We are in this together; cooperation and coordination in international strategic alliances

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We are in this together;

cooperation and coordination in international

strategic alliances

Master Thesis

MSc BA Small Business & Entrepreneurship

University of Groningen, Faculty of Economics & Business

Duisenberg Building, Nettelbosje 2

9747 AE Groningen, The Netherlands

Harmke Eveline Hummel

Van Speykstraak 42a

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2 Abstract

This research examines how the extent of cooperation in international strategic alliances influences the level and content of coordination between the partners. Furthermore, this study looks into the relationship between the level and content of coordination and the performance of an alliance. By means of a multiple-case study conducted at four Dutch companies in the food sector, it is found that the level of cooperation influences the way in which firms specify and implement formal coordination. Subsequently, the level and content of formal coordination directly influence the performance of alliances. Furthermore, relational coordination is added, measured by the partners’ shared experiences and culture, as an additional influence on the level and content of formal coordination and performance of an alliance. As a result, it is found that trust, a shared culture and alliance experience are the major influences on the level and content of formal coordination. A shared culture is also seen as directly affecting the performance of the alliance. In addition to the traditional focus on cooperation in international strategic alliances, this research also examines the role of coordination within alliances. Therefore, this research is distinctive from most prior research. Consequently, implications for academic and managerial use are provided.

Key words: cooperation, coordination, collaboration, performance, international strategic alliance

Acknowledgements

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Cross-case analysis ... 28

Relationship between cooperation and formal coordination ... 28

Relationship between formal coordination and performance ... 30

Relationship between relational coordination and formal coordination ... 31

5. Conclusion and discussion ... 33

Research question ... 33

Cooperation ... 33

Formal coordination ... 34

Relational coordination ... 34

Limitations ... 36

Implications for practice ... 37

Importance of formal coordination ... 37

Importance of relational coordination ... 38

Directions for future research ... 38

7. References ... 39

8. Appendices ... 44

1. Background of interviewed firms ... 44

2. Connection between theory and the interview guide ... 46

3. Interview guide – Dutch ... 50

4. Deductive codes with definition ... 55

5. Rated interview topics supplemented with explanations and quotes ... 57

CFG ... 57

Khumex ... 59

Storteboom ... 61

Vreugdenhil ... 63

6. List of deductive and inductive codes ... 65

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5 1. Introduction

In a context of increasing market globalisation, companies with a foreign investment strategy need to increase their international market presence (Majocchi, Mayrhofer and Camps, 2013). International strategic alliances have become a very popular strategy for entry into international markets (Hitt, Dacin, Levitas, Arregle and Borza, 2000; Shah and Swaminathan, 2008). International strategic alliances involve a commitment between legally independent firms to reach a common goal and allow partners to share risk and resources, gain knowledge, and obtain access to markets (Hitt et al. 2000; Anderson, Christ, Dekker and Sedatole, 2014). However, while international strategic alliances can create value, most studies find that roughly half the alliances formed end up failing in that they do not attain the objectives set (Kale, Singh and Perlmutter, 2002; Mamavi and Meier, 2015). Companies are thus facing a problem: companies are increasingly turning to international strategic alliances to develop their operations but they struggle to manage partnership relations to guarantee the success of these alliances (Kale et al. 2002; Mamavi and Meier, 2015). For this reason, alliance researchers have become increasingly interested in the organizational-level factors that explain why some companies have greater alliance success than others (Schilke and Goerzen, 2010).

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Janssens, Madhok and Van Looy, 2008; Gulati et al. 2012), but most research on alliances remains single-mindedly focused on the cooperation perspective (Gulati et al. 2005; Gulati et al. 2012). A combined perspective could provide a more comprehensive and nuanced view on alliances and resolve some puzzles intractable from the cooperation perspective alone (Gulati et al. 2012).

Cooperation within the context of strategic alliances can be defined as the agreement on what partners contribute and expect from the alliance (Gulati et al. 2012). For example, partners can agree to buy new machines together (contribution) to deliver faster and newer products to the market (expected benefits). In this definition, cooperation can range from highly cooperative (high contribution and/or expected benefits) to highly uncooperative (low contribution and/or expected benefits) (Gulati et al. 2012). Cooperation can therefore be measured as an extent.

