Management control of strategic alliances: the influence of
learning processes and trust building processes on the
development and use of control mechanisms
Master’s thesis
MSc Business Administration: Organizational & Management Control
University of Groningen -‐ Faculty of Economics and Business
Author: J.C. Dijk -‐ j.c.dijk.2@student.rug.nl -‐ S2219166
Supervisor: Prof. dr. J. van der Meer-‐Kooistra
Date: June 2013
Word Count: 18.205
Abstract
The use of strategic alliances is increasing as more organizations are recognizing the potential benefits of low fixed cost and still maintaining a high quality of their organizational activities. This results in more complex networks of strategic alliances around organizations. There has been little research on the dynamic aspect of management control in a network of strategic alliances, especially in the view of influences of learning processes and trust building processes on control mechanisms. Therefore, this research focuses on different learning processes and trust building processes from longer existing strategic alliances and their influence on the development and use of control mechanisms of recently developed strategic alliances. Data is collected from a case study in a network of connected strategic alliances with buyers and partners. Specifically, this study shed light on the development and use of control mechanisms in strategic alliances, as a result of learning processes (knowledge acquisition, information interpretation, information distribution and organizational memory) and trust building processes from longer existing strategic alliances. This research provides insight into the dynamic nature of the development and use of control mechanisms in strategic alliances and helps to get a further understanding in management control of strategic alliances.
Keywords: Management control of strategic alliances, control mechanisms, learning processes,
trust building processes, dynamic relationships
1. Introduction
Over the last few years, many organizations have established inter-‐organizational relationships. Due to the globalisation, increased competition, empowerment of customers (Van der Meer-‐ Kooistra & Vosselman, 2006), economic crisis and development of information technologies, organizations have to be creative to stay ahead of their competitors. An effective way of doing so is by making use of strategic alliances. Broadly defined, this refers to long-‐term inter-‐ organizational arrangements aimed at achieving shared strategic objectives (Cheng et al., 2004; Das & Teng, 2000). Common forms of strategic alliances comprise buyer-‐supplier relationships, joint ventures, direct equity investments, research and development agreements, and so forth (Das & Teng, 2000).
The increasing use of these strategic alliances has led to an evolving nature of organizational structures with substantial changes in their control mechanisms (Vélez et al., 2008). Especially, as many organizations are making use of an entire network of strategic alliances. To control these complex inter-‐organizational relationships, organizations are implementing control by means of different formal and informal control mechanisms to coordinate the functioning of the relationship (Häkansson & Lind, 2007; Caglio & Ditillo, 2008). Formal controls are described as hard control mechanisms, such as open-‐book accounting (e.g. Seal, Cullen, Dunlop, Berry, & Mirghani, 1999), cost management (e.g. Cooper & Slagmulder, 2004), and information sharing (Thrane & Hald, 2006). On the other hand, informal controls are based on soft control mechanisms, which are described as social and institutional. This kind of control emphasizes the role of rules (Coad & Cullen, 2006), routines (Coad & Cullen 2006) and actors (Mouritsen & Thrane, 2006) in the control of inter-‐organizational relationships.
Moreover, trust develops through learning processes, which can strengthen the relationship, make it more durable, indicate if change is applicable, and it can activate interaction about each other’s considerations and interests (Johanson & Mattson, 1987, p. 39).
The other important reason for the dynamic process of control mechanism is the notion of learning. Organizations engaged in inter-‐organizational relationships might learn how to use and develop control mechanisms by searching for information about potential partners, and from learning from prior exchange experiences with the partner (Dekker & Van den Abbeele, 2010). Huber (1991) indicates that there are four major learning processes in the form of knowledge acquisition, information distribution, information interpretation and organizational memory. These learning processes can explain why certain control mechanisms are used and developed for strategic alliances.
Both learning processes and trust building processes develop over time through interactions between these processes, and therefore cannot be separated. Yet research on the influence of learning processes and trust building processes on the dynamic nature of control mechanisms in strategic alliances is limited.
