Together we are strong

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Dioni Franken

University of Groningen Faculty of Management and Organization International Business Thesis

Together we are strong

factors influencing cooperation in Dutch-Serbian alliances

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Together we are strong

factors influencing cooperation in Dutch-Serbian alliances

Thesis

Author

D.L.J. Franken

Principal

The Royal Netherlands Embassy in Belgrade, Serbia and Montenegro Economic and Trade Section

Course

University of Groningen Faculty of Management and Organization International Business

University Supervisors J.A. Neuijen PhD.

B.J.W. Pennink PhD.

Groningen, January 2005

The author is responsible for the content of this thesis

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The only thing that will redeem mankind is cooperation Bertrand Russell

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Preface

The idea for writing this thesis was born during my internship at Dico/Andrijasevic. Will Vogels gave me the opportunity to start at their joint venture, other people, especially John Vesters and Zoran Peko made the internship possible. I have learned a lot in Ruma, thank you for all your support!

When I was writing this thesis, the Economic and Trade Section of the Royal Netherlands Embassy became interested in being the principal of this research. This provides the environment in which the results of this report are most useful, i.e. an organization through which Dutch and Serbian companies can meet and find support to build their alliance. Mila Mirkovic from the Economic and Trade Section helped me to find respondents. Thanks!

Smilja Latinovic and Maja Reijger helped and supported me during my stays in Serbia, with their knowledge, views and the always open doors of Larive Serbia.

Bram Neuijen and Bartjan Pennink from the Faculty of Management and Organization provided me with the necessary comments on the draft versions of this thesis. Thank you for being flexible, both in time as well as concerning the exact subject of the research! Marieke Bosscha has read the draft as well, and in basically all of her comments she was right.

Thanks! Peter Jeuken helped me improve the structure of this thesis and checked spelling and grammar. Thank you for your useful comments!

In December 2003, I started at Dico, to go to Ruma in January 2004. The rest of the year has been turbulent and hard. All people involved in this project, and dear friends: thank you for your support and understanding.

Saskia joined me on my way to Serbia, and came to visit me as well. You’re great!

My family played a central role, the past year. That will never change.

Dioni Franken

Groningen, January 2005

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Abstract

Introduction

This thesis focuses on factors influencing cooperation in Dutch-Serbian alliance. The description of the content of this thesis in this abstract is not all embracing; it provides an indication of the results.

Goal

To provide insights in and understanding of factors that influence cooperation in Dutch- Serbian alliances.

Central question

What are the factors that influence cooperation in Dutch-Serbian alliances? What are their characteristics and in which ways are they interrelated?

Method

In this research, Grounded Theory is the core of the methodology employed: “theory is derived from data, systematically gathered and analyzed through the research process”

(Strauss and Corbin, 1998: 12). After an orientation on the subject, partners in Dutch and Serbian cooperating companies are interviewed, as well as other experts in the field such as consultants. Those interviews result in data. This data is analyzed and categorized. The resulting categories are discussed with experts in the field again, complemented and changed.

Results

A great number of factors influencing cooperation in Dutch-Serbian alliances are identified.

These factors are categorized, resulting in a number of “umbrella-factors”, covering the results of the research. These higher-level factors apply to each of the partners in a cooperative alliance and are:

The orientation of the partner company towards cooperation

The environment of the partner-companies

The perception of the cooperating partners concerning the cooperation and the environment

The behavior of the partners

Behavior is identified as the central category in this research. Only through a partner’s behavior, other factors become explicit. The way a partner deals with the orientation of the partner company, aspects of the environment, and the perception of cooperation determines his behavior. The behaviors of partners “meet” during cooperation.

The relations between these factors are shown graphically on the next page, followed by an explanation.

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Partner A Partner B

Organizational characteristics:

Structure

Need for resources

Learning capabilities

Dependence

Financial status

Personal characteristics:

Respect

Commitment

Trust

Orientation: determining and influencing start, continuation

and end of cooperation

Orientation: determining and influencing start, continuation

and end of cooperation

Organizational characteristics:

Structure

Need for resources

Learning capabilities

Dependence

Financial status

Personal characteristics:

Respect

Commitment

Trust

Culture

Politics

Law

Economy

Environment Environment

Culture

Politics

Law

Economy

Behaviour

Communication

Behaviour

Communication

Perception

Evaluation

Perception

Evaluation Cooperation

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Explanation

Behavior of the partner is the explication of that partner’s orientation. This explication is influenced by the environment (culture) and perception. Communication is an aspect of behavior; Serbian partners sometimes find their partners too direct. Dutch partners sometimes see their partner’s behavior as indolent.

The orientation of a partner towards cooperation consists of a number of concepts: specific partner characteristics, dependence, need for resources, structure, respect, commitment and trust.

Dutch companies often want to cooperate with Serbian partners to produce in a low-wage country. In addition, the PSO- program of the Dutch government provides other resources, mainly financial, to aid cooperation between companies from these two countries. Some Dutch companies are attracted to Serbian partners because of the free trade agreement of that country with Russia. Serbian partners, in turn, are attracted to Dutch knowledge, the status that comes with cooperating with a Dutch company, better loan facilities and attaining a higher level of standards.