Coordination can be defined as the alignment or adjustment of partners’ actions to achieve jointly determined goals (Gulati et al. 2012). According to the literature, coordination can rely on specifying and implementing three different mechanisms. The three mechanisms are programming, hierarchy and feedback. Partners can use these mechanisms to unify and structure partners’ efforts, and to combine partners’ resources in productive ways (Gulati et al. 2005; Kale and Singh, 2009; Gulati et al. 2012). The exact interpretation of the three coordination mechanisms and the extent to which they are required depends on the nature of the interdependence between partners. Alliances with an high interdependence generally need greater and more complex coordination mechanisms as compared with those with less interdependence (Gulati et al. 2005; Kale and Singh, 2009).

Cooperation creates a form of resource interdependence between partners, since each partner’s expected benefits from the relationship depends on others’ contributions (Gulati et al. 2012). This dependency subsequently can have an influence on the way firms specify and implement the three coordination mechanisms; the level and content of coordination (Gulati et al. 2012; Choi and Beamish, 2013). According to Gulati et al. (2012), research is needed to understand when and how coordination mechanisms are changed by the extent of cooperation, and how such changes affect the performance of an alliance. Given this research gap and the problem that firms face in attaining the set objectives, the question of this research is as follows: How does the extent of cooperation influences the level and content of coordination in an international strategic alliance? And how does the level and content of coordination influence the performance of the alliance?

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we seek to find more meaningful insights into the relationship between cooperation and coordination in a strategic alliance and the relationship between coordination and alliance performance.

This research starts by an overview of the literature. It then continues by describing the research methodology, followed by the discussion of the results. Lastly, it discusses the implications and proposes opportunities for future research.

2. Literature review

In this chapter, important theoretical topics and relationships between these topics are discussed. At the end of this chapter, the research model is presented.

Strategic alliance

International strategic alliances have become an important organizational form due to globalisation (Kale et al. 2002). Globalization could be defined in simple terms as the ease of spreading people, ideas and goods throughout the world, and has caused a removal of barriers to trade (Oladimeji, Ebodaghe and Shobayo, 2017). As competition increasingly becomes more global, many firms choose international strategic alliances to enter new markets, obtain new skills, and share risks and resources (Inkpen and beamish, 1997; Zhang, Shu, Jiang and Malter 2010; Dadfar, Dahlgaard, Brege and Arzagi, 2014). Independent firms combine their resources, capabilities and competencies to develop, manufacture and distribute the goods and services of mutual interest (Dadfar et al. 2014). Alliances are a potential source of sustainable competitive advantage since partners can strengthen the basis of their competition (Dadfar et al. 2014). Yet in spite of this potential source of advantage, many alliances fail to realize their expected potential (Inkpen and Beamish, 1997; Dyer and Singh, 1998; Kumar, 2014). Alliance termination rates are reportedly over 50% (Kale and Singh, 2009; Dadfar et al. 2014; Kumar, 2014; Mamavi and Meier, 2015).

What accounts for the high failure rate of international strategic alliances? Most sociological and economic studies assert that the partners‘ failure to cooperate leads to the high failure rate (Zaheer et al. 1998; Sampson, 2004; Arend and Seale, 2005; Robinson and Stuart, 2007; Gulati et al. 2012). However, less attention is paid to a second perspective to look at international strategic alliances, namely coordination (Gulati et al. 2012).

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Cooperation

In the cooperation perspective, the implementation and success of a collaboration depends on partners’ agreement about the provision and appropriation of resources in an alliance (Gulati et al. 2012). Cooperation can be seen as an improvement process through mutual tolerance in the allocation of resources (e.g., intellectual, human or financial resources), such that no party is worse off than it would otherwise be (Faems et al. 2008). Organizations negotiate what they are willing to contribute to get what they want from the collaboration with partners (Zollo, Reuer and Singh, 2002; Robinson and Stuart, 2007; Gulati et al. 2012). The agreement about what a partner contributes and expects from the alliance describes the extent of cooperation. The larger the extent of cooperation the more inputs are provided and outputs are expected (Gulati et al. 2012).