The aim of this study is to increase our knowledge of the influence of learning processes and trust building processes on the use and development of control mechanisms in strategic alliances of an organization. It addresses the following research question: “how do learning
processes and trust building processes experienced in longer existing strategic alliances influence the development and use of control mechanisms in recently established strategic alliances?”
Therefore, this study will contribute to the existing literature on the dynamic and evolving nature of control mechanisms for strategic alliances. To do so, the study will use the case research methodology and investigate an organization with a network of alliances. This is a multilateral approach, as it contains six organizations, which cooperate in one network. This case research methodology will indicate whether learning processes and trust building of longer existing strategic alliances will influence the development and use of control mechanisms of recently established strategic alliances. This will be done in three steps. First, every strategic alliance of the organization will be investigated in three different phases of structuring inter-‐ organizational control systems. These phases are known as contact phase, contract phase and execution phase (Van der Meer-‐Kooistra & Vosselman, 2000). Second, by using Huber’s (1991) framework of learning processes and the trust building stages developed by Tomkins (2001), influences of learning processes and trust building processes on the development and use of control mechanisms in strategic alliances in different phases will be studied. And finally, the influence of learning processes and trust building processes on the development and use of control mechanisms in longer existing strategic alliances will be compared with the development of control mechanisms for one recently established strategic alliance. Hence, this research will provide empirical evidence on how learning processes and trust building processes experienced in longer existing strategic alliances influence the development of control mechanisms for recently established strategic alliances. Therefore, it will contribute to a further understanding of the influence of learning processes and trust building processes on the
dynamic nature of control mechanisms used for strategic alliances. This will give more insight
into how and why organizations develop and use certain control mechanisms for strategic alliances, and the development of control mechanisms over time.
The report is structured as follows. In the next section relevant topics from academic literature will be discussed. The topics are control mechanisms, trust building and control and learning processes and control. The methodology section explains the research methodology, the research design, including the choice of the case organization. This section is followed by the results, in which the interviews are analysed on the basis of interview statements, a conference call and documentation (checklists). Interviews are analysed by use of labelling and coding. The main findings are discussed in the context of academic literature in the discussion section. Further research and limitations of this study are discussed in the concluding remarks.
2. Literature review
This chapter discusses the relevant literature on management control of strategic alliances. The first section describes the theories about control mechanisms, which are explained on the basis of cost economics theory, the role of contracts in strategic alliances, three control patterns of inter-‐organizational relationships, and the three phases of structuring inter-‐organizational control systems. The second section discusses theories on trust building and control. The third section describes the theories on learning processes and control. The fourth and last section shows and describes the theoretical framework for this research.
2.1. Control mechanisms
This section discusses literature on control mechanisms of strategic alliances. Theories on control mechanisms are discussed on the basis of the following topics: transaction cost economics, role of contracts, and control patterns and phases.
2.1.1. Transaction cost economics
Much previous research has focused on formal control characteristics and much of this is based on transaction cost economics (TCE). TCE explains that certain activities are better coordinated in the market, while other activities are in better coordination within the boundaries of the firm in order to minimize the transaction costs. This theory is a reaction to the neo-‐classical economics, in which it is assumed that economies have a full transparency of present and future market conditions. In this case, all products and services in the market have the same quality. This means that factors like reliability and delivery times play little or no role, and only the price counts. Termination has no consequences, as a new relation for a certain product or service can be found at any time under the same conditions. (Van der Meer-‐Kooistra & Vosselman, 2000). Of course, this neo-‐classical theory is almost never the case. Mutual coordination is necessary in the buy decision, as both partners are dependent on each other and carry the risk of opportunistic behaviour by the other party. This risk of opportunistic behaviour is high when the transactions involve asset specificity, when they are subject to uncertainty, or when the transaction is frequent. Asset specificity includes specific investments, where a contractor invests in specific assets for the outsourcing party. The outsourcing party can take advantage of this by forcing a price reduction, which the contractor must accept, because it cannot sell the assets to another party or only for a lower price. Uncertainty involves transactions that are subject to disturbances. Due to these risks, ending a transactional inter-‐organisational relationship like a strategic alliance can involve high switching costs. Therefore, TCE explains that parties involved in transactions should not only consider the making-‐or-‐buying costs, but coordination and control costs connected with the risk of poor performance and opportunistic behaviour as well. (Van der Meer-‐Kooistra & Vosselman, 2000)
2.1.2. The role of contracts
Van der Meer-‐Kooistra & Vosselman (2000) defines three phases of structuring inter-‐ organizational control systems: the contact-‐, contract-‐ and execution phase. The second phase is described as the contract phase, therefore it is important to describe the role of contracts.
