M
ANAGEMENT
C
ONTROL
P
ROBLEMS OF
S
TRATEGIC
A
LLIANCES
THE ROLE OF TRUST AND CONTROL IN SOLVING
MANAGEMENT CONTROL PROBLEMS OF STRATEGIC
ALLIANCES
Sophia Wahl: S2754258
Organizational & Management Control
A
BSTRACT
With the increasing complexity of control in strategic alliances, alliance partners face control problems. This paper investigates the relation between trust and control to solve control problems of strategic alliances. By means of understanding control problems that underlie control solutions, the applicability of the latter can be better explained. Case study research was conducted at firms that maintain strategic alliances consisting of complementing partners. Interviews were conducted with representatives of the leadership boards and operational managers. Findings reveal that cooperation problems may result from a conflict between competition and cooperation of complementing partners. In addition to external cooperation problems, coordination and internal cooperation problems were identified. This study adds to literature by providing evidence of the dynamic character of trust. The study revealed that trust is continually shaped by interaction and experience. Firms reacted to cooperation problems by sending relational signals with the intention to emphasize one’s own trustworthiness. For that purpose, alliance partners proactively provided relevant information to partners. For individual strategic alliances between two partners, framework contracts were set up to facilitate coordination and to safeguard intellectual properties. These were designed in a way to leave organizations flexible.
T
ABLE OF CONTENTS
1
Introduction ... 1
2
Literature Review ... 3
2.1
Strategic Alliances – Underlying Reasons & Types ... 3
2.2
Interdependence ... 4
2.3
Relational & Performance Risk ... 5
2.4
Control Problems ... 6
2.5
Trust & Control in Strategic Alliances ... 7
2.5.1
Control ... 8
2.5.2
Trust ... 9
2.5.3
Models of Trust & Control in Strategic Alliances ... 9
3
Methodology ... 13
3.1
Case Selection ... 13
3.2
Case Description ... 14
3.3
Data Collection ... 16
4
Results ... 19
4.1
Contextual Variables and Influential Factors on Control Problems ... 19
4.2
Control Problems ... 21
4.3
The Role of Trust and Control ... 23
5
Discussion ... 31
L
IST OF
F
IGURES
Figure 1: Control Problems (Caglio & Ditillo, 2008) ... 6
Figure 2: From Control Problems to Control Solutions – Theoretical Framework ... 12
Figure 3: Simplified illustration of SA formed within or without a group belonging ... 14
Figure 4: CC1 Overview ... 15
Figure 5: CC2 Overview ... 16
Figure 6: CC3 Overview ... 16
L
IST OF
A
BBREVIATIONS
CC Case Company
GH Global Holding
OM Operational Manager
SA Strategic Alliances
1 I
NTRODUCTION
As the popularity of strategic alliances (SA) grows, individual firms are increasingly at the mercy of global alliances of firms (Buhman, Kekre, & Singhal, 2005; Langfield-Smith, 2008). Nonetheless, with a majority of alliances failing, the reported success rate of SAs is low (Sadowski, Duysters, & Sadowski-Rasters, 2005; Vanpoucke & Vereecke, 2010). In the debate of how SAs can successfully be managed, the importance of adequate governance is emphasized (e.g. Dekker, 2008; Teng & Das, 2008).
As SAs usually go beyond single transactions and are formed for the long-term, contracts do not cover all situations. Therefore, further control mechanisms and trust need to be relied on (Langfield-Smith, 2008). In this context, Vanpoucke & Vereecke (2010) suggest that building trust and coordination are most important. Emsley & Kidon (2007) argue that trust is a way to cope with uncertainties that cannot be solved by traditional controls. Within the uncertain environment of SAs, trust is regarded to be more effective than control. This is relatable to the missing central authority that can “dictate to the other what they will do” (Arnold, Benford, Hampton, & Sutton, 2014). Nevertheless, as trust is subjective and not controllable, it leaves an organization vulnerable and is critical in itself (Arnold et al., 2014; T. K. Das & Teng, 2001; Emsley & Kidon, 2007; Tomkins, 2001).
“a focus on control problems would induce researchers to look across the different streams that have thus far [been] developed independently” (Caglio & Ditillo, 2008: 891).
The research questions, motivated by Caglio & Ditillo (2008) are:
What control problems do firms face with strategic partners?
Which roles do trust and control have in order to solve control problems?
The thesis is structured into 5 chapters. Chapter 2 provides a review of relevant trust and control literature in the SA context to identify relevant concepts and literature gaps. The review starts with general criteria to categorize SAs and continues with notions of risk as well as interdependence, since these are associated with control problems. Subsequently, control problems are summarized that have been identified up to now. Trust and control literature in the SA context is critically reviewed. In order to do this, control models are shortly introduced and a definition of trust is provided. Based on an evaluation of trust and control models, a theoretical framework is developed. This will be used to inform the further investigation. Chapter 3 describes the chosen research design of case study research. Case selection criteria are outlined and selected cases are described. After that, the research approach is described in more detail. Chapter 4 presents the results of the case studies. In chapter 5 findings are discussed. The research questions of this study are answered and findings are re-integrated into literature.
The purpose of this study is to provide a deeper understanding of control problems in SAs. The identification of control problems helps to understand control needs of strategic alliances. Based on these fundamentals, the roles of trust and control to respond to control problems are analysed.
2 L
ITERATURE
R
EVIEW
In the following, literature on control problems and on the role of trust and control in SAs will be reviewed. Control problems may result from specific characteristics of SAs. Possible reasons to form strategic alliances, different equity forms, interdependencies between partners and underlying risks are considered. Subsequently, control problems are outlined that so far have been acknowledged. In order to study the role of trust and control in solving control problems, traditional control models are outlined and a definition of trust provided. Based on these fundamentals, models on trust and control in SAs are reviewed. The review informs the theoretical model of this study.
2.1 Strategic Alliances – Underlying Reasons & Types
Reasons for forming Strategic Alliances
Strategic alliances are formed for various reasons and different underlying motivations: In case of a highly competitive environment, SAs are formed to have a chance of surviving (Contractor & Lorange, 2002; Saxton, 1997). Another purpose of SAs is sharing resources and information to be able to enter new markets or to develop new products or processes (Anderson, Christ, Dekker, & Sedatole, 2014; Cavazos, 2013; Gulati, 1995; Varadarajan & Cunningham, 1995). Partners may also intend to increase efficiency and reduce risk through strategic alliances (Anderson et al., 2014). In fact, organizations enter SAs in order to achieve goals that are not realizable on their own (Anderson et al., 2014; Kumar, 2014). From that point of view, all partners involved within a SA aim to improve their situation. In other words, cooperation only makes sense, when all partners involved have the expectation to be better off as they were before. This view is guided by Luo, Shenkar & Gurnani, (2008). Based on Buckley & Casson (1988), they assume that cooperation is a pareto-improvement for partners such that “at least one of the parties is better off and neither is worse off than would otherwise be the case” (Luo et al., 2008, p. 429).