As said before, cooperation creates a form of resource interdependence between partners since each partner’s expected benefits of the relationship is dependent on the alliance partners’ contributions (Gulati et al. 2012). The key cooperation concern is that the partners won't behave as agreed with regard to contributions or payoffs (Gulati et al. 2005; Robinson and Stuart 2007; Gulati et al. 2012). Firms may contribute less than agreed or try to claim more benefits than agreed (Gulati et al. 2012). These problems are resolved by aligning interest through mechanisms such as incentives, sanctions, monitoring, rewards, punishments, and the prospect of future interactions (Grossman and Hart, 1986; Heide and Miner, 1992; Baker, Gibbons and Murphy, 2002; Gulati et al. 2005). For example, the use of bonuses tied to alliance-level profits can create incentives for cooperative behavior across firms (Gulati et al. 2005). Cooperation between partners is also more likely with each partner anticipating doing business with the other partner into the future. Each sees the benefits from future interactions as outweighing the immediate payoffs from non-cooperative behavior and thus may choose to cooperate (Gulati et al. 2005).

To summarize the coordination perspective section, table 1 provides an overview of the elements that are covered in this perspective.

Perspective Elements Explanation Examples Literature

Cooperation Inputs provided

Outputs expected

Relative extent of the provision of resources in an alliance

Relative extent of the expected appropriation of resources in an alliance Intellectual resources Human resources Financial resources Sharing of risks Gain knowledge Access to markets Zollo et al. 2002; Robinson and Stuart, 2007; Faems et al. 2008; Gulati et al. 2012; Dadfar et al. 2014

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Coordination

Besides determining the extent of cooperation, alliance partners must coordinate their actions to manage their interdependence and realize the benefits of their relationship (Luo, 2002; Gulati et al. 2005; Faems et al. 2008; Kale and Singh, 2009; Claggett and Karahanna, 2018). A coordinated collaboration can be characterized by efficiency, the relative low cost of designing and implementing coordination mechanisms, and by effectiveness, the degree to which coordination efforts actually produce the desired alignment or adjustment of action (Gulati et al. 2012). Coordination fails due to insufficient knowledge about how one’s actions are interdependent with each partner, what decision rules a partner is likely to use, how to allocate resources, or how information should be handled (Gulati et al. 2005; Kale and Singh 2009). These problems can arise even when partners’ interests are fully aligned with each other (Kale and Singh, 2009; Gulati et al. 2012).

According to the literature, organizing to achieve coordination can rely on different mechanisms, which serve to improve the predictability of other's actions, and to increase knowledge about how actions are interdependent (Van De Ven, Delbecq and Koenig, 1976; Gulati et al 2005; Kale and Singh, 2009; Gulati et al. 2012). A distinction can be made for which goals these coordination mechanisms are used (Van de Ven et al. 1976; Gulati et al. 2005; Mijaard, Brand and Mosselman, 2005; Kale and Singh, 2009; Gulati et al. 2012; Claggett and Karahanna, 2018). Table 2a provides an overview of studies that elaborate on coordination mechanisms in their research. When defining the used coordination mechanisms, it can be observed that the definitions of the control mechanisms are overlapping (table 2b).

Table 2a: Formal coordination mechanisms

Goal Mechanisms Authors

To manage alliances 1) Programming Van de Ven et al. 1976; Gulati et al. 2005; Kale and Singh, 2009; Gulati et al. 2012

2) Hierarchy 3) Feedback To structure

organisations 1) Formalisation Meijaard, Brand and Mosselman, 2005 2) Standardization

3) Coordination To structure work

processes 1) Actor selection Claggett and Karahanna, 2018

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Mechanisms Definition

1) Programming, Formalisation and Actor selection Guidelines on what actions need to be carried out 2) Hierarchy, Standardization and Content delivery Formal role or structure with authority and

decision-making ability 3) Feedback, Coordination and Enabling shared

interpretation

Coordinating work through communication

Table 2b: Definitions formal coordination mechanisms

Whereas the used mechanisms are named differently, it can be said that authors use these to cover the same thing. Studies in the alliance literature use programming, hierarchy and feedback. Since this study focuses on international strategic alliances, these three terms are used.

The first mechanism is programming. Programming involves developing clear guidelines on what actions need to be carried out by each partner, who exactly is accountable for each task, and a timetable for implementing them (Van de Ven et al. 1976; Gulati et al. 2005; Kale and Singh, 2009; Gulati et al. 2012). Programming enables coordination by improving the predictability of others' actions, reducing frustration, and simplifying decision making (Gulati et al. 2005; Faems et al. 2008; Kale and Singh 2009; Claggett and Karahanna, 2018). Examples of programming are the use of pre-established plans, schedules, forecasts, formalized rules, policies and procedures in which roles and their articulation are formally prescribed (Van de Ven et al. 1976).