Woolthuis, Hillebrand & Nooteboom (2005) explain the role between contracts and trust. They show in their case study that contracts and trust are both complements and substitutes of each other. Trust can be a substitute for contracts when contracts can be left incomplete in the case that parties fully trust each other, and the other way round, contracts can be a substitute for trust when parties highly mistrust each other. It can have a complement function as well, as contracts can create more trust and trust can create contracts. The latter happens when an organization is looking for a new partner for a strategic alliance, it subsequently will contact and contract those parties that they trust the most.
Transaction cost economics has not incorporated learning into its theoretical framework (Williamson, 1999; Mayer & Argyres, 2004). Mayer & Argyres (2004) explain the role between contracts and learning. In their case study they show that contracts change over time due to gained experience of working together. This change is a result of disagreements and problems, experienced in the project. Mayer & Argyres (2004) call ‘actual problems’ the primary drive for change, rather than ‘potential problems’. Therefore, parties change the contract on historical learning information to prevent these problems in the future, and do not focus on other potential problems that can arise in the future. Furthermore, Mayer & Argyres (2004) show that learning to contract has a pattern: “In essence, then, the parties proceeded quite gradually and
incrementally during the contracting sequence, responding to disputes one by one. Although each new contract negotiation provided an opportunity to attempt a more inclusive contracting approach, only after actually experiencing a dispute did the parties attempt to address it in later contracts” (Mayer & Argyres, 2004: 403). Thus over time, parties change their contracts
incrementally due to learning based on prior experiences of actual problems in the collaboration.
2.1.3. Control patterns and phases
The use of control mechanisms differs per strategic alliance. To indicate which control mechanisms fit a strategic alliance the best, several researchers have shown that there are three different control patterns with a certain combination of control mechanisms (e.g. Van der Meer-‐ Kooistra & Vosselman, 2000; Langfield-‐Smith & Smith, 2003; Caglio & Ditillo, 2008). The patterns are described as market-‐based, bureaucracy-‐based and trust-‐based. First, a market-‐
based pattern is characterized by low asset specificity, high task programmability, and high
output measurability. In this pattern, market mechanisms are dominant. Therefore a market-‐ based pattern is regulated by the price of the transaction, and contracts are not detailed and no specific control mechanisms are necessary. In case of opportunistic behaviour parties can easily switch to other parties. Second, bureaucracy-‐based patterns are used when the environment is characterized by medium uncertainty, and when the transaction includes medium asset specificity. This pattern can be linked to a bureaucratic mechanism that is dominant in a hierarchy. Specified norms, rules and standards are important in this pattern. In this case, payment is based on real output and detailed contracts with detailed rules are necessary to monitor output and performance, and specific control mechanisms are necessary in this pattern. Finally, trust-‐based patterns are characterized by high asset specificity, output or activities are difficult to measure, and it requires more intensive communication to build up trust. The dominant mechanism in this pattern is trust. Therefore, control mechanisms are in general more informal, but trust can be built by formal control mechanisms as well. Therefore, trust cannot be placed in a specific form of control mechanism, and trust building depends more on the attitudes of the parties.
where the output is difficult to measure, the execution phase is more characterized by personal consultation and by the development of trust.