Strategic Alliance Types
Besides, equity involvement is regarded to have impact on the proximity of partners. If no equity is involved, partners are said to have a “greater interorganizational distance” (Contractor & Woodley, 2015, p. 539). Non-equity alliances are regarded to be more passive than equity alliances due to limited involvement of partners (Contractor & Woodley, 2015). The design of a SA has an impact on coordination requirements. The complexity of coordination increases when partners accomplish tasks across organizational boundaries (Gulati & Singh, 1998). The present study is to consider solely alliances that cooperate across organizational boundaries. In the following, joint ventures will be neglected, since they involve the establishment of a new entity.
Alliances are also differentiated in terms of how many partners are involved: e.g. one partner to many, one by one or many to many (1-n, 1-1 or n-m) (Caglio & Ditillo, 2008). Thus, it is important to define who is interacting with whom and if the focal company’s partners interact as well.
2.2 Interdependence
The construct of interdependencies to classify alliances is widespread in literature. Considering a simple organization, Thompson (1967) differentiates between pooled, sequential and reciprocal interdependencies between business units. Literature on SAs (e.g. Gulati & Singh, 1998; Dekker, 2004) draws on Thompson’s (1967) classification to differentiate between different levels of interdependence between partners.
In addition, the direction of cooperation, which can be either horizontal or vertical, is considered as an indicator for interdependence (Caglio & Ditillo, 2008; Smith, Carroll, & Ashford, 1995). A vertical link consists between a subordinate and a superior, while a horizontal link lies between organizations on the same level (Smith et al., 1995). The level of interdependence is said to be more apparent in vertical links. Horizontal links exist between competitors or complementors (Caglio & Ditillo, 2008).
2.3 Relational & Performance Risk
The subdivision of risk into relational and performance risk (Das & Teng, 2001; Das & Teng, 1996) has been widely acknowledged in literature on SAs (e.g. Anderson et al., 2014; Caglio & Ditillo, 2008; Kang et al., 2014; Langfield-Smith, 2008; Schreiner, Kale, & Corsten, 2015). While Schreiner, Kale & Corsten (2013) indicate a synonymous meaning of “‘relational and performance risk’” and “‘problems of cooperation…’ and … ‘coordination problems’”, in the following, it is argued that cooperation and coordination problems stem from (amongst others) relational and performance risk. Relational and performance risk will therefore be outlined as an antecedent to control problems.
The distinct types of risk are differentiated by their source of risk: Performance risk is relatable to market factors, such as the competitive environment, while relational risk emerges from the cooperative relationship. Performance risk in an alliance context concerns the accomplishment of alliance goals, supposed all partners are compliant with alliance commitments. While performance risk is faced by every organization, relational risk is unique to inter-firm commitments. Relational risk is interlinked with possibly contrasting strategies, motives and interests of partners. These introduce the risk of partners acting opportunistically (Kang et al., 2014; Park, Kim, & Kang, 2015). Consequently, each partner is at the jeopardy of partners, who disregard alliance arrangements and common goals (Das & Teng, 2001; Das & Teng, 1996). Benefits and risks therefore co-exist (Desarbo, Benedetto, & Song, 2005; Luo, 2008; Nakos & Brouthers, 2008) and make it necessary to control the risk. If both the perceived risk and benefits are high, risk is regarded of higher importance (Kang et al., 2014). As such, an evaluation of benefits and risks is necessary to assess a strategic alliance before entering it.
2.4 Control Problems
Figure 1: Control Problems (Caglio & Ditillo, 2008)
Due to fragmented authority structures and “physical, cognitive and cultural distance between partners” (Schreiner et al., 2013, p. 1400) as well as due to the absence of a pivotal authority, profit motives are resulting that are overlapping but not similar (Anderson et al., 2014; Williamson, 1991). The possibility of an accomplishment of individual goals at the expense of a partner is relatable to relational risk. Control problems result of this. The review of control problems is guided by Caglio & Ditillo (2008). They identify three forms of control problems that generally have been acknowledged in literature: Appropriation concerns, coordination requirements and cooperation problems. According to Dekker (2004), antecedents and resulting control problems determine social and formal controls used in SAs. Antecedents, such as interdependence and task uncertainty, determine the control problem “coordination requirements”. Asset specificity, environmental uncertainty and frequency establish appropriation concerns, which are related to opportunistic behaviour (Dekker, 2008).
when neither inputs nor outputs are measurable or observable. Cognitional complexity for example occurs when knowledge resources are involved (Caglio & Ditillo, 2008; Dekker, 2004).
The cooperation problem is relatable partners’ distance and separateness. The latter may lead to individual targets, which are not in line with the alliance objectives, and consequently require mechanisms to align them (Caglio & Ditillo, 2008; Schreiner et al., 2013). The literature stream on cooperation problems builds on transaction cost economics (TCE) and agency theory and deals with the risk that partners do not cooperate (Caglio & Ditillo, 2008, p. 891): “partners may have incentives to cheat and free-ride in order to attain their own specific goals at the expense of the objectives of the collective undertaking, so they need to introduce mechanisms to align their objectives” or as stated by Kumar (2014, p. 88): “The key challenge is to achieve strategic consensus, which implies a shared vision for the alliance”. Earlier, the cooperation problem was observed by Ouchi (1979) in a single organization context, where separate units did not cooperate. Besides, Ouchi (1979) dealt with appropriation concerns to some extent, when it is stated that “[W]hen a team of individuals collectively produces a single output, there develops the problem of how to distribute the rewards emanating from that output” (Ouchi, 1979, p. 833).
The alignment of goals creates task interdependences. In turn, these require coordination and thus are introducing the control problem of coordination (Caglio & Ditillo, 2008; Dekker, 2008). The complexity of coordination stems from the division and accomplishment of tasks across organizational boundaries. Thus, the coordination problem introduces the need of an inter-firm cooperation to define task and scope of their partnership. Uncertainty created by coordination tasks is to be differentiated from appropriation concerns, as the former is corresponding to the uncertainty of an increasing interdependence between partners (Gulati & Singh, 1998). If the interdependence between partners is extensive, coordination difficulties raise (Grandori, 1997; Thompson, 1967). For example the “joint application of complementary know-how” creates such difficulties (Grandori, 1997, p. 902).