The second coordination mechanism, the use of hierarchy, involves the creation of a formal role or structure with authority and decision-making ability to oversee ongoing interactions between partners and to facilitate resource sharing (Gulati et al. 2005; Kale and Singh, 2009; Gulati et al. 2012). As an example, a firm can appoint a separate dedicated alliance manager to manage this, or both partners can create an alliance review committee to play this role (Kale and Singh, 2009). Hierarchy enables coordination by dedicating individuals to the task of coordination, and allowing them to be informed about and even decide how different interdependent partners should behave (Gulati et al. 2005).

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In addition to the formal coordination mechanisms, firms can also use relational coordination – specifically, the relationship dimensions of relational coordination – to align their actions (Claggett and Karahanna, 2018). Relational coordination increases confidence about how others will behave and how one should behave in a given situation, and so enable the alignment of action (Gulati et al. 2005; Faems et al. 2008; Claggett and Karahanna, 2018). According to the literature, relational coordination can have multiple dimensions, for example: a shared experience, mutual respect, leadership, precedent and a shared culture (Gulati et al. 2005; Faems et al. 2008; Claggett and Karahanna, 2018).

This research will focus on two of these dimensions, namely a shared experience and a shared culture. These two are chosen since they are used in most literature and relevant when looking at international strategic alliances (Gulati et al. 2005; Faems et al. 2008; Claggett and Karahanna, 2018).

A shared experience refers to firms which have dealt with each other before to reach a common goal together. A shared experience can give a firm knowledge about who needs to know what based on the workflow (i.e., who to share information with) and what expertise each individual in a partnering firm possesses. This knowledge can help, for example, in selecting the best actor to coordinate problems during the alliance (hierarchy mechanism) (Claggett and Karahanna, 2018).

A shared culture consist of comparable beliefs, behaviors, norms, objects, and other characteristics common to the members of a firm. A shared culture allows for a shared language and taken-for-granted understandings which makes it easier to predict the decision steps a firm can take and improves the ability of groups to successfully interpret information shared through the coordinating mechanism, leading to improved outcomes (Gulati et al. 2005; Faems et al. 2008; Claggett and Karahanna, 2018). For these reasons, we expect a stronger relationship between the enactment of the coordination mechanisms and the performance of an alliance in the presence of relational coordination (Gulati et al. 2005; Faems et al. 2008; Claggett and Karahanna, 2018).

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Perspective Elements Explanation Examples/categories Literature

Formal

coordination Level and content of the programming mechanism

Level and content of the hierarchy mechanism

Level and content of the feedback mechanism

Developing clear guidelines on what actions need to be carried out by each partner, who exactly is accountable for each task, and a timetable for implementing them Creating a formal role or structure with authority and decision-making ability to oversee ongoing interactions between partners and to facilitate resource sharing Creating a formal structure in which partners regularly inform each other of their respective actions or decisions and to periodically evaluate the evolving nature of their interdependence Pre-established plans, schedules, forecasts, formalized rules, policies and procedures Separate dedicated alliance manager, review committee Committees, meetings, group training programs, combined teams Van de Ven et al. 1976; Gulati et al. 2005; Kale and Singh, 2009; Gulati et al. 2012 Relational

coordination Shared experience

Shared culture

When a firm has dealt with another firm before to reach a common goal together When firms have a comparable culture, which consists of the beliefs, behaviors, norms, objects, and other

characteristics common to the members of a firm

Knowledge that informs a firm about the routines of another firm, either through a shared experience or a shared culture Gulati et al. 2005; Faems et al. 2008; Claggett and Karahanna, 2018

Table 3: Overview of the coordination perspective

Integrating cooperation and coordination

Cooperation involves the agreement about what a partner contributes and wants from the alliance and creates a form of resource interdependence (Gulati et al. 2012). While this perspective has its focus on partners‘ level of agreement about the provision and appropriation of resources, the coordination perspective highlights the specific ways that partners agree on to implement and operate the relationship (Gulati et al. 2012).

