, they become vulnerable to the benevolence of the knowledge source (Lee 1997). Benevolence-based trust

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likely shapes the extent to which knowledge seekers will be forthcoming about their lack of knowledge, even after seeking out the knowledge source, and so creates conditions for learning. (Levin & Cross, 2004) Furthermore, trust establishes a basis of intimacy and reliability, which leads parties to be more open and receptive to the transfer of knowledge (Dyer & Hatch, 2006) stimulating frequent communication (Szulanski, 1996) and coordination flexibility, because parties are more willing to respond quickly to inter-firm requests (Das & Teng, 1998). Not only does exposure to the source unit’s socialization process greatly encourages the transfer of tacit knowledge, but the willingness to spend significant time together and maintain stable relationships also facilitates tacit knowledge transfer (Kotabe, Martin & Domoto, 2003). Doz (1996) acknowledged this type of trust. He concluded that deterioration over time of one partner’s perception (Alza) of the integrity and forthrightness of the other partner (Ciba Geigy) led to the demise of the alliance.

The research findings clearly indicate that relational social exchanges between partners have strong influence on the extent of KT and inter-firm learning accomplished in a strategic alliance. Trust in the partner’s abilities is positively linked to new knowledge, skills and competencies gained through the alliance. Additionally, without partners exhibiting benevolent behaviour, it would be difficult to have deeper and meaningful exchanges of information, knowledge and skills. It is clear that both benevolence-based and competence-based trust affect alliance knowledge transfer. When both dimensions of trust are optimal it could increase receptiveness and usefulness of knowledge, thereby smoothen the successful functioning of the alliance. Hence,

Working Proposition 1: The greater the extent of competence-based trust between alliance partners, the greater will be the degree of knowledge transfer and learning.

Working Proposition 2: The greater the extent of benevolence-based trust between alliance partners, the greater the degree of knowledge transfer and learning.

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3.3 Relative Absorptive Capacity (AC)

To reduce the difficulty of KT, an organization must employ similar codification standards and programming schemes to effectively present information and knowledge (Bhatt, 2001). Various scholars adopt this perspective and found empirical support accordingly. For example, Cohen & Levinthal (1990) suggest that the relatedness between organizational AC and the new knowledge to be absorbed are likely to influence a firm’s ability to learn from another firm. Other studies proved that the lack of compatibility and cultural differences between alliance partners frustrates KT and successful learning of an alliance (Parkhe, 1993; Inkpen, 1995). Lane & Lubatkin (1998) referred to the compatibility of partners as the theory of “relative” absorptive capacity and their findings proved the explanatory power of this concept with regard to performances of alliances. Lane et al. (2001) argued that partners’ compatibility will evolve from three factors: (a) Prior Learning ties between alliance partners, (b) Business Relatedness (c) Cultural Compatibility. We will further elaborate on these factors and explain how they influence KT and learning between international alliance partners.

3.3.1 Prior Learning

Through the history of an alliance, partners learn about each others' ways of doing business, and interpret each others' acts from experiences. Alliance partners may be induced to invest in inter-firm relation-specific assets that reduce transaction costs and thus increase value created (Dyer & Singh, 1998). Continued partnering provides an opportunity to refine the partner-specific interfaces, to further develop the partner-partner-specific decision making, and enhance conflict resolution routines, hence increase the likelihood of alliance performance (Hoang & Rothaermel, 2005). Furthermore, learning accumulated through partner-specific alliance experience may lead to the emergence of dyadic inter-organizational routines, characterized by stable interaction patterns among the two partners, that can facilitate the development of

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inter-firm sharing routines (Zollo & Winter, 2002). Inter-partner knowledge-sharing routines lay the foundation for developing partner-specific relational capital and absorptive capacity necessary to create a successful alliance (Dyer & Singh, 1998; Lane et al., 2001). It enables alliance partners to understand valuable knowledge and effectively transfer it across firm boundaries (Dyer & Singh, 1998). Moreover, Kale, Singh & Perlmutter (2000) reported that relational routines and trust developed through prior interactions reduce the fear of opportunistic behaviour and allow for a greater openness, hence, facilitate learning and KT in strategic alliances. Therefore,

Working Proposition 3: There will be a positive association between EMNEs prior learning from their Western partners and its current knowledge transfer from those partners.