2.5 Trust & Control in Strategic Alliances
2.5.1 Control
Studies on control problems in a single organizational context have been applied to strategic alliance studies. For example, the conceptual framework for the design of organizational control mechanisms by Ouchi (1979) deals with cooperation problems and appropriation concerns – both of which are labelled as problems of evaluation and control. Although Ouchi (1979) investigated single organization context, findings have also been applied to strategic alliance studies (e.g. Das & Teng, 1996; Dekker & Van den Abbeele, 2010; Dekker, 2004; Langfield-Smith, 2008; Smith et al., 1995). Ouchi (1979) differentiates between three mechanisms to deal with control problems: Markets, hierarchies and clans. As markets have the advantage of a high measurability of individual contributions, individuals can be adequately rewarded. In bureaucracies, control mechanisms are applied that are a mixture of monitoring and a socialization process. Clans are completely reliant on socialization processes to establish goal congruence. Besides, control types are matched with forms of commitment, subdivided into internalization, identification or compliance. Internalization is allocated to market, identification to clan and compliance to bureaucracy. The control mechanisms that are suitable for a particular organization are determined based on the ability to measure outputs as well as by the knowledge of the transformation process. Behaviour control or output control can be used when both are high. When only one of the preconditions is high, either or can be used. In case the measurability of outputs is low and the knowledge of the transformation process is imperfect, clan control is assumed to be suitable.
However, SAs are to be allocated to the category of hybrids, as Borys & Jemison (1989) did. They define hybrids as using governance forms of more than one entity, which is associated with an increased complexity of control. For SAs the complexity is to define where the hybrid begins and where the boundary of sharing resources and obligations is to be located. In this context they mention “[b]oundary permeability” which means that companies need to define which parts do have to flow through the boundary and what needs to stay in the organization. It has to be defined which resources are accessible to the hybrid and which are not. This complexity of SAs emphasizes the importance of control (Borys & Jemison, 1989).
transaction cost minimization and elimination of opportunistic behaviour. TCE lacks the dynamic component of SAs. Thus, it is called for taking into account the social context of SAs (Dekker, 2004). Due to uncertain or complex possible future states plus the bounded rationality, Ouchi (1980) questions the ability of contracts to fully cover future transactions and future obligations. “Contingent claim contracting” is impossible (Ouchi, 1980) as a complete specification is unrealistic. The alternative is to leave contracts incomplete, leaving partners vulnerable and therefore “will succeed only if each party can trust the other to interpret the uncertain future in a manner that is acceptable to him. Thus, given uncertainty, bounded rationality, and opportunism, contingent claim contracting will fail” (Ouchi, 1980, p. 133).
2.5.2 Trust
In the following, Mayer, Davis, & Schoorman's (1995) definition of trust is applied:
Trust is “the willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective to the ability to monitor or control that other party” (Mayer et al., 1995, p. 712). “Trust is not taking risk per se, but rather it is the willingness to take risk” (Mayer et al., 1995, p. 712).
Trust needs to be differentiated from similar concepts such as cooperation. Neither is cooperation necessarily interlinked with risk, nor trust is a precondition for cooperation to occur. Consequently, these constructs need to be treated separately (Mayer et al., 1995). This also applies to confidence and predictability, which have both been treated synonymously with trust in literature, but are to be differentiated from trust (Mayer et al., 1995). In their proposed model of trust (Mayer et al., 1995), the antecedents of trust are “factors of perceived trustworthiness”, which are ability, benevolence and integrity. Those factors influence trust. Trust determines the risk propensity with the moderating effect of “perceived risk”.
2.5.3 Models of Trust & Control in Strategic Alliances
before, is based on opportunistic behaviour. According to Das & Teng (2001), trust reduces perceived risk. Control, in contrast to trust, affects the behaviour of the partner as it is a more “proactive and interventionist approach” (Das & Teng, 2001, p. 254). Together and in interaction, trust and control determine one’s perception of risk. Control mechanisms are differentiated between behaviour, output and social control. Although they clarify that they refer to subjective risk as trust is a state of mind and therefore cannot take actions or influence actual risk, the direct link between trust and perceived risk remains questionable in the background of the definition of trust given by Mayer et al. (1995), where perceived risk is the moderating variable between trust and the willingness to take risk.
Another framework, where trust and risk are regarded to be interlinked, was created by Langfield-Smith (2008). Combining TCE with trust and risk literature, a model is developed that describes influences on the management control package of SAs. Transactional characteristics, guided by Williamson (1991), are separated into asset specificity, behavioural uncertainty, environmental uncertainty and transaction frequency. The initial perceptions of risk determine the management control package. The management control package involves the governance structure, control mechanisms and “processes that lead to the development of trust and mitigation of risk” (Langfield-Smith, 2008, p. 347). The initial perception of risk is affected by perceived trust as well as by transactional characteristics. More specifically, Langfield-Smith (2008) connect goodwill trust to relational risk and competence trust to performance risk. Due to the assumption that the management control package is solely determined by risk, the model misses other purposes of control than that of safeguarding against risks.
assumes that trust needs control and control needs trust to be efficient (T K Das & Teng, 1998; Dekker, 2008). An interactive approach accounts for the dynamics between trust and control by taking into account the mutual influencing (Vosselman & Meer-Kooistra, 2009).
In Monczka et al.’s (1998) supplier alliance research model, which they adapted from Mohr & Spekman (1994), they assume that the success of an alliance is influenced by, among others, alliance attributes, which are subdivided into commitment, trust & coordination and interdependence. Furthermore, communication behaviour, conflict resolution techniques and the selection process of partners influence the success. With their model, they aim to investigate each variable that is relevant for alliance success. Another model where alliance success is considered, is by Kang et al. (2014). It describes the connection between benefits/risk perception, behavioural direction and alliance outcome. The behavioural direction can be active or protective, dependent on the perceived benefits and risks. The alliance outcome is either commitment to or dissolution of the relationship and therefore represents the variable of alliance success. In the following, it is argued that the behavioural direction is a relevant variable in terms of choosing control mechanisms, with a higher reliance on these mechanisms in a protective state than in the active state. Callahan & MacKenzie (1999) do also consider strategic alliance success. For that purpose they incorporate the dynamic environment and the changing aspects of SAs to account for the back and forth of a strategic partnership: points where SAs are evaluated concerning the success and the possibility to adapt control choices that have been made previously (Callahan & MacKenzie, 1999). Thus, alliance outcomes as described by Kang et al. (2014) are not necessarily positive or negative, but may include an adaption in the negative state.
specificity, environmental uncertainty and frequency are responsible for appropriation concerns. How to control for those problems is moderated by trust. The choice of formal control mechanisms is influenced by control problems. This influence is moderated by trust as well as by social control of partner selection. Partner selection as a social control is also influenced by capability trust and goodwill trust. Formal control is subdivided into behaviour control and output control. The assumption of his model is that the partner selection process may decrease the need for formal control. In his case study he finds that in addition to appropriation concerns, coordination requirements and social context influence alliances’ formal control structure. In a later study, Dekker (2008) treats control problems (appropriation concerns, coordination requirements and dependence) as an influence on the extensiveness of governance and the selection effort. Both relationships are moderated by partner experience.