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Performance

Performance can be measured as the extent to which partners achieve their strategic objectives (Yan and Gray, 1994). According to Zollo (2002), three indicators can be used to directly gauge the performance of alliances. First, the knowledge accumulated from participating in an alliance. Alliance research identifies knowledge accumulation as a key organizational outcome of interfirm collaboration (Zollo et al., 2002). A second indicator is the extent to which an alliance creates new opportunities for a firm. The creation of new, often unexpected, opportunities can be seen as an important source of value from collaborations (Zollo et al. 2002). Finally, to capture the other elements of firm’s strategic intents in engaging in alliances, the degree to which the alliance satisfied the partnering firm’s initial objectives can be used as third indicator (Zollo et al., 2002) .

When partnering firms work together successfully, they are able to enhance cooperative behaviour and resolve competitive conflicts, obtain greater learning benefits, develop innovative products, deal with turbulence and market uncertainty and improve technical skills (Yang, Lai, Wang, Rauniar and Xie, 2014). However, most alliances fail in that they do not attain the objectives set (Kale et al. 2002; Yang et al. 2014; Mamavi and Meier, 2015). In this research, we investigate how the level of cooperation influences the coordination mechanisms and subsequently how this change influences the performance of the alliance.

Figure 1: Conceptual model

3. Methodology

This section presents the design of the study and the steps in collecting the data. Furthermore, it analysis the validity of this study based on academic literature. Last, it presents the steps in analysing the data.

Research design

Since roughly half the alliance formed end up failing, while they can be a potential source of sustainable competitive advantage (Kale et al. 2002; Mamavi and Meier, 2015), a more detailed understanding is needed how different factors enable a firm to enhance their performance.

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Robinson and Stuart, 2007; Gulati et al. 2012). This study overcomes this limitation by conceptually separating cooperation and coordination in the context of international strategic alliances.

A visual presentation of what this study will encompass is presented below in figure 1. This study examines how the level of cooperation (X) influences (a) the level of formal coordination (Z) and how formal coordination influences (c) the performance of an alliance (A). In addition to the formal mechanisms of coordination, elements of relational coordination increase confidence about how others will behave and how one should behave in a given situation, and so enable coordination (Gulati et al. 2005). This study therefore examines how relational coordination elements (Y) influence (b) the level of formal coordination. To examine how the level of cooperation and the level of relational coordination influence the performance during the alliance, line d and e are added. Solid lines in figure x represent pre-alliance data and dotted lines represent post-pre-alliance data.

Figure 2: Research model

Data collection Firm selection

To study cooperation and coordination in the context of international strategic alliances, companies with an international focus are required. Based on Grant (2004) the term ‘international strategic alliance’ refers to ‘clear agreements characterized by the commitment of two or more firms to reach a common goal by bringing together resources and activities, with at least one of the partner’s headquarters located outside the country of operations of the alliance’. These agreements can be either spoken or written agreements.

This research focus on dutch firms, with an alliance outside the Netherlands, operating in the food sector. Selecting firms in the food sector mitigates industry level differences between the selected firms which increases internal validity. Furthermore, due to the researchers’ background in this industry, her personal network is highly suitable to contact firms in the food sector.

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machines, and with companies who wish to receive a certain end product. To mitigate collaboration differences, we focus on collaborations located at the same place in the production chain.

We chose to focus on collaborations at the end of the production chain; all selected collaborations should contain agreements with companies that expect an end product adapted to their specific wishes. Furthermore, we focus on collaborations set up for the same purpose: better products adapted for the end customer. The selected collaborations should contain business-to-business collaborations, which means that the collaboration partners are not the final customer of the product but buy a product which they can resell to their customers.

To investigate if differences can be found between small and medium-sized enterprises (SMEs) and large enterprises, this research focus on two large enterprises and two SMEs. According to the Organization for Economic Co-operation and Development (OECD), firms below 250 employees are considered as SMEs and firms above 250 employees are considered as large enterprises. In this research we focus on firms that are well below or above this limit. Based on the preconditions described above, this research focus on four different companies. These four companies are CFG Holding B.V., Khumex International Food, 2 Sisters Storteboom B.V. and Vreugdenhil Dairy Foods.

Interviews

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Data quality

To improve the validity of this study, we take different aspects of validity into account, namely: construct validity, internal validity and external validity (Neall and Tuckey, 2014). Construct validity is the degree to which a study actually measures what it should measure. Internal validity is the degree to which there is a cause effect relationship in the result of the study. External validity is the degree in which the results stay true in other situations (Neall and Tuckey, 2014).