3.3.2 Business Relatedness

It is argued that when knowledge source and recipient possess similar knowledge bases, this could reduce some of the transfer barriers (Narteh, 2008). The main idea is that when the object of learning is related to what is already known and a common language exists, learning performance could be enhanced, making it possible to work to a common goal (Cohen & Levinthal, 1990; Grant, 1996). A basis for common understanding and interpreting experience is then provided (Dyer & Singh, 1998). Common understanding represents the extent to which the work values, norms, problem-solving approaches, and prior work experience of a dyad are similar (Nelson & Cooprider 1996). Bettis & Prahalad (1995) refer to problem solving attitudes and work value of managers as the dominant logic of a firm. They assert that what constitutes relevant prior knowledge, compatible norms, and similar dominant logics will likely vary with the types of organizations being studied. Therefore, these differences must be taken into account when making empirical predictions based on relative absorptive capacity (Lane et al., 2001). A certain degree of similarity, relatedness and/or overlap of expertise’s

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dominant logic between alliance partners is broadly accepted as a precondition for learning and knowledge transfer to succeed (Cohen & Levinthal, 1990; Lane & Lubatkin, 1996: Narteh, 2008). Empirical research suggests that the higher the relatedness of partner firms, the stronger the control over specific activities and operational uncertainties, hence the higher the perceived alliance performance and survival (Luo & Peng, 1999; Mjoen & Tallman, 1997). Finally, Minbaeva, Pedersen, Bjőrkman, Fey, & Park (2003) concluded that the ability to transfer information based on the possession of a relevant knowledge base is one of the main competitive advantages of multinationals in their foreign environment. Obviously, the research literature suggests that similar heuristics and shared experiences between a source and a recipient are important antecedents of learning and remove barriers to promote mutual understanding and knowledge convergence (Szulanski, 2000). Hence,

Working Proposition 4: It can be expected that business relatedness prior to the strategic alliance will enhance learning and knowledge transfer between the EMNEs and their Western Partners.

3.3.3 Cultural Compatibility

Knowledge transfer and learning in domestic alliances is complicated. Geographic distance and cultural differences adds to the challenge in international alliances (Inkpen and Tsang, 2007). Culture constitutes a powerful informative resource from which actors express their feelings, craft their understanding and expectations (Saunders, 2012; King, 2007). It has been defined to include shared beliefs, values and practices of a group of people which could vary among cultural communities (Taylor & Osland, 2003). King (2007) argues that if national cultural norms are somewhat contrary to established organizational norms— such as might be the case for employees of a foreign-based firm—the latter can dominate, but that is unproven and unlikely for the long-run because national culture is so enduring. Since people carry their

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corporate and ethnic backgrounds into their collaborative relationships (Taylor & Osland, 2003), it is likely to affect their mental models, hence influences how they interpret, and make use of a body of knowledge (Inkpen & Tsang, 2007). The literature on alliance relationships views cultural distance as problematic. Complications may arise when knowledge is transferred across dissimilar cultures (Inkpen & Tsang, 2007). Newell (1999) for instance found out that Westerners’ attempt to transfer MBA education to China initially failed because most of the concepts were at variance with Chinese values and practices. Bhagat, Kedia, Harveston & Triandis (2002) found that cultural differences generally strengthen the social identities of managers working in international strategic alliances. For instance, in Sino-foreign joint ventures, the terms “the Chinese side” (or, Zhongfang in Chinese) and “the foreign side” (Waifang) are frequently used by both local and expatriate managers when they described the situations in the ventures which impeded alliance KT and learning (Tsang, 2001). Knowledge can be transferred successfully through effective communication but it is more than a simple activity. Kedia and Bhagat (1988) reported that cultural difference between the source and the recipient, are seen to be one of the organizational communication barriers. Similarly, Ting-Toomey (2007) argued that intercultural encounters are often filled with misunderstanding and second guesses because of language problems, communication style differences and different value orientations. When managers of a an international partnership fail to speak the same language, a negative impact on learning can result (Liu, 2012). Liu (2012) also found significant differences between the attitude of Western partners versus Non-Western partners. Western partners are more open and easier to communicate and share information than Japanese partners which are inclined to protect their proprietary knowledge with strict rules. Obviously, differences in beliefs, values and practices between the knowledge source and recipient could create barriers to learn unless they are identified and harmonized (Lane et al.,2001; Lyles & Salk, 1996). This bridging can be established