Based on previous frameworks, the theoretical framework for this study has been developed. The framework treats trust as the willingness to take risk and agrees with Vosselman & van der Meer-Kooistra (2009, p. 269) that the “[p]ositive expectations about the ability, the benevolence and the integrity of the other party form the input of such a willingness, whereas risk taking in the relationship is the outcome of this willingness”. Influential factors on control problems, control problems itself and control mechanisms are under consideration. Control problems determine the purpose of control. The solution to control problems is determined by trust as well as by perceived risk.
3 M
ETHODOLOGY
Although the role of trust and control has been widely acknowledged in literature, the connection between control problems and control solutions, mediated by trust, remains rather unexplored in other strategic alliance contexts than partnerships with vertical interdependencies. It is aimed to understand the purpose of control based on underlying control problems. A complementing versus competing relationship of
horizontal strategic alliance partners is considered.
3.1 Case Selection
Along with Eisenhardt (1989), the case study approach is chosen to build theory as this study intends to better understand the interrelation between influences on control problems, control problems, control and trust. Motivated by Caglio & Ditillo (2008) a bottom up approach is chosen to identify and understand the control problems first, before the role of trust and control in those solutions is analysed. Taking this approach, there is a chance to add to the previously identified control problems, based on which control solutions can be suggested. Therefore, this bottom-up approach is to facilitate out of the box thinking, and theory development.
Yin (2003) suggests case study research as a strategy when posing a research question that is exploratory in nature.As proposed by Glaser & Strauss (1967)) for case studies with the purpose of developing theory, theoretical sampling is chosen. SAs are selected that perform interdependent tasks within a complementing-competition relationship.
The holding context raised an additional research question:
How does the ownership structure affect trust and control in solving control problems?
Figure 3: Simplified illustration of strategic alliances formed within a group or without belonging to a group
3.2 Case Description
CC1
In the following, the predominant case CC1 will be outlined in detail.
Figure 4: CC1 Overview
Since 2013 GH owns CC1. CC1 has strategically been relocated within GH at the beginning of 2015 as a reaction to their inability to get a foothold in their previous alliance. After CC1 obtained a decline in sales of over 20% in 2013 and negative financial results in 2013 and 2014, a change process was initiated. The financial reports of 2013 and 2014 point out limited growth opportunities in Germany and the consequential focus on international markets for the future. The SA they belong to now is present in more than 80 countries with about 100 offices and employs more than 8000 people. In 2006, CC1 entered a minority equity alliance and owns 30% of that company. Alliance partners outside GH are differentiated in terms of ownership. Since GH is no authority to CC1’s strategic partners outside the holding, the control situation differentiates from their SA within GH.
The case company classifies as a creative company. Creative organizations are characterized by dealing “in symbolic goods […] whose value is contained not in physical properties or even intangible qualities but in symbolic meanings– ideas, images, emotions and experiences” (Bilton, 2007, p. 138). CC1 offers digital, design as well as brand strategy services to clients. The development of shared creative services increases the complexity of coordination across organizational boundaries. Creative processes cannot be standardized neither are they observable. The presented case gives insights into strategic partnerships of firms that are operating at the same level.
GH (2013) Holding (2001) (Group 1) Group 2 (2015) CC1 100% German Office 1 German Office 2 Chinese Office
35% Minority Owned Subsidiary 100%
Swiss Office 1
Swiss Office 2
CC2
Figure 5: CC2 Overview
Before GH acquired CC2 in 2014, CC2 was owner-operated. CC2 is headquartered in Cape Town and has three more offices in South Africa. The acquisition of CC2 by GH was executed through a main subsidiary of GH. The acquisition process that CC2 underwent differentiates from CC1. CC2 has been the primary focus of acquisition for the reason of providing the African footprint for the alliance they are now belonging to. CC2 is employing more than 100 people at four offices in Africa. The SA they are allocated to within the holding is employing about 7000 people and operates through more than 40 offices in about 30 countries. Currently, CC2 is in the process of establishing relationships with partners.
CC3
Figure 6: CC3 Overview
CC3 belongs to GH since the beginning of 2015. The company was founded in 2009 and was owner-operated until the acquisition in 2015. Similar to CC2, CC3 was the focus of acquisition with the intention to establish an African footprint. All three CCs now belong to different alliances (main subsidiaries) within GH.
CC3 is located in Cape Town, South Africa. The group that CC3 is allocated to has more than 100 offices in about 30 countries and employs more than 3000 people. CC3 itself employs about 50 consultants. CC3 has locations within South Africa and is the only alliance member in South Africa (group 3).
Before CC3 became part of GH, they cooperated with other independent agencies on a project basis. For the purpose of having an established repertoire of partners as well as for the reason of benefitting from the logic of referring to each other and recommending services, they formed their own network.
3.3 Data Collection
To find out about the specific control problems the company faces in coordinating and controlling its strategic partnerships, interviews with decision makers of the case companies will be conducted. Within observation and document analysis, key positions are identified as is in line with Eisenhardt (1989). These
GH (2014) Group 1 CC2
key positions are decision makers (top management) as they decide to establish and how to manage SAs. Additional data are annual reports of CC1, participation at collaborative events at CC1 as well as access to collaborative interaction and joint pitch preparation (for CC2 and CC3, annual reports were not provided). After and while data is collected through interviews, data is analysed and coded as is framed under the label “within-case analysis” (Eisenhardt, 1989). Within-case analysis helps dealing with the analysis process at an early stage and “to become intimately familiar with each case as a stand-alone entity” (Eisenhardt, 1989).