The needs of companies from the two countries determine the initial orientation towards cooperation. As time goes by, they might change, due to either cooperation-related or cooperation-independent reasons. Dependence is reversely related to the need for resources.

Most often, when cooperation between Dutch and Serbian companies starts, the Dutch partner is seen as less dependent. In the course of time, resources flow to the Serbian partner, making the latter less dependent. Dependence of the parent-company is also determined by its

structure. Changing this structure can influence the dependence on the alliance. Since the environment in Serbia is ever-changing, for example in law, customs-regulations and politics, this dependence could become a problem for both partners.

Orientation towards cooperation is also based on trust, commitment and respect. Trust is regarded as very important by partners from countries, as well as commitment and respect.

However, Dutch companies do not always trust their partner’s intentions and capabilities, the ingredients of trust. This perception is based on both the environment and the cooperation itself. When evaluating the cooperation, Dutch partners often find their partners in Serbia to be stubborn and proud. Serbian partners see themselves as capable generally, which is not always shared by their Dutch partners. Both commitment and respect are valued highly by respondents from both countries in general, and are related to dependence (especially commitment) and trust. Commitment is related to need for resources as described above.

Quality of the management is rated as poor in Serbia, by both Dutch and Serbian partners, in general. This leads to problems in cooperation, where the expectations and management ideas of Dutch and Serbian partners are conflicting. Dutch partners are used to flat organizational structures and multitasking and pro-active employees for example, and their Serbian partners are used to different organizational ideas. The stable Dutch environment and history have provided the possibilities for management-development, which is different for Serbia.

Cultural differences are also important here. Serbian masculinity in combination with low quality of management sometimes leads to irrational decisions in the eyes of Dutch partners.

Having a personal relationship is valued more by the Serbian partners than by the Dutch. This does not mean Dutch people do not want to go out for dinner together, an important aspect of Serbian culture, but the next morning, Dutch partners seek the same level of confirmation as the day before. This puzzles their Serbian partners.

The PSO program of the Dutch government is an environmental aspect triggering cooperation between companies from Serbia and the Netherlands. Since most of the activities of Dutch-

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Serbian alliances are located in Serbia, the influence of that country’s environment is most important in all subsequent steps. Changing laws and customs regulations have been

discussed before; cultural differences are also part of that environment. Serbian companies for example are more short-term oriented than Dutch companies. Their culture could be described as more masculine. These environmental factors influence cooperation both in a direct way (different way of communicating) and in an indirect way, through orientation (quality of management).

When cooperation is evaluated, perception seems to play an important role. Especially since a lot of the alliances are still in the start-up phase of the cooperation process, “hard” indicators are scarce. When cooperation is evaluated, not only the measurable indicators are given thought. Some general feelings influence the future behavior of the partner to a considerable extent. Serbian people are said to think “when it comes from abroad, it is good”. On the other hand, Serbian partners recognize the gap in knowledge between them and their Dutch

partners. This gap sometimes leads to a continuous idea of being exploited by their Dutch partner, if not now, then maybe in the future. Dutch partners in turn often stick to a general feeling that their Serbian partners can not always be trusted. The political situation in Serbia and the image of the country also contribute to this feeling.

The factors discussed above influence cooperation in Dutch-Serbian alliances. The influence becomes explicit in one of the factors, partner behavior. When cooperating, both Dutch and Serbian partners are exposed to each other’s behavior.

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1. Introduction of the research project

1.1 Motivation

In 2002, Dico International b.v. (Dico), a producer of metal beds, from Uden in the Netherlands and Andrijasevic d.o.o. (Andrijasevic), a producer of mattresses, from Ruma, Serbia and Montenegro started an alliance to produce and sell mattresses. They built a new factory, next to the existing factory in Ruma, and installed new machines. On the fifth of April of this year, production in the new building started. The whole process was supported by the Dutch government through the PSO-program (see 1.2).

During my internship at the joint venture I focused on a number of issues, like cost price calculation and market research. However, I also became interested in cooperation between Dutch and Serbian companies in general. How does cooperation between companies from these two countries work? What are characteristics of cooperation? Why is cooperation successful, or not? A number of broad questions came up. When I looked for answers to those questions in existing literature, I could not find anything, except for general stories on the hospitable nature of the Serbs, for example.

The best way to find answers to my broad questions seemed to research the matter myself.

That would also be a great way to speak to more people in the field, to visit other companies than Dico and Andrijasevic, and to see more of Serbia.

1.2 Government support

The Dutch government started a program in the year 2000 called “Program for Co-operation with Central and Eastern Europe” (PSO)¹. By providing the major part of the necessary financial resources, the program supports more structural cooperation between companies from the two countries. Dico and Andrijasevic founded their joint venture with PSO-support.

1.3 Principal

This research project has been undertaken on behalf of the Economic and Trade Section of the Royal Netherlands Embassy in Belgrade, Serbia and Montenegro. The embassy supports Dutch companies that (want to) cooperate with partners from that country. Apart from that, the economic and trade section of the embassy is a partner in PSO projects.