Van der Meer-‐Kooistra & Vosselman (2000) argue how these control patterns and phases can be linked to each other. Every pattern consists of these three phases. In a market-‐based pattern, the contact phase is characterized by competitive bidding, as asset specificity in this pattern is low. The contract phase only consist of clarity about the price and the involved parties will not spend much time on developing detailed contracts. The execution phase can include competitive price biddings from other parties. This will stimulate the existing partner to be efficient and effective.
The bureaucratic-‐based pattern consists of these three phases as well. The contact phase in this pattern is characterized by specific criteria on which potential suppliers are selected. The suppliers must follow prescribed procedures to make their offer. Next, the contract phase is characterized by a detailed development of the contract. All potential consequences and contingencies for the transaction must be specified in detail, and subsequently the performance will be measured by realized output or activities. Finally, in the execution phase control mechanisms will accommodate performance measurement and frequent supervision, which can be used for evaluation. In this phase the quality and quantity of the output will be measured frequently, and the requirements of this ex post information processing are described in detail.
In the trust-‐based patterns the contact phase involves selecting potential suppliers on the basis of trust, which can be the result of friendship, previous relationships, or by the reputation of a potential supplier. The contract phase is characterized by no detailed development of contracts, as this inter-‐organizational relation is mostly socially embedded. The described contracts function as a sort of contract framework, which will be more developed in the course of time by use of personal consultation. Therefore, payment is not based on output or activities, but is, more often, for example, a lump sum payment. Culture based controls will be used to control the relation. The execution phase is basically aimed at developing competence trust and goodwill trust, which will be used as the control mechanisms.
2.2. Trust building processes and control
Trust can have a great influence on the development and use of control mechanisms in an inter-‐ organizational setting, because trust cannot be isolated from control (Vosselman & Van der Meer-‐Kooistra, 2009). However, previous research on control and trust differs on two competing statements. First, there is a debate on the relation between control and trust. Some researchers argue that trust and control are complementary and substitutes of each other, while others do not agree and argue that this relation should be seen as an interaction. Second, some research states that trust is a form of informal control mechanism (e.g. Bradach & Eccles, 1989; van der Meer-‐Kooistra & Vosselman, 2000; Dekker, 2004), and could be seen as social based (Dekker, 2004; Sohn, 1994). Other researchers mention that trust should not be seen as a control mechanisms in itself, but more as an outcome of behaviour and control mechanisms (Vosselman & Van der Meer-‐Kooistra, 2009; Das & Teng, 1998). Das & Teng (1998) also mention that trust is not the same as social knowledge, as it cannot predict and understand other behaviours.
used to achieve a desired outcome for the strategic alliance (Coletti, et al., 2000). According to Woolthuis et al., transaction cost economics states that control mechanisms are the basis for building trust, since trust can be built by appropriate behaviour through incentives.
Das & Teng (1998) mention that a complementary relation between trust and control might not exist, since there is no common level of confidence that is acceptable to all organizations. The level of confidence differs because it is affected by many factors, like in the case of a strategic alliance: the type of alliance, the goal of the alliance, number of resources needed, type of knowledge necessary, and the risks of the inter-‐organizational relationship. Therefore, the relation between the level of control and level of trust is not strictly inverse and complementary, because the confidence level differs and fluctuates between different partners and different cases. Das & Teng (1998) further argue that a higher level of trust does not simply result in a lower level of control, as it just means that a higher level of confidence in the partner has been reached with control and trust functioning as parallel phenomena.