To control for construct validity different aspects are considered. First of all, the informants must be personally engaged in the management of the international strategic alliance from the start. This will enhance the reliability of this study since the participants reflect our research phenomenon richly (Eisenhardt and Graebner, 2007). Second, we focus on one particular industry which controls for industry differences (Croonen and Brand, 2015). Last, to make sure interview questions truly discuss a certain theoretical topic, an overview table is set up that sows the transformation of theoretical topics to interview questions (appendix 8.2). To control for internal validity we will compare the results with conflicting and similar literature. Literature discussing similar findings ties together underlying similarities in phenomena normally not associated with each other (Eisenhardt, 1989). Comparison with conflicting findings force to discover the underlying reasons for the conflict (Eisenhardt, 1989).

To control for external validity this research includes as many different alliances as possible, within the time constraints of this research, to provide an holistic understanding of the relationship between cooperation, coordination and alliances performance.

Data analysis

The interviews will be analysed through a within-case analysis and a cross-case analysis. While single-case studies can richly describe the existence of a phenomenon, multiple-case studies typically provide a stronger base for theory building (Eisenhardt and Graebner, 2007). Multiple cases enable comparisons that clarify whether an emergent finding is simply idiosyncratic to a single case or consistently replicated by several cases (Eisenhardt and Graebner, 2007).

Within-case analysis

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codes are preconstructed labels based on theoretical topics found in the literature. The deductive codes can be found in appendix 8.4. Inductive codes are formulated by the researcher, based on emergent topics from the interview. Inductive codes will be used to complement the preconstructed deductive codes. Special attention will be paid to code frequencies and mechanisms that explain the relationship between cooperation, coordination and alliance performance. After this step, all interview topics will be scored based on the codified data, on a Likert-scale of 1 to 4. These scores represent a general indication of the concepts’ presence in the qualitative data. These scores are clarified with an explanation and corresponding quotes. These tables are created to be used in within- and cross-case analysis, aiming to improve the level of structure within this analysis.

Cross-case analysis

Coupled with within-case analysis is cross-case search for patterns. Cross-case analysis improve the likelihood of accurate and reliable theory, that is, a theory with a close fit with the data (Eisenhardt, 1989). This analysis is structured by comparing the firms in regard to codes and relationships found in analysing the cases. In this step we propose and discuss hypotheses emerging from the cross-case analysis (Eisenhardt, 1989).

4. Analysis

This chapter consists of a within-case and cross case analysis. During the analysis of the interview summaries, deductive and inductive codes are used as mentioned in the method section. The full list of the deductive and inductive codes including the code frequencies can be found in appendix 8.6.

Within-case analysis

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explanation and corresponding quotes. The tables with these ratings can be found in appendix 8.5.

1. CFG Introduction

CFG is a poultry processing company. Activities within CFG contain logistics, administration, quality and production. Within the production process, slaughtered chickens are processed and packaged. CFG currently has around 150 employees. The interviewee is the founder and owner of CFG. CFG has an alliance with Kentucky Fried Chicken (KFC). KFC is a restaurant chain in the quick-restaurant-service spread throughout the entire world, headquartered in London, England. CFG produces poultry products for KFC, with whom they have an alliance since 2013.

Content analysis

Relationship between cooperation and formal coordination

From the start of the alliance with KFC, CFG has invested a lot in buildings and machinery. New machines were purchased at the beginning to meet KFC's volume and quality requirements. Since the alliance, CFG has bought the building next to them, including new machinery, as an extra production hall to produce products for KFC. For CFG, these investments are major investments that entail the necessary risks. To earn back the high investments, CFG needed commitment from KFC that a certain volume would be achieved. The inputs provided and outputs expected can therefore both be marked as high.