A better understanding of the factors that influence cooperation is the reason for the embassy to have this research performed. The findings will be used during a trade mission from the Netherlands in July 2005, organised by the Dutch government.

1 The program’s aim is to promote the transfer of economic knowledge by the Dutch trade and industry in order to support the transformation to a market-oriented and stable economy in target countries in Central and Eastern Europe. EVD: http://www.evd.nl/zoeken/showbouwsteen.asp?bstnum=109244

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1.4 Thesis outline

This thesis contains quite a number of definitions that are sometimes closely related. The section below is an example of a section that will be provided at the start of chapters three through seven, with distinct heading and lay-out.

Definitions

Some definitions are relevant in more than one chapter, and are therefore listed more than once. If a definition is provided at the start of the chapter, it will not be repeated in the text.

All definitions can also be found in the list of keywords at the end of this thesis.

The contents of the following chapters are described below.

Chapter Content

2 Research set-up: goal, central question, conceptual model, type of research, research product, methodology, research model, research objects, data gathering, constraints

3 Orientation - review of literature on cooperation in alliances

4 Identification of concepts that influence cooperation (field research) 5 Categorization and modeling of the identified factors

6 Test of categories and model (field research)

7 Theorization: the tested categories and model are integrated into a model and integral view (integrative story), describing factors that influence cooperation in Dutch-Serbian alliances

8 Conclusion and reflection

Appendix In a separate document, the appendix contains interview questions and interview data

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2. Research set-up

Definitions

Alliance: “A broad term capturing many forms of inter-firms cooperation that go beyond mere market transactions” (Nooteboom, 1999: 1). In this document I have used the terms alliance and cooperation indiscriminately, mainly because cooperation and cooperating in one sentence may look confusing

Conceptual model: “The ideas that are recorded in a conceptual model relate to:

o The variables, that are considered to be important (the properties of the objects of the research)

o The expected relations between these variables (assumptions about those relations” (Van der Zwaan, 1995: 37)

To cooperate: doing things together for some reason and for some purpose

Embassy: the Economic and Trade Section of the Royal Dutch Embassy in Belgrade

EVD: Economische Voorlichtings Dienst (Economical Advisory Agency), the agency executing the PSO program for the Dutch government

PSO: Programma Samenwerking Oost-Europa, “Program for Co-operation with Central and Eastern Europe”. The program’s aim is to promote the transfer of economic

knowledge by the Dutch trade and industry in order to support the transformation to a market-oriented and stable economy in target countries in Central and Eastern Europe

2.1 Introduction

This chapter focuses on the goal and the set-up of this research project. Relevant elements are central question and methodology. These are provided in section 2.2. The type of research, research product, methodology and research model are described in section 2.3, after which a conceptual model is presented in section 2.4. The last section of this chapter, section 2.5, focuses on various research-related issues: research objects, data gathering, data analysis, the use of theory and constraints.

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2.2 Problem statement

Goal

To provide insights in and understanding of factors that influence cooperation in Dutch- Serbian alliances.

This research project identifies factors influencing cooperation. They are explored to provide insights and understanding. Relations between these factors can be part of the exploration, if it turns out that these relations do exist.

This goal should be attained by finding answers to the following questions:

Central question

What are the factors that influence cooperation in Dutch-Serbian alliances? What are their characteristics and in which ways are they interrelated?

2.3 Research type, research product, methodology

Type of research

Factors that influence cooperation between Dutch and Serbian companies are the subject of this research project. I have not found any publication that focuses specifically on this subject.

All I could find were publications on Dutch and Serbian culture, and on cultural differences between the Netherlands and Serbia, but these publications do not focus on the impact of cultural differences on cooperation between Dutch and Serbian alliance-partners.

The type of research should fit the type of problem. “Qualitative methods can be used to explore substantive areas about which much is known, to gain novel understandings, or about which little is known, to gain new understandings” (Stern, 1980, in Strauss and Corbin, 1998:11). Little is known about factors influencing cooperation between Dutch and Serbian companies, our substantive area. We would like to gain novel understandings about this area, so employing qualitative methods seem to suit the type of problem.

This research project consists of qualitative research, which means that “…the research- findings are not arrived at by statistical procedures or other means of quantification”

(Strauss and Corbin, 1998: 11). The outcome of such a qualitative research is described below.

Research product

As described above, factors that influence cooperation need to be found through this research.

A theory thus needs to be developed. Strauss and Corbin (1998: 15) define theory as “a set of well-developed concepts related through statements of relationship, which together constitute an integrated framework that can be used to explain or predict phenomena”. The

phenomenon in this research is factors influencing cooperation in Dutch-Serbian alliances.

The other central elements of the definition of theory prescribe the products that need to be developed; “concepts” and “statements of relationship” together form an “integrated framework”.

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In my opinion, a conceptual model depicting these concepts and relationships is the product that suits the needs of this research best. Section 2.4 focuses on the development of such a model in this research project. This model will be supported and explained, which is done in an integral view on the subject.