Vosselman & van der Meer-‐Kooistra (2009) also argue that control and trust do not substitute or complement each other, but they interact. They mention that “the rather simple
‘and/or’ or ‘and/and’ debate on the relationship between control and trust downplays the dynamics between trust and control” (Vosselman & Van der Meer-‐Kooistra, 2009: 269). They
state that the relation between control and trust should be seen as a dynamic relation, and therefore as an interaction. This interaction arises, since trust building needs an institutionally embedded governance structure that will compensate for negative expectations about future behaviours. And vice versa, trust will strengthen the governance structure by improving the credibility of control mechanisms involved, and produces stability and durability. Vosselman & van der Meer-‐Kooistra (2009) describe two kinds of trust, called thin trust and thick trust. Thin trust is produced by accounting and control practices, which help align the interest of the parties involved. It is called thin, because it will only compensate for negative behavioural expectations. Thick trust is about positive behavioural expectations. Parties can build thick trust by making voluntary local decisions, and therefore it complements thin trust with positive expectations of the integrity, benevolence and ability of the parties. “Whereas thin trust is the result of ‘structure’,
thick trust is the result of ‘agency’. Therefore, the building of trust in a transactional relationship may be viewed as a matter of ‘embedded agency’ (Vosselman & Van der Meer-‐Kooistra, 2009:
272). Because of this dynamic interaction, it is important to study and explain this relation between control and trust.
Tomkins (2001), in his study exploring the relation between accounting information and trust in inter-‐organizational relationships, suggests that there is an inverse U-‐shaped relation between the level of trust and information needed. Therefore, at the start of a strategic alliance, a growing need for information is necessary to build trust and subsequently reach a better level of trust, simply because information gives the parties in the strategic alliance a better indication of the other party, and therefore brings about more trust. However, as the relationship matures, this growing need for information reaches an optimal level, and thereafter less information is needed. In other words, there is a positive relation between information and level of trust in the early stages of an inter-‐organizational relation, and a negative relation in the later stages. Tomkins (2001) mentions two types of information in relation with trust: “Type 1 is information
that relates to the willingness to trust; that is what is needed to create trust and check on the state of the relationship. Type 2 is information needed for mastery of events by that relationship as an entity itself” (Tomkins, 2001: 171). Moreover, type 1 is about the information on competence
Caglio & Ditillo (2012) provide evidence that management accounting information exchange needed in inter-‐organizational relationship is also an inverse U-‐shape. In other words, the link between relationship duration and amount of accounting information exchange is positive in early phases of the relationship and will decline in later phases. The first pattern can be explained in that, while the relationship matures, managers are willing to exchange more accounting information due to a growing level of trust. The later trend arises, because accounting information becomes less important, as opportunistic behaviour from both parties is less likely.
2.3. Learning processes and control
Learning is a relative new area in the literature of management control of strategic alliances, and an important factor in the development, use and change of control mechanisms (Dekker & Van den Abbeele, 2010). Learning can be considered as a dynamic process, in which knowledge moves between different levels of action, from individual to group level, and subsequently to organizational level and vice versa. Therefore, organizational learning should not only be considered from an organizational level, but from a group and individual level as well (Jerez-‐ Gomez et. al, 2002) (Huber, 1991).
The main drivers from previous literature on learning in an inter-‐organizational setting are based on deliberate learning and experiential learning (Zollo & Winter, 2002; Mayer & Argyres, 2004). Dekker & Abbeele (2010) elaborate on the above two learning settings with their two learning processes: (1) learning to design control by searching for information of potential partners (Deliberate learning), and (2) learning from prior exchange experiences with the partner (experiential learning). Therefore, the value of learning increases with the intensity of potential control problems that partners face, like uncertainty, risk and ambiguity (Dekker & Abbeele, 2010). With respect to deliberate learning, Zollo & Winter (2002) state that the development of control mechanisms within inter-‐organizational relationships could be the result of deliberate learning. With respect to experiential learning, Mayer & Argyres (2004) provide evidence that parties involved in a transaction learn from each other by combinations of control mechanisms with different types of detail and with the effective matching between combinations of transaction features. Yang and Lai (2011) provide evidence of relationship learning between organizations in a joint activity. Relationship learning involves unique memories based on historic events with structures of reference and values of involved parties. These factors are not necessarily on an organizational level, but rather on an individual or group level, since managers and teams of involved organizations interact with each other.