To ensure the quality of this study, controllability, reliability and validity are taken into account. Controllability is the prerequisite of validity and reliability (van Aken et al., 2012). To ensure controllability, memos about the research will be noted as suggested by Strauss & Corbin (1994). Besides, instruments of observation, document analysis and interviews are used and different respondents’ perspectives are incorporated (van Aken et al., 2012). Data was collected through semi-structured interviews with relevant decision makers of CC1 as well as with one representative of CC2 and CC3. Since each of the provided cases belongs to a different alliance within GH they reflect different perspectives.
The theoretical framework, which was developed based on a literature review, informs data collection and facilitates the finding of patterns in interview transcripts by providing a set of categories.
Transcripts of interviews conducted in English and summaries of interviews conducted in German are provided in the Appendix.
Respondent Function Case Date & Time
Location Language Duration Medium
Interviewee 1 CEO since 2010, Management Board since 2003
CC1 15/10/23
9:15 am
Office of the CEO
German 51 min Recorded
and transcribed Interviewee 2 Head of Business Development
& Client Management since 2007, Part of the Management Board CC1 15/10/29 11 am Meeting Room, Video telephony via Fuze
German 61 min Recorded
and transcribed
Interviewee 3 Senior Business Development Manager
CC1 15/11/10
12:30 pm
Meeting Room German 99 min Recorded
and transcribed Interviewee 4 Head of Strategy since 2013, Part
of the Management Board
CC1 15/11/10
14:30 pm
Office of the
Head of
Strategy
German 58 min Recorded
and transcribed Interviewee 5 Head of International Operations
since 2015, Part of the Management Board, 8 more years of experience in different positions at CC1, e.g. built up the Chinese Office and has been the Managing Director there
CC1 15/11/13
11 am
Meeting Room English 54 min Recorded
and transcribed
Interviewee 6 Director Business Development since 2015, Strategic Alliance experience from previous agencies
CC1 15/11/19
3 pm
Video telephony
German 83 min Recorded
and transcribed
Interviewee 7 Client Service Director CC2 15/11/26
1 pm
Meeting Room at CC2, Cape Town
English 38 min Recorded
and transcribed Interviewee 8 Director CC3 15/12/10 11 am Meeting Room at CC3, Cape Town
English 43 min Recorded
and transcribed
4 R
ESULTS
Results are outlined according to the underlying framework provided in the literature review. The results chapter is structured from the general to the specific. Hence, to facilitate the explanation and understanding of control problems, types of SAs are described as well as the way of interaction is considered. In the next step, the degree of interdependence is evaluated and specified. Subsequently, control problems of the cases are discussed. The role of trust and control in solving control problems is analysed by considering benefits and risk perception of interviewees as well as their perceived need to control partners.
Whilst studying control problems, the importance of the ownership structure was apparent. Being a member of a network by ownership predetermines partner selection as well as control solutions. Therefore, the context of alliances is considered.
4.1 Contextual Variables and Influential Factors on Control Problems
Alliance Classification
The investigated case companies maintain or strive for SAs with individual members of their alliance. These alliances are based on GH’s ownership. They are allowed choose members from their groups. For CC2 and CC3 these are the only partnerships since they are part of GH. CC2 as well as CC3 maintained individual networks that grew based on experience and constituted companies they had already worked with and with whom they wanted to stay in touch for further projects. However, these contacts in their network were not manifested by contracts. Neither was equity involved. Previously maintained partnerships and networks without equity involvement have successively been replaced with partners that are a member of GH, unless previous partners belong to GH.
In addition to being owned by GH and the intention to establish alliances within the group frame, CC1
owns subsidiaries as well as alliance partners to a minority, classified as minority equity alliances
group. This is in line with the corporate aim to grow its own businesses within GH. From CC1’s perspective it is important to position itself.
Interviewee 3: “You always weigh up individual interests with [GH] interests, again and again.”
CC1’s SA partners outside GH are not necessarily interlinked. CC1 is the focal point among these strategic partners. In comparison, CC1’s strategic alliance within GH offers multiple possibilities of partnerships. Experience is shared on a platform accessible for every partner and interaction formats are set up that concern every group member. Individual coalitions are entered project-wise.
The alliances under consideration are equity and contractual alliances. In case an entity A (100% owned by GH) and entity B (100% owned by GH) operate at the same level within the group, they enter
contractual alliances under the umbrella of GH. Partners establish contractual alliances, where one
alliance partner does not own the other.
Cooperation within CC1’s SAs (GH group cooperations as well as with their minority owned alliances) involves the joint bidding for jobs, continuous exchange of queries, exchange of personnel for a specific project, the sharing as well as transfer of knowledge. In addition, partners are sub-contracted for projects. CC2 and CC3 refer to the joint bidding for jobs, knowledge sharing as well as the logic of referring to each other as the main advantages of SAs. CC2 as well as CC3 draw on partnerships in case they do not cover requested services with their own portfolio. The diversity of local specifics in the African context requires them to consult agencies with local knowledge in regions where campaigns are to be launched.
Sharing knowledge and thus learning from each other helps agencies to develop themselves further and to
meet client’s needs. For that purpose, strategic alliances gather cases and lessons learnt from all partners. This pool is accessible to each member of an alliance. The main purpose of SAs is to increase the offered service portfolio by complementing portfolios of partners. This enables the participation in tenders that one partner cannot accomplish by its own efforts. In addition, CC1 aims to tap into new markets. The partner’s infrastructure as well as their local knowledge is mentioned as main advantages of partnerships. The latter seems to have an increased relevance in the South African context. Interviewees highlight diverging cultures, specific local needs as well as language complexity in Africa.
Interdependence
interdependencies emerge. Sequentially, partners are dependent on work of a partner that serves as an input and reciprocal in terms of both partners’ mutual dependence on input from the each other. Sequential as well as reciprocal interdependencies occur within the scope of projects. Even if partnerships are formed for the long-term, joint work comes about on the basis of projects. As a consequence, partnerships have to be initiated continually and maintained in the meantime by regular interaction formats that serve to keep each other updated.
The multi-layered construct of CC1 introduces a decision-making interdependence as well as an interdependence related to the balancing, analysing and weighing-up of interests. Especially CC1 is situated in a construct of possible conflicts of interests. Due to ownership, firms have to comply with GH’s interests. The ownership by GH predetermines the pool of partners an entity can choose from. When an entity maintains alliances outside GH as CC1 does, GH quickly questions the alliance in case it does not provide positive results.
Interviewee 5: “…to my mind, the ownership is what really determines how an organization works or responds or reacts in a situation.”
Interviewee 3: “You need to take into account the ownership situation of each entity that you cooperate with to understand each partner’s interest.”