Methodology

In this research, Grounded Theory is the core of the methodology employed. In grounded theory, “theory is derived from data, systematically gathered and analyzed through the research process” (Strauss and Corbin, 1998: 12). The researcher does not begin the project with a preconceived theory in mind. Rather, an area of study is chosen, and theory is allowed to emerge from the data. “Grounded theories, because they are drawn from the data, are likely to offer insight, enhance understanding, and provide meaningful guide to action”

(Strauss and Corbin, 1998: 12). This fits the goal of this research remarkably well.

One of the characteristics of grounded theory is that the research does not start with a well- defined set of categories into which the results of the research will fall. Those categories are developed during the research. Five stages can be identified, that lead from the central question to an answer to that question. In short, the stages and the consequent products are:

1. Orientation on the subject: In this phase, a general idea of the subject is formed. Literature provides a framework to ask sensible questions during the interviews

2. Identification: cooperation in a number of Dutch-Serbian alliances is discussed with the partners and other experts, resulting in the identification of a number of concepts 3. Categorization and modeling: the concepts found in the previous stage are grouped,

resulting in a number of categories and a model indicating the relations between the categories

4. Test: categories and model: the categories and the model are discussed with a number of experts on Dutch-Serbian cooperation, to test their validity

5. Theorization: based on the categories and model from stage three and the necessary adjustments identified in stage four, categories and model are refined and result in a theory on factors influencing cooperation of Dutch and Serbian companies

This results in the following diagram (including the chapter in which the research stage is described):

Research model

Because of the methodology employed, I will organize the chapters around the elements of the research model. This model is presented in section 2.3. Methodological steps are

described explicitly throughout this thesis. They can be recognized by the following heading and lay-out:

Figure 2.2: research model Orientation Identifica-

tion of concepts

Categorization and modeling

Test: categories and model

Theorization

(chapter 3) (chapter 4) (chapter 5) (chapter 6) (chapter 7)

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Methodology

This is an example of the lay-out of those parts of this thesis that focus on methodological steps. These parts can be found throughout this thesis. In addition, the research model from section 2.3 is printed on the first page of every chapter in which one of the steps is taken, i.e.

on the first page of chapters 3-7. The step discussed is highlighted.

2.4 Conceptual model 1

Cooperation between companies will most probably be influenced by a number of factors.

These factors may be found at the individual partners and in the environment of the alliance.

However, these factors may also be influenced by what happens in the alliance, as a reaction.

This conceptual model is my hypothesis of the way cooperation and the factors influencing this cooperation are related.

Conceptual models usually provide relations between concepts as a starting point. This model, however, provides the initial relation between cooperation and influencing factors, but it does not provide the factors themselves. Employing the already described methodology presented, such a model is an outcome of my research.

A number of models are presented in the following chapters, resulting in a final model,

presented in chapter seven. The table below indicates the locations of these models in the text.

The model above is my initial hypothesis of factors influencing cooperation in Dutch-Serbian alliances. During the research project, this purely hypothetical model gradually transforms into a model that is based on interviews in the field. In grounded theory terms, the model becomes more and more grounded in the research data. This gradual shift is indicated in the table as well.

Model

number Section Page Basic background of the model

1 2.4 15 First idea of relation between

cooperation and influencing factors

2 3.3 21 Factors influencing cooperation, model

based on literature review

3 5.4 48 Factors and relations between them:

model is based on identification by respondents in the field

4 7.3 59

Hypothesis based

Data based

Final model, based on a discussion of model three with experts in the field Factors influencing

cooperation

Cooperation

Figure 2.1: conceptual model 1

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2.5 Research objects, data gathering, use of theory, constraints

Research objects

All of the alliances that are included in this research are companies making use of the PSO program of the EVD. The reason for including these companies is that no other cooperating companies could be found in a reasonable time span. The Embassy does not know of the existence of other cooperating companies, as well as the experts at the EVD (who have more activities than only PSO). Because of the limited amount of time, I decided to only interview partners of alliances making use of the PSO program, and other experts such as consultants, Embassy- personnel and EVD executives. This approach has its drawbacks and advantages, comparable to Hofstede’s research on culture at IBM (as described in “Cultures and

Organisations, software of the mind, 1991, by Geert Hofstede)². Given the limitations

however, focusing on these research-objects was the best way of getting a set of data that was large enough to draw well-grounded conclusions.

Data gathering

The research consists of both desk and field research. As will be clear in the description of the research stages in the chapters to come, both have been used throughout the research.

Open interviews were used during talks with cooperating partners and other experts. The interviews were conducted in Dutch at the Dutch partners and experts and in English at the Serbian partners and experts. Most of the interviews were recorded with a digital recorder, sometimes however I had to take notes, because of the sensitivity of the conversation. The respondents sometimes asked not to record the conversation, on other occasions I could “feel”

their discomfort, so I chose not to record and took notes instead.

When is enough data collected to make well-grounded statements? According to Strauss and Corbin, no more data is needed when the concepts that result from stage three can be left unchanged after the testing of those in reality. As long as new information emerges, too little data has been gathered.