Another important framework of organizational learning has been developed by Huber (1991), which also contains organizational memories, as well as knowledge acquisition, information sharing, and information interpretation.
Many organizations involved in strategic alliances go through learning processes acquiring knowledge and information about the other party of the strategic alliance. Therefore, knowledge acquisition is an important construct with respect to learning processes in strategic alliances. The literature on knowledge acquisition is multi-‐faceted, and therefore Huber (1991) developed five sub-‐processes to further explain the learning processes. These five sub processes are portrayed as: (1) congenital learning, (2) experiential learning, (3) vicarious learning, (4) grafting, and (5) searching and noticing.
Congenital learning is about the knowledge that is already available within organizations and
this knowledge can be taken to the strategic alliance. Experiential learning is learning from experiences over time. Vicarious learning is about learning from observing other organizations. Next, grafting is learning from acquiring knowledge by grafting on new members who possess certain knowledge, which is new for the organization. This is a reason why organizations involve themselves in strategic alliances, as they need the information and capabilities of the other party for the strategic alliances for their own organizational process (Cheng et al., 2004). Finally,
searching and noticing is about searching and noticing information from the environment and
Another important learning process for different organizations involved in a strategic alliance is the interpretation that employees give to acquired information. Huber (1991) uses the interpretation definition of Daft & Weick (1984), which states: "the process through which
information is given meaning" (Daft & Weick, 1984: 294), and "the process of translating events and developing shared understandings and conceptual schemes" (Daft & Weick, 1984: 286). Huber
(1991) concludes that organizational learning also occurs from a development of different interpretations within organizations, since these interpretations change the organization's potential behaviours, compatible with learning. The shared interpretation of new information will be affected by five sub-‐processes: “(1) the uniformity of prior cognitive maps, (2) the
uniformity of the framing of the information as it is communicated, (3) the richness of the media used to carry the information, (4) the information load on the interpreting units, and (5) the amount of unlearning that might be necessary before a novel interpretation can be developed” (Huber, 1991: 102).
Information distribution is a process whereby information from several parties is shared and results in new information and a new understanding. Subsequently, learning occurs by bringing together the pieces of information from different parties, resulting in new information. For example, with regard to strategic alliances, parties can learn from their relationship when they obtain new information from the other party about their agreement and joint activity.
Finally, learning from organizational memory is about how information is stored and used as a basis for decision making in the future. This kind of learning is explained by two sub-‐processes, which are storing and retrieving information and computer-‐based organizational memory. In the case of storing and retrieving information, organizations learn hard and soft (in the minds of its members) information from routines and non-‐routines and store this in new standard operating procedures, routines and scripts. However, different individuals and departments within the organizations also have learned from organizational memory and subsequently differentiation, departmentalization and specialization result in a diffusion of knowledge. This means “organizations often do not know what they know” (Huber, 1991: 105). The other sub-‐ process, computer-‐based organizational memory, learns from data that is captured and resident in computers. For example, information on processes from received shipments, fabrication of products, and other output data. This data can be used as a basis for decision making in the future as well.
Stouthuysen et al. (2013) have shown that these different kinds of learning processes can be linked to different control patterns. They have proven that learning processes in a market-‐based pattern consists of knowledge acquisition, specifically congenital learning, scanning and performance monitoring. In a bureaucracy-‐based pattern, learning processes consist of knowledge acquisition, information distribution and information interpretation. With regard to sub-‐processes of knowledge acquisition in a bureaucracy-‐based pattern, learning can be linked to grafting, vicarious learning and experiential learning. And finally at a trust-‐based pattern, learning is an outcome of organizational memory.