4.2 Control Problems
The case companies face control problems that are related to overlapping service portfolios. A cooperation-competition conflict results. This could lead to cooperation problems. Besides, due to interdependent tasks (on a project basis) alliances require interaction and coordination, introducing coordination problems. Cooperation problems in a different sense than described in the literature review occur labelled as internal cooperation problems. Internal cooperation problems result from a lack of motivation at the operational level to invest in additional efforts. Internal cooperation problems are thus related to the anticipated control problem of coordination.
Cooperation-Competition Conflict
Interviewees acknowledge the relational risk of an over-take of clients as well as of personnel by an alliance partner. It occurs in the course of joint projects where partner A has introduced partner B as a co-supplier for a complementing service.
Although the alliances under consideration are formed in order to provide complementing services to clients, partners’ service portfolios are overlapping. For this reasons, partners may try to maximize their own share of a project and of joint clients. This results from simultaneous cooperation and competition and could hinder cooperation, leading to a protective state described in the literature review where capabilities remain unused.
Interviewee 1: “Sometimes the main service provider doesn’t want the partner to have contact to the client due to the fear of losing business to the partner.”
Interviewees refer to people as the core of their business and stress that their business is not based on technology, but knowledgeable and talented people. The similarity of the partners in terms of specialization is also reflected in comparable personnel needs, which introduce the risk of losing staff to a partner.
Interviewee 5: “That’s a big risk because people mean knowledge. People mean talent, expertise, our business is completely dependent on our expertise, on our people.”
The described concerns are relatable to the control problem of cooperation since they are related to opportunistic and unobservable behaviour.
Internal Cooperation Problem & Coordination Problem
The formation of SAs is decided and executed by the management board of involved parties. Collaboration is delegated top down by the management board to Operational Managers (OM). Difficulties are anticipated concerning the implementation of the initial idea and motivation of collaboration at the operational level. Although the benefits of a partnership are visible at a top management level, they might not be to OMs, who are responsible to initiate partnerships. Interviewees describe situations where the partnership makes sense and is promising from a superior perspective, but may fail due to limited motivation or a defensive attitude at the operational level. This causes situations where “Strategic alliances are envisaged, but are in action more seldom than what is aimed” (Interviewee 4).
Interviewee 1: “The quality of a partnership is determined by employees at the operational level and their willingness to push cooperation forward.”
Interviewee 2: “In the end alliances sometimes fail due to irrelevant issues an employee of partner A has with an employee of partner B.”
performance based on the generated revenues, but sets qualitative goals for collaboration. Yet, the latter causes a negative impact on performance in the set-up phase due to initial expenditures.
Internal cooperation and coordination problems are interlinked since the initial effort necessary to coordinate interdependent tasks might inhibit the motivation to cooperate.
Interviewee 8: “It’s always much harder in the beginning, when you don’t know them.” Interviewee 3: “A return on investment is only achieved later on.”
Interviewee 6: “So it happens that you have a huge network, but nobody is working with each other, because most agencies avoid the additional effort needed.”
Since alliances are formed with the purpose of offering complementing services, they require the interaction of partners to go beyond the carrying out of each partners’ own business. Due to cooperation (external and internal) and coordination problems, minimal interaction between partners may result. A pure compilation of services, without reconciling them, causes imperfect solutions. At CC1, interviewees report situations where they had worked with an alliance partner, but failed when they submitted the proposal on their own.
Interviewee 3:“It was doomed to failure because we were not able to present it to the client confidentially. It would have been different if we had presented together at the client site.”
4.3 The Role of Trust and Control
In the following, the roles of trust and control in terms of solving control problems is discussed. At first, partner selection as means of minimizing control problems is discussed. Interviewees of the management board lead the analysis of partner selection since they are initiators of partnerships. Subsequently, control instruments applied to strategic alliances are under consideration and will be related to trust accordingly.
Partner Selection
The independent initiation of partnerships for other reasons than rules and ownership, but because of being convinced of the value of working together, is regarded to create more commitment as well as that it motivates the involved partners. Conscious and voluntary decision making in favour of a certain partnership is therefore considered as a promising starting point for SAs.
Interviewee 2: “Independent alliances function much better than when they are dictated.”
Careful partner selection is a way to cope with conceivable issues. To prevent those and to set the precondition for cooperation on the long-term, a partner is selected that offers a complementing portfolio as well as thinks the same way. Besides, reputation and friendliness are relevant.
Interviewee 2: “If you have consensus at the meta level where rules are set, then you are able to overcome bumpy paths for the reason that you think the same way or you see the world from the same perspective.”
This counts for self-established partnerships, irrespective of GH, as well as it counts for the allocation among the different groups GH. In the context of GH, individual partners are selected from the alliance an entity is allocated to. The relocation within GH, which was triggered by CC1’s management board, demonstrates the importance of fit. The background of CC1’s belonging to GH by heritage had an effect on their allocation within the holding. Individual integration of CC1 by evaluating the fit did not take place and CC1 remained part of the acquired group irrespective of an optimized fit between group and entity. In comparison, CC2 and CC3 decided themselves and independently in favour of an ownership by GH. They differentiate from CC1 since they actively decided to become part of GH while CC1 became part passively. As a consequence, the interaction of CC1 and members of their first alliance at GH were rare.
In the beginning of 2015, CC1 was allocated to another network that also belongs to a different division within the holding. The management board of CC1 requested the relocation itself. Through the selection of a complementing partner, it is aimed to make the most of their group belonging in order to facilitate the attainment of strategic goals. Interviewees emphasize the importance of fit, of an intrinsic motivation, belief and consensus as well as of complementing factors.
Interviewee 1: Within this framework you certainly search for a partner that supports your interests and your development.”
Interviewee 3: “We are able to build better alliances [with the new group]”
Interviewee 1:“We have driven this step […] to have an ideal partner [the group belonging within GH] at our side to form ideal strategic alliances, where the partner is complementing our capabilities ”
The partner selection therefore aims to limit foreseeable control problems of cooperation by setting the course for cooperation. The quality of partner selection increases with an intrinsic motivation by
persuasion (Interviewee 2). The relocation within GH is reflected as positive and promising for the reason
Interviewee 2: “If you have options and you consciously decide on an alliance or collaboration – then it’s already a good starting point”
Interviewee 1: “We thought that the [new group within GH] is the better strategic partner compared to [our previous arrangements within GH]”
Profound partner selection can reduce the likelihood of control problems as well as setting the preconditions for trust to be in place, since the antecedents discussed in the literature review of partner’s benevolence, integrity as well as ability are considered. Therefore, partners enter a partnership with the expectation to have a trustworthy partner. The conscious decision and the willingness to cooperate might increase the motivation due to the voluntariness. Both market characteristics and partner’s attributes should be taken into account when selecting a partner. Thus, whether the partners fit and how they could interact is discussed beforehand. This interpretation of the role of partner selection in reducing control problems is guided by interviewees who emphasized the importance of finding a partner that thinks the same way, that has a good portfolio and with whom one can cope with market challenges.