2 Hofstede’s research on cultural differences was based on a set of 116.000 questionnaires collected from IBM employees in over 40 countries (Cray and Mallory, 1998: 49-). All of the respondents were doing the same kind of job, so only their nationalities would differ. Any variation in attitudes and values would stem from differences in culture, according to Hofstede. But: “There has been much formal and informal debate on the suitability of IBM employees as the target for this study, on the breakdown of the massive sample (116.000) into country samples, on the dominance of male responses (especially in countries where females are not found in executive positions), on the built-in bias of the sort of people (are they a minority?) who are attracted to and selected by IBM as employees, on the use of a survey to collect data and on the items from the survey used to establish the indices of difference. All these debates rest on valid questions” (Hunt, 1981: 55 in Cray and Mallory, 1998: 53).

Although I don’t expect my research to be the subject of “much formal and informal debate”, there are some similarities. I could say, that because all of the interviewed people work on alliances that are rooted in the same kind of circumstances, only typical differences between Dutch and Serbian partners would emerge, for example.

Or that, because of the similar context, a better focus on the exact subject of this research is possible.

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Use of theory

As described in the methodology part, above, this type of research lets theory emerge from the data. This is the main way in which theory finds a place in this research indeed; it is the result. Existing theory will be used as a tool to construct a new one. The theories used are explained where applicable.

Constraints

Resources for this research are limited, especially time wise. From the official starting date, the fifth of January 2004, seven months are identified as the total research period, including the writing of this thesis. This has consequences for the outcome of the research; this could be more elaborate and universal if more time was available. A methodological impact of these constraints is discussed above, under “research objects”.

2.6 Conclusion

This chapter focused on the set-up of the research. Central elements of that set-up are the:

Research goal: To provide insights in and understanding of factors that influence cooperation in Dutch-Serbian alliances.

Central question: What are the factors that influence cooperation in Dutch-Serbian alliances? What are their characteristics and in which ways are they interrelated?

Type of research: Qualitative research

Methodology: The core of the methodology employed is Grounded Theory

The goal will be attained by the gradual development of a conceptual model, throughout the coming chapters. The final conceptual model in section 7.3 will be supported and explained by an integral view on the subject. This model and the integral view together form a theory on the factors influencing cooperation in Dutch-Serbian alliances.

Alliances making use of the EVD’s PSO program will be interviewed. Interviewing only these alliances can be seen as a constraint. Other constraints are mainly time and money wise.

The next chapter provides an orientation on the subject, by reviewing relevant literature on cooperation in alliances.

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3. Orientation – review of literature on cooperation in alliances

Definitions

Alliance: “A broad term capturing many forms of inter-firms cooperation that go beyond mere market transactions” (Nooteboom, 1999: 1)

Cooperation: Doing things together for some reason and some purpose

3.1 Introduction

As indicated in chapter one, I started this research from a very broad perspective. This perspective alone is not enough to ask sensible questions during interviews. Therefore, general theory on alliances is discussed in this chapter, followed by a theoretical approach to factors influencing cooperation between companies. The goal of this chapter should be kept in mind: this is an orientation on the subject, in order to have some background on the subject, to ask relevant questions during the interviews. So, the goal is not to provide an extensive

description of the theory, for in grounded theory, the researcher does not begin the project with a preconceived theory in mind. It merely is the development of an interview topic list.

Section 3.2 focuses on alliances in general, and reasons to start an alliance. Section 3.3 provides factors that potentially influence cooperation. These factors are presented in a conceptual model in section 3.4, which is conceptual model 2. Based on this conceptual model, an interview topic list is developed in that section as well.

3.2 Alliances - definitions and motives

“If a company wants to achieve a certain result, it can try to do so by executing activities in three different ways: via hierarchy (make), via markets (buy) and via hybrid forms

(cooperation)” (Boersma, 1999: 2).

“Producing results in costs of organization, and control, buying results in costs of contact, contract, and control” (Nooteboom, 1999: 32). Hybrid forms (alliances) result in some kind of combination, depending of the structure of the cooperation.

Extended definition

Alliances can be incidental cooperation between independent firms, more systematic and lasting forms of cooperation, equity joint ventures and mergers and acquisitions. Examples of alliances are project based alliances, lasting for a well defined period of time, licensing agreements, agency-agreements, distribution agreements, equity joint ventures, mergers and acquisitions, and everything in between.

Orientation Test: categories Theorization

and model Categorization

and modeling Identification of

concepts

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Motives

“The main drive towards alliances is the need to cooperate in order to maintain flexibility, core competence and the incentives that arise from autonomy, while utilizing complementary resources for both efficiency and learning...” (Nooteboom, 1999: 60).

The tendency to internationalize and to focus on core competences and to outsource more activities, by companies all over the world, leads to a need for solutions. As stated above, there are two options, buying or cooperating. Cooperation has a number of advantages, that simple market relations (buying) do not offer, or to a lesser extent: “to circumvent entry barriers, achieve speed of market entry, adapt products to markets, acquire sources of materials, components, labour, technology or learning, set market standards, pre-empt or attack competition” (Nooteboom, 1999: 42).