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through strong commitment from the senior management teams of both the host and foreign partner (Devapriya & Ganesan, 2002). Lorange and Roos (1993) suggest that international strategic alliances’ success is linked to a firm’s ability to adapt to cultural differences. Since partner firms usually have distinct cultures, international alliances are often formed on the basis of cultural compromise among the partners concerned. Consequently, the alliance partners’ cultures need to be compatible to ensure a successful international alliance. Hence,

Working Proposition 5 : It can be expected that cultural compatibility of the EMNEs and their Western partners will be positively associated with effective knowledge transfer and learning.

3.4 Assimilation

To overcome difficulties associated with cross border KT, certain learning structures and processes must exist to facilitate the assimilation of knowledge from the alliance partners (Lane et al., 2001). Communication bridges, conditions for team learning, and systems help capture and transfer knowledge across organizational boundaries (Minbaeva, 2007; Inkpen & Tsang, 2007). Gupta & Govindarajan (2000) considered the importance of communication channels and the richness of communication links, openness, and density of communication. In international partnerships setting Lyles & Salk (1996) categorized this into: Formal goals, Flexibility & Adaptability, and Alliance Management Involvement & Staff Training.

3.4.1 Formal Goals

Formal goals have been found to positively influence the assimilation of external knowledge (Jansen, Van Den Bosch & Volberda, 2005). Lyles & Salk (1996) summed up that articulated goals provide mechanisms for evaluating: 1) the state of collective understanding and the efficacy of action; 2) the discrepancies between explicit goals and plans; 3) the progress assessed at a particular time; and, 4) the new knowledge needed to correct deficiencies or difficulties. Different types of articulated strategies might have different implications for the

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quantity and type of KT in an alliance (Nonaka & Takeuchi 1995). First, articulated goals advance knowledge acquisition by focusing members upon the same vision or mission (von Krogh et al., 1994). Second, articulated goals and plans provide a common measure against which to access and adjust individual and collective actions and their outcomes (Lyles & Salk, 1996). Well-designed explicit goals and procedures capture prior experiences that may selectively direct partners to assimilate new knowledge. Formal intervention is closely related to goal articulation. Okhuysen & Eisenhardt (2002) studied the impact of formal interventions when groups try to achieve superior knowledge integration from an external source. They found that explicit instructions for the group to follow help guide the discussion among members and enhance the communication of tacit knowledge. Also, Lyles & Salk (1996) argued that formal guidance keep groups focused, provide an immediate source of feedback and enables group members to observe discrepancies between their actual behaviours and their achievement of the process goals. In international alliance setting, Lyles and Salk (1996) found support for the notion that explicit goals, business plans and division of labour between partners help focus their attention on potentially useful knowledge to be transferred. Knowledge transfer is thus facilitated when explicit processes help partnership members to target knowledge that could or should be transferred. Hence,

Working Proposition 6: A certain degree of formal goals is expected to positively influence knowledge transfer and learning between the EMNEs and their Western partners.