Formal Control
With their belonging to GH, they are part of the detailed risk and control system of GH that, among others, involves monthly reporting of accounting variances concerning the balance sheet and statement of income. It further includes annual budget compilation, which is to be updated four times a year, a detailed, monthly analysis of the trade working capital, a weekly sales forecast for all projects of all clients for the following months as well as weekly/monthly meetings of middle management to discuss current topics and decisions. GH therefore introduces an additional instance to alliances within GH that controls both partners.
Asking for formal control mechanisms applied to SAs, interviewees refer to contracts. They emphasize the need to define contracts at the beginning of a partnership to eliminate obstacles of undefined circumstances. Contracts are meant to create the preconditions for cooperative interaction of partners. Framework contracts serve as a basis for ensuring the secure handling of data and intellectual property. Contracts facilitate joint projects and reduce transaction costs for recurring issues that for example concern daily rates for personnel, the commission for establishing a contact between a client and a partner and for forwarding queries.
Interviewee 1: “You need to make sure that your and your clients’ intellectual property is treated confidentially.”
settlement of prices and costs for personal that are engaged in projects. It defines qualitative standards as well as interfaces between partners and the basic requirements for joint projects.” Interviewee 4: “We define the basic parameters together.”
As SAs offer individualized services to each client, they need adapted and individualized adjustments that might not be conform to their cooperation agreement. In addition to formal control mechanisms, established either by GH or on an individual basis, project-specific arrangements are defined separately. Each project requires an individual consideration and negotiation towards project scope, task division as well as an agreement on how partners are going to arrange the contact to the client. A standardization of project parameters is not possible as conditions vary. Partners have to decide whether all partners are visible to the client. For the purpose of improved coordination, interviewees emphasize the necessity to appoint one responsible agency for the project. Most of the time the responsible agency provides one single point of contact to the client to reduce the complexity and to simply communication with the client. Hence, negotiations on a project basis serve to define the scope, decide for a responsible party as well as to define the process and therefore facilitate the coordination of a project.
Interviewee 6: “You set clear criteria framing the partnership to be able to orient”
GH provides a standardized code of conduct that regulates alliances. In comparison to individual framework contracts that CC1 has with its long-term partners outside GH, GH’s code of conduct is more detailed, perceived to overregulate partnerships.
Interviewee 1: “If you consider our long-term partnerships, we have a manual. Especially [GH] has a code of conduct that precisely defines how you have to behave as well as it sets the framework for every activity that is carried out within the scope of cooperation.”
In spite of the safeguarding purpose of management control by GH, GH is criticized to “not provide
guidance” (Interviewee 4) to attain financial goals that are set by GH. However, the frame of GH is also
regarded to give structure and helps to find trustworthy partners.
Interviewee 7: “I think it gives us a little bit more structure and it gives us some more specific starting points, who to work with and it gives credibility with our clients that we can say, we are part of this bigger group.”
are designed parsimonious to guarantee that the “partner should be free in how he accomplishes the
targeted aim as long as we do accomplish it” (Interviewee 4).
Interviewee 4: “You need enough freedom for improvisation. It would not work out differently since you cannot anticipate the future.”
Interviewee 1:“If we cooperate with [of the alliance within GH] we partly agree on individual solutions that deviate from [GH’s] code of conduct since we need flexibility to conduct business, otherwise your hands are bound” “As a matter of fact, you lack flexibility. Such, as soon as you enter a relationship that goes beyond the simple belonging to a group, but concerns cooperation, you need to dig deeper into the individual realities than the standardized rule book [by GH] does.”
Although “contracts create the important basis for strategic alliances” (Interviewee 2) they are designed incomplete to remain flexible. Contracts are designed to coordinate tasks and safeguard partners and include the option to dissolve the relationship.
Behaviour control of partners is neither desired nor possible. Behaviour is not observable due to cognitional complexity. Since partnerships are passive until they are activated by the initiation of a project, they introduce the possibility to evaluate the partnership after the completion of each project in order improve as well as to dissolve the partnership.
Interviewee 7: “I think where we had experiences with companies that did not deliver, we would just not use them again. We would find somebody else.”
Interaction Formats & Communication Culture
Besides the contractual situation and the way the interaction with a client is designed, partners set up interaction formats on a regular basis. In addition, interviewees emphasize the importance of informal interaction. Issues should be discussed when they occur. An open and transparent exchange of information that is relevant for the partnership is expected.
Interviewee 2: “Create an informal environment where problems, challenges and threads are addressed as early as possible” “Two formats are possible to discuss all matters of the partnership, the formal jour fixe and an informal get together. The latter is much more worthwhile since no one is pilloried officially.”
Interviewee 4: “Please inform me if something is not going to work out. Then it’s okay, because you have commitment.”
Interviewee 6: “I expect transparency in all aspects relevant to the partnership. That is what I understand cooperation to be.”
facilitate learning that can be brought forward to upcoming projects. Getting an idea of the big picture of the alliance facilitates sense making and helps managers to anticipate required actions.
Regular meetings also serve to make sense of situations.
Interviewee 5: “There is a sense of not always reacting based on the last months’ numbers, or not always reacting based on what happened in the last months. And if you can keep a healthy balance between not waiting for too long to make a company or corporate decision, and not jumping too quickly and responding or panicking, then I think you have excellent prospects for long- term growth.”
Interviewee 1: “If one issues or positive aspects, it’s necessary to get together with the partner to transfer learning for the up-coming projects. If you haven’t had interaction with the partner, you will notice. If you haven’t had interaction to get a superior view on the alliance, you will get issues and imbalance at the operational level.”
Interviewee 7: “Almost the key thing when I think about control is that you have regular and on going communication.”
Regular interaction serves to inform each other as well as to update the business plan in order to create preconditions for transparency. Interviewees perceive it as important to prevent situations where one is faced with unexpressed expectations.
Interviewee 4: “It’s a huge problem if you are confronted with unexpressed expectations. This causes frustrations as well as that partners diverge from each other”
In addition to regular formal meetings, informal interaction is regarded to be sufficient, on a day-to-day basis with informal feedback.