Due to the high level of cooperation within the alliance, CFG felt a necessity to cover risks in agreements, to be sure of a commitment from KFC. CFG and KFC made clear guidelines on what actions need to be carried out by each partner, who exactly is accountable for each task, and a timetable for implementing them. Every time CFG makes a big investment, agreements regarding commitments are laid down in a three-year framework agreement. In addition, every year the partners prepare a report together in which they write down the prices, volumes, forecasts, new investments, and quality requirements they expect from each other for the coming year. These agreements state, for example, that KFC is obliged to purchase a fixed quantity for a certain amount of time. Through these agreements CFG can be more certain that the high investments made will be earned back. Within the contracts set up by the partners, guidelines are defined which the partners must adhere to. If these guidelines are not adhered to, a permanent team can make decisions in this regard. Having this team guarantees progress within the alliance which also provides more certainty for CFG. The partners did not make clear

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agreements on how and how often they have meetings. However, even without these fixed agreements, they still meet on a monthly basis. If they have meetings with each other, fixed topics are discussed such as prices and volumes. Additional topics vary depending on the projects that are running. Having these meetings on a regularly basis also guarantees progress within the alliance. If progress is secured, CFG can be more certain that the high investments will be earned back. Based on this analysis, the level of programming and hierarchy can both be marked as high. The level of feedback can be marked as medium, since the partners do not have fixed meetings but still meet on a regularly basis.

Relationship between formal coordination and performance

According to the interviewee, the agreements played a clear role in the success of the alliance. Through these agreements the partners had clear guidelines on how they could achieve their goal of growing together. For example, by having clear guidelines on what actions need to be carried out by each partner, it was clear to both partners for which part of the growth they were responsible. Furthermore, by having a team with authority and decision-making ability to oversee ongoing interactions, progress was monitored which contributed to targets being met within the alliance. Having contact on a regular basis was mentioned by the interviewee as the main reason for the success of the alliance. Thanks to the intensive and open communication, CFG and KFC were able to gain a great deal of knowledge in the field of new production techniques. Due to these new techniques the partners were able to grow in volume and quality, and deliver new customers with improved products. The initial objectives, knowledge accumulated and opportunities created can therefore all be marked as high.

Relationship between relational coordination and formal coordination

Even though the level of cooperation played an important role in the agreements made between the partners, this is not the only influence as mentioned by the interviewee. The interviewee had worked with KFC before, during a previous job. The interviewee’s familiarity with KFC made him want to work with KFC again. These previous experiences between KFC and the interviewee, the founder of CFG, were so good that they led to a basic level of trust between the partners before they even started their alliance. According to the interviewee, this level of trust can be seen as the basis for all their agreements made. Without this trust they would have made many more agreements to be sure that all risks were covered and that the targets could be achieved.

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Due to the shared experiences, the partners were familiar with each other's corporate culture. Both partners find openness very important within their company, but also towards external partners. This shared culture plays an important role in the alliance. Because both parties consider transparency to be important, they keep all processes within the alliance open and no things are held back. By doing this, both parties are never confronted with unpleasant surprises. This shared culture influenced the agreements the partners made on how often they see each other. Because both parties know each other and trust that everything is shared fairly, they do not find it necessary to plan fixed meetings. Both parties assume that if there are things that need to be discussed, the partners themselves will bring it up. This also has a direct influence on the performance of the alliance. By both keeping the lines of communication open, problems are quickly initialized and solved.

In addition to this influence of having a shared culture, another influence emerged during the interview. KFC is a large company with many more alliances than only the alliance with CFG. As a result, KFC already had a plan prepared in which they wanted their partner to comply, a ‘code of practice’. This has had a major impact on the agreements between CFG and KFC. However, it should be mentioned here that the interviewee indicated that there was enough room to adjust this ‘code of practice’ to the alliance with CFG.

2. Khumex Introduction

Khumex is a trading office in poultry products within Europe. Khumex is a small company with 10 employees. Activities within Khumex are purchasing, sales, and administration. The interviewee is the founder and owner of Khumex. Khumex has an alliance with a Lithuanian company, KG. KG is a company that produces poultry products. Khumex sells the poultry products from KG on the western market. Khumex and KG have an alliance since 2012.

Within the alliance with KG, Khumex did not invest in terms of machinery and buildings, only in terms of time and personnel. Khumex hired one employee especially for the alliance with KG. Khumex is a small company in which only 10 people work. The interviewee therefore indicated that hiring an employee specifically for an alliance can be seen as a major investment for Khumex. It should be mentioned here, however, that the

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interviewee also indicated that if the alliance would ever come to an end, this staff member could be deployed for new collaborations. For this reason, the inputs provided can be characterized as medium.