2.4. Theoretical framework
Longer existing strategic alliance Contact phase Development of control mechanisms Contract phase Development of control mechanisms Execution phase Use of control
mechanisms
Recently developed strategic alliance
Contact phase Development of control mechanisms Contract phase Development of control mechanisms Execution phase Use of control
mechanisms
Learning processes
Trust building processes
Figure 1: Theoretical framework
Previous literature already discussed the arrows from the control mechanisms to trust building processes, and explained the role of control mechanisms and the three phases within a strategic alliance. These arrows indicate how trust building arises from the development and use of control mechanisms in the different phases within strategic alliances. The arrows from the different phases to learning processes is a relatively new area in literature, and this research will contribute to explaining how trust building processes arise from the development and use of control mechanisms in the different phases. The arrows from learning processes and trust building processes to a recently developed strategic alliance indicate and explain how learning processes and trust building processes from longer existing strategic alliances are influencing the development and use of control mechanisms in a recently developed strategic alliance within each phase of structuring inter-‐organizational control systems.
3. Research methodology and design
This chapter describes the used research methodology and design. The chapter is divided in 4 sections, namely: case study methodology, case context and rationale for selecting, data collection, and reliability and validity.
3.1. Case study methodology
This paper takes a qualitative theory development approach, a rather new phenomenon in research of management control of strategic alliances. A case study methodology (Yin, 2008) will be used to gain more insight into the influence of learning processes and trust building processes experienced in longer existing strategic alliances on the development and use of control mechanisms for recently established strategic alliances. A case study approach is useful to explore and explain learning processes and trust building processes in more detail, and results can be gainful for future research.
3.2. Case context and rationale for selecting
Additionally, Stredge makes use of a network of strategic alliances with buyers of their product and with suppliers with who they work together in a number of branding projects. Buyers of their product include Rollz International, Neon Private Equity, Philips, ABN Amro, de Bijenkorf and more. They have nine suppliers with who they work together when they need their specific expertise. For instance, they work with an audio-‐visual production organization, when they need audio-‐visual production for promotion.
Stredge has been selected for a number of reasons. Firstly, Stredge has formed many strategic alliances, which is the most important selection criterion. Secondly, this organization has an entire network of strategic alliances with buyers and suppliers, with many longer existing strategic alliances and some recently developed strategic alliances. This gives the opportunity to investigate the influence of learning processes and trust building processes from longer existing strategic alliances on the development and use of control mechanisms in recently developed strategic alliances. Thirdly, the directors and owners who are working with the strategic alliances are very experienced, since they have been working with those alliances for many years. Interviews with the directors and owners resulted in interesting data about the learning processes and trust building processes and how they develop and use control mechanisms. Finally, because the owner of Stredge has been very open and helpful, this has created the opportunity to investigate their network of strategic alliances.
3.3. Data collection
Data has been collected by means of a case study within a network of strategic alliances of Stredge. This research will show a multilateral perspective, because it collects data from an entire network of strategic alliances. This paper collects data from the buyer-‐supplier relationships between Stredge and their buyers, and from alliances between Stredge and other suppliers with who they cooperate. The directors and owners, who are managing these strategic alliances, have been working with these alliances from the beginning. Therefore, these directors and owners have experienced the learning processes and trust building processes.
As this paper collects data from the network of strategic alliances of Stredge, it is possible to study whether learning processes and trust building processes from longer existing strategic alliances are influencing the development and use of control mechanisms of a recently developed strategic alliance. Therefore, the most recently developed strategic alliance is used as the focal one. This strategic alliance was formed one year ago. The most recently developed strategic alliance was chosen, because the control mechanisms in this strategic alliance are recently developed and used, so they can be compared with experiences of longer existing strategic alliances. This can give an indication whether learning processes and trust building processes from longer existing strategic alliances are influencing the development and use of control mechanisms of recently developed strategic alliances.