Doz and Hamel (1998: 19) identify three primary goals of alliances:

1. Cooptation. Cooptation turns possible competitors into partners and suppliers of

complementary goods and services, for the development of a new activity. This goal can be twofold: a) to include potential rivals into the alliance and b) to include companies that can supply missing elements.

2. Co-specialization. Co-specialization is obtained when previously distinct market positions, competencies and sources of knowledge are combined, resulting in synergy, creating value.

3. Learning. Alliances offer the opportunity to learn new skills, especially when it comes to specific, tacit knowledge and skills. Core competences are not for sale on the market.

The reasons to form an alliance may be clear, but forming and managing an alliance is often far from trouble free. Doz and Hamel (1998: 23) identify four fundamental questions that partners of alliance should ask themselves:

1. Will the alliance create value, and for whom?

2. Will the alliance survive for a long enough period of time?

3. Will the partners be able to integrate conflicting interests and priorities?

4. In what way will partners manage their growing web of alliances?

These four questions are returning elements in literature on alliances (see “references”). They can be posed in different ways, or have varying elements, but when elaborated on, and split up in subquestions like: “what is the influence of the environment?”, concerning the lifetime of the alliance, they seem to be quite universal. Below, in a discussion of Boersma’s

framework, this discussion is continued in a more operational manner.

3.3 Which factors could influence cooperation?

Boersma’s model and its use in this research

Boersma’s model (1999: 26) focuses on the development of trust in international joint

ventures. Trust, in this model, is seen as one of the factors influencing the performance of the joint venture. The factors, and the relations between them, are based on three streams in theory, the “Resource based view of the firm” (Penrose, 1959; Wernerfelt, 1984; Hamel, 1991), the Transaction cost approach (Williamson, 1975, 1985; Hennart, 1988, Kogut, 1988) and Economic Sociology (Granovetter, 1985; Uzzi, 1997) (Boersma, 1999: 26). Because of the combination of a number of theories in one model, instead of a focus on one, this model proved to be a suitable starting point for my research. The factors identified seem to be easy

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to talk about during interviews, and also seem to cover my subject rather well. Why it can be used for cooperation in alliances and not only for the performance of international joint ventures is explained after the following model:

Boersma focuses on trust as the major factor influencing the performance of international joint ventures. That is why her model is called “a conceptual model of trust development in IJV’s”. The model above is a simplified version of Boersma’s model of trust development.

The time factor is included in her model, which I left out in figure 3.1. This leaves trust as one of a number of relevant factors. So it could be renamed, to for example: “a conceptual model of factors influencing the performance of international joint ventures”.

Applicability to cooperation in other types of alliances

The question arises whether this model could also be used for other types of alliances. I think the theories on which the model is based provide room to do so. Boersma describes why.

“Why firms may choose an equity joint venture can, however, not be explained by the resource-based approach, as this approach only points out why firms start to cooperate, but not why they choose a certain mode or structure” (Boersma, 1999: 27). Transaction costs economics (TCE) explains why firms choose for market hierarchy or market transactions.

“Hennart (1988) and Kogut (1988) have used TCE to explain why some firms choose an equity joint venture while others favour a contractual, non-equity joint venture (including licensing agreements, distribution and supply agreements, and other kinds of contracts)”

(Boersma, 1999: 27). Again, “joint venture” could maybe be replaced by “alliances”.

Boersma includes Economic Sociology (ES) to incorporate “social embeddedness” of economic relationships. These economic relationships and their characteristics of human relations and evaluation of the performance of the cooperation do not only take place in international joint ventures, but in any form of alliance.

Environment

Strategy

Need of resources Structure

Evaluation Performance Behavior

trust Interdependence

Partner characteristics

Figure 3.1: A conceptual model of trust development in IJVs, Boersma, 1999: 26 (simplified version)

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Based on the discussion above, I think it would be justifiable to extrapolate Boersma’s model to (international) alliances in general, instead of only international joint ventures.

Therefore I have replaced “joint venture” by “alliance” for the purpose of this research project. In my research I focus on yet to be established factors influencing cooperation in Dutch-Serbian alliances. Therefore, “performance of the alliance” needs to be replaced by

“cooperation” in the model.

Nooteboom’s definition of alliances as provided previously seems to justify doing this. An alliance is “a broad term capturing many forms of inter-firm cooperations that go beyond mere market transactions” (Nooteboom, 1999: 1). So, an alliance is some way of inter-firm cooperation. To cooperate, to do things together, is what is performed in an alliance.

Performance of an alliance can be measured in a great number of ways, because there can be a great number of goals. I think that performance of an alliance is not a distinct and well-

measurable issue, but that depending on the goals of the partner, a certain performance is

“perceived” in the evaluation. In my opinion, “the” performance of an alliance is non-existent.

Thus, “performance of the alliance” is transformed into “cooperation”.

Now, I think Boersma’s model can be altered to fit my needs. Again, if any doubts about this arise, the goal of this phase in my research is not to come up with a set of factors that will be a rigid in the next phase, but some guideline to ask relevant questions during the interviews.

The model that I used as a guideline is presented below.