3.4.2 Flexibility & Adaptability

While formal plans provide common understanding, partner members must be allowed a degree of freedom and adaptability to create their own implementation sub goals (Lyles & Salk, 1996). Especially when partners differ in competencies and culture it is important to compose learning objectives, flexible enough to adapt to unexpected changes in the alliance

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(Inkpen & Tsang, 2007). Employee decision partaking represents an important mechanism with regard to absorptive capacity, as it is closely related to organizational effectiveness and adaptability (Schleimer & Pedersen, 2013). Participation in decision making increases the range of prospective "receptors" to the environment which enables the recipient to selectively act on new external knowledge (Cohen & Levinthal, 1990). It allows for interplay among a variety of perspectives and leads to a rich internal network of diverse knowledge that supports assimilation of new external knowledge (Jansen et al., 2005). Research indicates that coordination capabilities (e.g. job rotation and cross functional interfaces) promotes flexibility and adaptability. These capabilities could result in lateral forms of communication that deepen knowledge flows across boundaries (Gupta & Govindarajan, 2000), promote non-routine information processing, and contribute to a unit's ability to overcome differences about new external knowledge (Jansen et al., 2005). Lyles & Salk (1996) empirically proved a significant association between IJV learning and its organization’s flexibility and creativity. This is thought to be especially important for creating an openness and constant renewal of ongoing and new strategies to new knowledge when facing unfamiliar host environments (Schleimer & Pedersen, 2013). And it could create emergent problem-solving skills and knowledge building on what the foreign partner provides, and tailor it to fit the specific needs of the alliance (Cohen & Levinthal, 1990; Lyles and Salk, 1996). Hence,

Working Proposition 7: The greater the partners’ flexibility and adaptability, the easier it can assimilate new knowledge and learn from its foreign partner.

3.4.3 Alliance Management Involvement and Training of Staff

The socialized and internalized knowledge within a strategic alliance can provide an important basis for knowledge development (Nonaka, 1994). More often than not, certain managers in the teacher firm are assigned to communicate with the knowledge recipient to

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promote learning (Tsang, 2002). Bresman, Birkinshaw & Nobel (1999) showed that interpersonal communication, such as visits and meetings, were significant facilitators of international knowledge transfer. The amount of time and effort spent by parent managers on understanding the operation of a partnership is a key determinant of knowledge acquisition (Inkpen, 1997). Alliance management involvement is a direct channel and is usually achieved by assigning expatriate managers to work in the strategic partnership. Management involvement, refers to the extent to which the foreign partner participates in managing details of the various aspects of the alliance operation (Tsang, 2002). Empirical study support the idea that expatriate managers are an effective vehicle for knowledge acquisition (Lyles & Salk,1996: Lane et al., 2001). For example, as to experiential learning, Inkpen & Beamish (1997) assert that the experience of managers in an IJV is the key to acquire especially tacit knowledge of the local environment where the venture is located. Hansen (2002) supports this findings by stating that the extent of direct relations in the knowledge network could impact the difficulties of transferring tacit knowledge. He found that actively involved networks were better able to acquire knowledge from their partner (Minbaeva, 2007). Through dialogues and debates as a means of learning, the knowledge concerned will be refined and made more explicit (Inkpen & Tsang, 2007). Furthermore, the training of recipient staff by a teacher firm can be seen as a vehicle for transmitting explicit knowledge and socially embedded information (Nonaka 1994). Complementing this view, Inkpen (1997) suggest that as a way of socialization, active management involvement of the teacher firm and recipient firm can function as a vehicle for transferring explicit knowledge and tacit knowledge (Nonaka, 1994). Hence,

Working Proposition 8: The degree to which there is active alliance management involvement and the training of the training of alliance staff enhances knowledge transfer and learning.

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3.5 Conceptual Research Model

Based upon the working propositions discussed in the theoretical foundations, the associated conceptual research model is presented in figure 1. Propositions 1 and 2 investigate the role of both dimensions of trust, respectively competence-based trust and benevolence-based trust, and its impact on knowledge transfer and learning in international alliances between EMNEs and Western firms. Propositions 3, 4 and 5 addresses the three components of absorptive capacity and how they influence knowledge transfer and learning in the studied international alliances. These components include prior collaboration, business relatedness and cultural compatibility. Finally, working propositions 6, 7 and 8 study the organizational structures and processes (assimilation) which are meant to enhance knowledge transfer and learning in the international alliances. These organizational mechanisms include respectively formal goals, flexibility & adaptability and alliance management involvement & staff training.