Data consists of semi-‐structured interviews, attendance at a conference call between Yours and Michelin and documentation in the form of checklists from Stredge to assess potential parties for strategic alliances. The owner of Stredge had contacted its buyers and suppliers for the interviews. This resulted in seven semi-‐structured interviews with directors and owners of the buyers and suppliers. Two interviews were held with owners of Stredge, five interviews were conducted with the suppliers and buyers of Stredge, and two interviews were held with organizations outside the network of Stredge for additional information. One organization is Yours (Youth for road safety), a non-‐governmental organization (NGO) based on road safety for youth in the world. Yours has strategic alliances with many organizations over the world, including the World Health Organization, Michelin (founding member, which gives financial support), Tom Tom, and more. The other organization is the Waterboard Groot-‐Salland, which is a governmental organization. They are responsible for the maintenance and management of water in West Overijssel, for keeping the water levels in lakes, ponds and brooks at the right levels, and for cleaning and maintaining the water quality in their area. The Waterboard has strategic alliances with other governmental parties and with private parties, which are called public private partnerships.
3.4. Reliability and validity
Semi-‐structured interviews are constructed on the basis of the topics addressed in literature and the theoretical framework. The format of the interviews is included in appendix 1. The interviews were conducted at the office buildings of the interviewees, which was a familiar place for the interviewees. The duration of the interviews was aimed at one hour, however, the interviewees were very open and this resulted in an average of one hour and 15 minutes. Interviews were recorded and transcribed in Microsoft Word to increase the reliability. Furthermore, labelling and coding methods were used to analyse the interviews. A certain degree of subjectivity is inevitable in qualitative research, since the formulation of interview questions can differ per researcher. This can change fragments used for the results and analysis. However, a repetition of this study is possible, since the main ideas of interviewees will not change.
The semi-‐structured form of the interviews gave interviewees the opportunity to express their ideas in their own formulations. However, the coding and labelling system is based on the answers of the interviewees. The researcher has adopted an objective view when analysing the data. Other researchers should perform this research to increase reliability.
4. Results
In this chapter the most important findings from the interviews with the owners and directors of the parties are presented. The interviews consisted of 4 main topics: control mechanisms, control patterns, learning processes and control, and trust building and control. These topics also covered interview questions, which indicate whether learning processes and trust building processes from longer existing strategic alliances influence the control mechanisms of recently developed strategic alliances. The results of these topics are explained in this chapter.
4.1. Control pattern Stredge
The main part of the case study focuses on the network of Stredge and therefore it is important to start with an analysis of Stredge. This case study of Stredge gives a clear insight in the growing trend of using strategic alliances nowadays. Many organizations are searching for cost saving strategies to survive the economic crisis. They want to maintain their organizational activities, but cannot afford a big pay roll. Therefore, Stredge has developed strategic alliances with suppliers (who they call partners) and buyers. They compare this method of working with the film industry, as filmmakers strive to hire the best actors, writers, producers and other specialists for a particular movie. Stredge uses the same concept, since they hire their best suppliers with different areas of expertise for particular services for their buyers. It is a strategy to lower costs in times of low demand and to always work with the best specialist when necessary. The owners of Stredge explained this as follows: “So you can keep your costs low and
always work with a good team. Otherwise you run the risk that you only have people on board who can make good scripts, while you need specialist for a guerrilla marketing campaign” [Owner, Stredge].
The alliances of Stredge are located in the trust-‐based pattern. The asset specificity of their product gives a first indication: “Every product is 100% customized for every customer, only the
process to develop the product is the same every time, but the outcome is thus 100% specific to the customer. The outcome cannot be sold on a different day to a different customer” [Owner, Stredge].
This means that asset specificity is very high, since every output is specifically developed for every customer and cannot be sold to any other customer. A very high asset specificity is a characteristic of the trust-‐based pattern. The owner of Stredge was very clear about the important role of trust with respect to the control mechanisms: “The notion of trust is the core of
what it’s all about, this makes it difficult to control the alliance” [Owner, Stredge]. This explanation