SAs are dependent on OMs and employees to initiate collaborative projects and to coordinate projects across organizational boundaries. It is regarded to be crucial to prove and guide manager’s actions towards collaboration to overcome problems of cooperation. The leadership board needs to provide guidance to OMs and employees to facilitate strategic cooperation. Leadership support is expected in the course of establishing SAs. SAs within GH are multi-entity conventions. In this complex construct it is emphasized to understand the benefits of partners and to get an overview of each partners’ abilities. The leadership of alliances should provide guidance to employees to penetrate the complexity of alliances. For employees at the operational level it is crucial that leadership communicates the purpose of SAs and show how each employee’s contribution fits in with the organizational aim.
Interviewee 5: “There also needs to be a reason that you feel you are contributing to larger purpose.”
Interviewee 7: “they help prioritize how it fits into all the other work that the other agency’s doing and they also say that it is important, then people give more time to help”
Trust
CC1 aims to signalize trust as well as commitment to start up SAs within GH. It appears that before a framework contract between partners is set up, a strategic initiation takes place.
Hence, in terms of trust, an emphasis is put on trust building when CC1 signalizes the willingness to work cooperatively by contributing to the partnership without (directly) demanding an equal return. The emphasis on commitment as well as on the importance of voluntary contributing to a partnership is meant to stimulate an alliance. Interviewees emphasize the voluntariness of long-term partnerships and the fact that both partners profit from a partnership. At the starting phase of a strategic alliance (which is the case for CC1 and members of their new group within GH), CC1 aims to position itself within the network and make itself indispensible. Such, there is a trust logic to stimulate and motivate the partner’s willingness to work together.
Interviewee 1: “What we’ve experienced is that if you open up to your partner, the partner will do the same.”
Interviewee 3: “If you unselfishly offer support to your partner, without knowing if you will get something in return, and you maybe do it a second and third time, then something will come back. Regular jour fixes are important to keep each other updated as well as to signalize the willingness to share knowledge.”
Interviewee 2: “Supporting each other unreservedly is much more important than having a control system in place that requires me to prove that someone hasn’t contributed to a collective idea.” “You have to establish a confidence base that ensures that it’s okay to talk about problems without fearing that the other will strategically take advantage our of this situation.”
However, after the set-up phase of an alliance, control instruments need to be in place in order to react to control problems. The initiative efforts in trust building are meant as a foundation, but have to be complemented by control. In solving internal cooperation problems, leadership becomes an essential role to create commitment to the partnerships at the operational level. Interviewees anticipate the need to give on-going guidance to OMs. This is the condition to overcome motivational problems at the operational level. The leadership board of both firms need to motivate the initiation of alliance projects to overcome the initiative issues. The experience with partners helps to reduce coordination efforts. Besides, by becoming experienced with each other, antecedents of trust can be fulfilled by knowing the partner and believing in the partner’s ability. Thus, internal cooperation problems can be solved by experience.
Interviewee 7: “the more work with another company, the more you understand how they work and the better you can work with them.”
In terms of the selection of a partner, variables of trust are considered. It seems that finding a trustworthy partner is as important as the business fit. Interviewees describe that their situation of belonging to GH helps them to find trustworthy partners, since they expect that their service be of high quality. In addition, interviewees have confidence that the network will stay the same. The control system by GH seems to influence trust that partners have in members of their network due to the selection process that GH applies to members of the network.
Interviewee 7: “That’s maybe where it’s nice to be part of a network, because you expect that the network will stay the same … and that the partner won’t suddenly disappear.”
Interviewees relate trust to experience they have gained with partners. They trust that risky situation can be handled and solutions will be found together. As such, trust is increased through positive experience.
Interviewee 1: “even if something is going wrong, you will find a way in an experienced partnership how you cope with the situation”
Interviewee 5: “These alliances, partnerships are also very cyclical, some days are good, and some days are not so good. And you have to find a way to accept both. Otherwise it’s very short-term.” “I think it really helps to have that long-term perspective.”
Interviewee 6: “when you come together to achieve a common purpose, trust is absolutely essential, especially for the reason that don’t produce anything. What we do is dependent on people, on their competencies and know-how”
Trust and control complement each other in a sense that one can trust the partner to behave in the sense of the relationship, but will ask for results at the same time.
Interviewee 5: “willing to listen or provide this guidance […] it is really dependent on trust. And trust works in both directions, you know, in order for me to win the trust of my boss, I’ve got to demonstrate that I am competent, capable, willing, and you know, just being a team player.” Interviewee 5: “And then, on the other hand, a person can give you the trust, can accord you the trust, but it doesn’t mean that you take it and do actually something positive with it.”
5 D
ISCUSSION
The first research question concerned the type of control problems that are faced by strategic alliances. This research question was posed following Caglio & Ditillo’s (2008) call for bottom-up studies to enable the subsequent integration of findings into literature. Cooperation and coordination problems were identified. Cooperation problems are relatable to similarities between alliance partners. These similarities are reflected in overlapping service portfolios and introduce the attractiveness for partners to become the main provider for a client – in fact a typical competition situation. Cooperation problems therefore stem from partners’ competition-cooperation-conflict. Coordination problems arise from the accomplishment of interdependent tasks. The coordination and improvement of interdependent services de facto is the added value that alliance partners offer to their client. However, it is this coordination that causes difficulties for partners. In addition to cooperation and coordination problems, internal cooperation problems were identified. Internal cooperation problems are relatable to coordination requirements of strategic alliances. OMs are sceptical towards cooperation due to the additional effort that is required to coordinate inter-organizational task accomplishment. This scepticism is increased when OMs are of the opinion to be able to provide services themselves (service portfolio overlap). Additional efforts will reduce their turnover in the short term. When their performance is measured based on turnover, the internal control system could cause an aversion to collaboration. Appropriation concerns could not be identified in the present case. The internal cooperation problem concerns the impracticalness of strategic partnerships if resources=employees are not dedicated to the partnership. In line with Amaldoss & Staelin (2010), this suggests that partners have to “fully commit the needed resources for the alliance” to realize alliance goals. This implicates the need to implement the collaborative values into every (relevant) organizational level to succeed. The found control problems match with Rond & Bouchhiki’s (2004) dialectical tensions approach. Tensions of collectivism-individualism, cooperation-competition and trust-vigilance are relatable to the identified control problems. The dialectical tensions of cooperation and competition cause cooperation problems. Collectivism versus individualism can be associated with CC1’s ambiguous role in terms of maintaining alliances outside GH. CC1 is in conflict with strengthening its own brand when taking the group-support. Tensions between trust and vigilance appear when partners trust each other, but at the same time have a compulsion to assure oneself about the trustworthiness of the partner.