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Figure 1. Conceptual Research Model

Source: Author

TRUST

- Competence-based

- Benevolence-based

WP 1 & 2

ASSIMILATION

- Formal Goals

- Flexibility & Adaptability

- Management Involvement

& Training

WP 6, 7 & 8

RELATIVE AC

- Prior Collaboration

- Business Relatedness

- Cultural Compatibility

WP 3, 4 & 5

Knowledge Transfer & Learning

Between EMNEs and Western firms

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4. Methodology

This chapter addresses the methodology of this research. It will describe how the research goals are meant to be achieved and will justify the choice of method accordingly. First, the conceptual issues of research methods are discussed. Thereafter a description of the research design will follow where the methodological choice, the structure and execution of the research are described. Subsequently, the chapter will discuss and explain the data collecting methods, whereby semi-structured interviews and additional surveys are utilized. Finally, the data analyzing method is discussed, for which a thematic coding approach is used.

4.1 Conceptual Issues; Philosophy of Research

When conducting academic research, a host of methodologies are ready available to researchers. However, it is the nature of the research question, and the phenomenon under investigation, which should determine the correct research method to use since different kinds of information are gathered in different ways (Gill & Johnson, 2010). Also, researchers need to be aware of the philosophical commitments they make with their methodological choices. Because baggage has a crucial impact upon what they do and how they understand whatever it is that they think they are investigating (Gill & Johnson, 2010). Each philosophy adopted has significant assumptions of how the researcher views the world. These assumptions underpin the research strategy and its methods are derived from two major ways of thinking about research philosophy, namely ontology and epistemology.

Ontology

Ontology is the concept from philosophy which focuses on exploring what, in fact, is ‘being’; in other words, the nature of ‘reality’ (Krijnen & Kee, 2007). This raises questions of the

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assumptions researchers have about the way the world operates and the commitment held to particular views (Saunders et al., 2007). This concept takes into consideration how reality is constructed; either from the objective or the subjective perspective of ontology. Objectivism posits that social entities exist in reality external to social actors concerned with their existence‘ (Saunders et al., 2007). Krijnen & Kee (2007) asserted that ‘social’ reality can be investigated through empirical means without the investigator affecting this reality. Conversely, subjectivism explains that reality is shaped by our thinking and speaking about this reality, by the way we interpret and explain reality, and by the language we use to describe it (Krijnen & Kee, 2007). What means that facts are established by human thoughts or that our ‘social’ reality is not independent of our way of talking and thinking. Thus, reality is ‘socially constructed’, what makes subject and object within the reality inseparable. In this research a subjectivist view will be adopted on constructing ‘reality‘. A subjectivist perspective is the most appropriate for the purposes of this research, as the process of inter firm knowledge transfer in international alliances involves different individual ‘social actors‘ with different views on ‘reality‘. This approach allows this research to observe, compare and analyze the different views on knowledge transfer in international alliances between culturally different partners.

Epistemology

Closely linked to ontology, epistemology concerns what constitutes acceptable knowledge in a field of study and investigates the origin, nature, validity and limits of human knowledge (Krijnen & Kee, 2007). Within epistemology, researchers can embrace different perspectives but the most prominent school in epistemology is what is called ‘logical-positivism’ (Krijnen & Kee, 2007). This perspective suggests that, reality is a ‘fact’ which can be observed through observation and logic reasoning and that reality is measurable which can be explained through

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means of causality. Here, only phenomena that can be observed will lead to the production of credible data (Saunders et al., 2007). Unsurprisingly, this approach has found strong support in natural sciences as a means to comprehend knowledge of the reality (Krijnen & Kee, 2007). On the other hand, researchers which are critical of positivism argue that deep contextual insights into this complex world are lost if such complexity is reduced to a series of law-like generalizations. Especially in social science where research concerns the behaviour of people or organizations, it remains unsure how their motivations can be generalized through quantitative and replicable means (Krijnen & Kee, 2007). In this vein, the research philosophy is likely to be closer to that of the interpretivist, an epistemology that advocates the necessity for the researcher to understand differences between humans in our role as social actors (Saunders et al., 2007). For the purposes of this study, the interpretivist perspective will be the most appropriate because different human social actors, alliance managers, will contribute to the research and influence it’s outcomes. Through this approach, this research aims to address the ‘how’ and ‘why’ questions of international collaborations between Western firms and EMNE resided in The Netherlands.