3.4 Conceptual model 2

Environment

Strategy

Need for resources

Structure

Evaluation Cooperation

Behavior

Trust

Interdependence

(other) Partner characteristics

Figure 3.2: conceptual model 2: factors potentially influencing cooperation, based on: Boersma, 1999: 26

Culture of the partners

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Explanation

Except for replacing “performance of the alliance” by “cooperation” I specified one of the partner characteristics, that is culture. The reason for this is that although the effect of cultural difference on international alliances is not exactly clear, there has been a lot of research, and the topic remains a source of discussion. Moreover, I think culture is a partner characteristic, but of a very different level than for example partner size (see table below). Culture seems to be the partner characteristic that is influenced by the environment of the partner, contrary to the other partner characteristics. The other changes have been discussed before.

The items and the relationships between them are explained in the table on the next page. This description is based on the description by Boersma, but where she focuses the description on international joint ventures, I focus on alliances in general.

The table on the following page presents the dimensions on which cooperation can be evaluated (which in itself is a factor that influences cooperation) and the influencing factors, after which a more elaborate explanation of the concepts is provided.

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Concept Explanation

Cooperation

A latent variable that can be measured by five dimensions:

Longevity: the expected lifetime of the cooperation

Quality of the relationship: perceptions of trust and openness

Effectivity: the extent to which set goals are or will be achieved

Achievement: financial performance of the joint venture

Stability: changes in equity and/or the contract

Factors affecting cooperation

Ten main variables which positively or negatively affect cooperation

Partner characteristics: distinguishing features of the partner companies, like learning capabilities and size

Culture: the collective programming of the mind which distinguishes the members of one group or category of people from the other (Hofstede, 1991: 5)

Partner strategy: the strategic direction of the partner

Need for resources: the extent to which the partners need each other’s resources

Structure: key characteristics of the cooperation

Behavior: conduct of the cooperating partners

Interdependence: the extent to which the partners need each other’s resources and the number of alternatives available

Environment: factors that are outside the direct influence of the cooperation, like earth quakes and currency

devaluation

Evaluation: partner’s appreciation of cooperation

Trust:

1. : the expectation that the partner will behave cooperatively in the board of the joint venture

2. : to accept or neglect the possibility that things will go wrong

Table 3.1: dimensions of cooperation and influencing factors (Major source: Boersma 1999: 30)

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Dimensions of evaluation

The first dimension is longevity. “This is a combination of concepts, identified by authors as continuity, evolution/dissolution, longevity, failure and the potential for failure and a number of definitions of success” (Boersma, 1999: 15

“Quality of the relation” incorporates labels such as trust, harmony, morale and cooperativeness. Only perceptual data can be used to measure these indicators

Effectivity: this is the personal interpretation of hard data, like profitability and return on investment

Achievement: goals can be “hard”, such as turnover figures, but can also be of a different character, such as effects of learning, which are harder to quantify. The overlap with the third variable is evident; the difference is that this variable deals with the extent to which the pre-set goals are attained, and the third variable, effectivity, the extent to which the cooperation is successful, not only concerning the pre-set goals, but also in other respects

The last dimension is stability. “This dimension is operationalised most of times as changes in equity” (Boersma, 1999:16)

Factors influencing cooperation

The discussion of the factors of the model is based on Boersma, 1999: 20-. All of these factors contain a number of aspects. This is why factors are called categories below; a factor is a category of aspects. A more theoretical discussion on these definitions follows in chapters four and five, for now, we treat “factor” and “category” as interchangeable.

The first category is partner characteristics. This includes characteristics like culture, size, industry, learning capabilities. The last characteristic can be both positive and negative.

When the partners are active in the same industry, and the object of learning builds on the existing knowledge in the company, a lot can be learned (positive). Learning can also have negative effects, when what is learned leads to one of the partners becoming obsolete

Culture: “Culture is everything that people have, think and do as members of their society” (Ferraro, 1998: 16). The influence of cultural differences on international alliances has received a lot of attention, but whether this should be seen as negative or positive remains unclear (Hennart and Zeng (2002: 700)

Partner strategy is the strategy of a company that leads to the search for a partner. This could be product diversification, or market development. The strategies of the partners can be different, but should be complementary, in order to make the cooperation work. Most important here is a necessary “fit” in the long term strategy, to have a positive influence on the cooperation

Need for resources: the mutual need for resources is the reason for cooperation. If the one party doesn’t need the other, there is no reason for cooperation

Structure of the joint venture: all the formal agreements between the cooperating partners, and structural characteristics. The size of the share, mode of control etc. are parts of the structure. The influence can be both positive and negative. For example: “When lawyers are involved in a too early stage, for the writing of agreements, often the negotiations are ended without any result” (Hamill and Hunt in Woodside and Pitts, 1996: 87). Only when the business plan is in a final stage, the involvement of lawyers is desirable

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The fifth is the behavior of the partners. This is the behavior of the management of the joint venture, or the cooperating partners. Conflicts can have a negative influence on the cooperation, but, when solved in the right way, they can also be positive for the

cooperation. Open and free communication is positive for the cooperation, in general

The next category is interdependence. An organization is dependent when it needs resources from another organization. Boersma stipulates that real dependence is only the case when those resources can only be obtained at one other organization. In cooperation, a situation of unequal dependence can arise. Power is closely connected to this situation.

“When one company owns resources that the other company needs, and the latter owns fewer resources that the other needs, the first will be more powerful” (de Leeuw, 1990:

180). Not using that power has a positive effect on the cooperation

The environment can play a big role in the success of the alliance. Examples are currency devaluation, affecting repatriated profits, or the prices of raw materials, etc. The

government can also affect the alliance, for example when the foreign partner is only allowed to have a minority share in a joint venture. Whether it also affects the cooperation of the partners, is not clear

The evaluation of the cooperation can be based on both the efficiency of the cooperation and the equity of the partners (honesty)

The last factor is trust. Trust can be defined as “to accept or neglect the possibility that things go wrong” (Nooteboom, 1999: 25). This definition incorporates a number of elements of trust:

o There is a possibility that things will go wrong

o “There is a wide range of objects of trust, to which trust is extended: goods, people, social systems, nature or God. When extended to people, it is usually called

behavioural trust” (Nooteboom, 1999: 26) o Cognitive and affect-based trust is included

In alliances, this could mean that “partners stick to promises, perform their duties in the best possible way and have open commitments. This means that partners are willing to do more than strictly necessary” (Boersma, 1999: 24)

Interview topic list

Strauss and Corbin (1998: 49-52) list a number of issues related to the use of literature. The basic idea is that literature can be very useful, but should be handled with care. Literature should not constrain one’s mind, and when interviewing, the researcher has to take care not to only identify those concepts he just read about in the literature. On the other hand, a

demonstration of some overall intent of the research might satisfy respondents.

Based on the dimensions of cooperation, and the factors influencing cooperation, I developed a list of topics that was used during the interviews. Keeping the above considerations in mind, I made a simple diagram of table 3.1, that I put on the table during the interviews³. This diagram is presented on the following page.

3 As suggested by my supervisor Bram Neuijen. It worked very well!

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3.5 Conclusion

There can be a great number of reasons to form alliances, including “efforts to circumvent entry barriers, achieve speed of market entry, adapt products to markets, acquire sources of materials, components, labor, technology or learning, set market standards, pre-empt or attack competition” (Nooteboom, 1999: 42).

Cooperation can be influenced by a number of factors. The following ten factors were identified as topics that were raised during the interviews:

Partner strategy

Need for resources

Structure

Environment

Partner characteristics

Culture

Interdependence

Trust

Behavior

Evaluation

The goal of this phase was attained by the development of the list above (and the

understanding of the characteristics of these factors). It is the input for the next stage, which is an identification of factors influencing cooperation Dutch-Serbian alliances. The result of this identification can be found in the next chapter.

Partner strategy

Need for resources

Structure

Environ- ment

Partner character-

ristics Culture

Interde- pendence Trust

Behavior

Evaluation

Coopera- tion

Figure 3.3: Interview topic list

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4. Identification of concepts in the field

Definitions

Categories: Concepts that stand for phenomena (Strauss and Corbin, 1998: 101) (in this research, a concept is a labeled phenomenon of the lowest level (a labeled interview fragment) and a category is group of concepts)

Concept: A concept is a labeled phenomenon (Strauss and Corbin, 1998: 103)/ The building blocks of theory (Strauss and Corbin, 1998: 101)

Phenomena: Central ideas in the data represented as concepts (Strauss and Corbin, 1998:

101)

4.1 Introduction

In the preceding chapter, a list of topics was developed. This list was used during the

interviews with a number of Dutch-Serbian alliance partners and other experts. This chapter presents general information on the interviews, as well as concepts that were identified on the basis of those interviews. Those concepts are not explained or discussed here. In the following chapter these concepts are categorized and discussed. This is done to avoid presenting the same information twice.

General characteristics of the interviews and the respondents are provided in section 4.2.

These are followed by the results of the interviews in section 4.3. After the presentation of the results, a conclusion is provided in section 4.4.

4.2 Interview and respondents

Interview

As described in section 3.3, a model containing a list of topics was developed. This model was used as a “point of departure” for all interviews. From these basic subjects, the

conversations led everywhere usually. If more guidance was needed, a number of questions were used to keep the conversation going. These questions can be found in the appendix two.

The interviews took various amounts of time, from one up to three hours. As described before, most of the interviews were recorded with a digital recorder, except when it did not

“feel” right to record, or when I was asked not to record the conversation.

Although by far most of the information was gathered during interviews, some ideas were born during short conversations with people. So, some concepts are based on these short talks.

The number of fragments per respondent in appendix three indicates whether the conversation was a full interview. This is the case with more than four fragments per respondent.

Orientation Test: categories Theorization

and model Categorization

and modeling Identification of

concepts

Together we are strong

Together we are strong

Together we are strong

Preface

Abstract

Table of Contents

1. Introduction of the research project

2. Research set-up

3. Orientation – review of literature on cooperation in alliances

4. Identification of concepts in the field