4.2 Multiple-case Study Research Design

The research design includes an explanation of the general way in which the research is intended to be carried out (Saunders et al., 2007). More specifically this design aims to address the questions such as what techniques are used to collect the data, what sources of data will be used and, how are research limitations dealt with (Van der Velde, Jansen & Anderson, 2004). This is true for both qualitative and quantitative research approaches. Qualitative research is useful when the investigation is directed to determine the motivations, perceptions and/or beliefs of a certain phenomenon (Van der Velde et al., 2004).

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Aligned with the aforementioned research philosophy, this study therefore uses a qualitative research method to investigate cross-border KT and learning between alliances in The Netherlands. To investigate this phenomenon, a multiple case study design is applied which enables the research focus to examine full context and data is gathered among a relatively small number of people or firms in order to gain more in depth understanding of the particular subject being studied (Taylor, 2005). An approach defined by Eisenhardt (1989, p. 534) as the “research strategy which focuses on understanding the dynamics present within single settings”. Thus this method aims to describe, rank and explore data with the aim of generating working propositions or illustrating an existing theory (Yin, 2012). The advantage of such an approach is that it can lead to deeper insight into the ways in which organizations interact with each other and their environment, have mutual expectations about each other and accommodate their behaviour to each other (Van der Velde et al., 2004). The in-depth focus on the case, as well as the intention to cover a broader range of contextual conditions, yield a wide range of topics to be covered by any given case study. In this sense, case study research goes beyond the study of isolated variables which is more associated with quantitative study methods (Yin, 2012). Since this research mostly focuses on explaining how the cross-border KT and learning process can be enhanced for international alliances, the research question is explanatory in nature . According to Yin (2012) a case study is pertinent for this type of studies. The case study is deemed to lead to greater insights into the ways in which the international alliance partners interact with each other and what their expectations are about the cross-border knowledge transfer. However, this method brings some disadvantages. As a phenomenon is investigated with a few units of analysis, the method is said to suffer from a perceived inability to statistically generalize the case study‘s findings to a much broader level. By investigating a phenomenon at one particular location, cross-sectional and with only few organizations within the sample as units of analysis, this would result in lower generalizability

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(Deng, 2007). The results are only valid in a specific setting for specific type of organizations. In order to find patterns in how knowledge is transferred within international alliances, this research includes insights from multiple practitioners from multiple international alliances in the Netherlands.

This research method aims to find explanatory, as well as exploratory, findings about this phenomenon (Yin, 2012). The explanatory element would refer to the extent of how existing theories about international alliances would correspond with the reality where EMNEs and Western firms have formed alliances; the exploratory element would show if this framework is suitable enough to investigate this phenomenon (Yin, 2012).

4.3 The Case Criteria and Execution of the Research

To find out what impedes learning and KT in a cross-cultural strategic alliance and how this can be enhanced, this research investigates multiple international partnerships as the unit of research analysis. This study collects qualitative data predominantly from secondary data and semi-structured interviews. Interviews will be conducted with different (alliance) managers from Western firm that partnered with various EMNEs (Non-Western firms) and vice versa. By investigating this phenomenon from multiple perspectives and with multiple methods, this methodology aims to increase the validity of the acquired data (Eisenhardt, 1989). With this research approach it is meant to obtain exploratory and explanatory findings.

In this study the criteria of these partnerships are based on the broad view of an international alliance that corresponds Tsang’s (1999) definition. He conceives the international strategic alliances as international cooperative arrangements involving at least one foreign and one domestic firm. It can appear in the form of a R&D coalition, a coproduction agreement, franchising, licensing, or a joint venture. More specifically the international alliances must