It was very important for Khumex that the alliance with KG would succeed. The interviewee indicated that the volumes the partners agreed upon at the beginning of the alliance were difficult to find somewhere else. If the alliance did not succeed, Khumex would have to look for new suppliers, which would cost Khumex a lot of time. Outputs expected can therefore be characterized as high.

Due to the importance of the alliance, a lot of time was invested into making clear agreements1_{. It even involved a specialist to help make clear agreements with regard to}

goals, volumes, prices, qualities and penalties. These agreements are laid down in various contracts. Examples are agreements stating the volumes and prices that both parties must adhere to. Thanks to these agreements, more certainty was created for Khumex that the targets within the alliance would be achieved. It has also been agreed in these contracts that KG itself may not supply countries to which Khumex sells products for KG. Consequences are established if KG does not adhere to this. Permanent persons have been appointed to monitor this for both parties. Consequences are also recorded if volumes are not achieved by both parties. Thanks to these agreements, Khumex is assured of a permanent supply, and assured of a fixed group of customers. In addition, agreements regarding the extent and ways of communication between the partners have also been clearly put in writing. The partners talk every Monday at 8 a.m. during a conference call, and every first Monday of the month there is a physical meeting in Lithuania with a permanent team. Thanks to these agreements, Khumex can monitor the supply from KG and can respond adequately if goals are not achieved. Because of all these agreements laid down in contracts, the level of programming, hierarchy and feedback can all be marked as high.

According to the interviewee, the agreements laid down in contracts affected the performance of the alliance. The interviewee indicated that from the start of the alliance, the partners have made great strides in terms of volume. The agreements made clear who was responsible for which part of the growth, how progress was being monitored, and who was responsible for solving problems that came up during the alliance. Having clear

1_{Khumex allowed us to read the contracts that are put in writing between Khumex and KG. These contracts fully corresponded} with the interviewee’s answers. Unfortunately, Khumex was the only company that gave us access to their written agreements.

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agreements about the level and content of communication also had a clear role in this. These agreements provided Khumex with the opportunity to monitor the progress of the alliance, to intervene if things were not going well and to propose new ideas to KG. At the moment, the collaboration with KG is not running smoothly according to the interviewee. KG no longer supplies the correct volumes to Khumex, which means that Khumex often has to disappoint its customers. This fluctuation in volumes is caused by KG who does not continue to invest in newer and more efficient machines. Khumex has been noticing this standstill for a while and is currently trying to stimulate improvement in this area. Penalties are sometimes used to make clear to KG that things must change. However, Khumex prefers to discuss with KG during the weekly meetings that improvements need to be made. Khumex believes it is important to maintain a good long-term relationship with KG and therefore sees joint consultation as the best way to change KG instead of constantly using penalties. At KG this is not yet fully understood and solutions are not yet introduced due to cultural differences between Khumex and KG. We will elaborate on this in the next paragraph.

The performance of the alliance can be characterized as medium. The partners have experienced a growth together and also expect this for the future. However, they are currently experiencing some turbulence due to KG's corporate culture.

Before Khumex and KG started an alliance, they had been doing business with each other for a few years. During these years, both Khumex and KG experienced a significant growth in volume. This shared experience created a trust between the partners that both parties were capable of doing trade in high volumes. These high volumes, however, made certainty on commitment from both parties increasingly important. To cover the risks for both partners, since they became so important to each other, KG and Khumex started an alliance. This alliance meant better agreements with each other to record commitment from both sides. According to the inverviewee, the mutual trust that had been established prior to the alliance, was the reason they started this alliance. However, since KG became so important for Khumex, they felt the necessity to lay down different agreements in written contracts.

Due to the shared experiences, both parties were familiar with each other's corporate cultures before the alliance. As a result, Khumex knew that KG has a completely different corporate culture than Khumex. KG still features a vertically layered company structure where each layer is accountable to the layer above. Khumex is a company in which everyone bears responsibility for their own activities and in which there is a very

‘’If your competitors are already on a racing bike but you are still on an old bike, you won't

win the race.’’

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open atmosphere.

The interviewee indicated that due to these cultural differences, he found it very important to make clear agreements with KG. Especially having extensive communication was often mentioned in this regard. Because both parties work in a completely different way, different expectations often arise towards each other. By having a lot of consultation, these expectations can be expressed and explained. The clear agreements on paper on how and by whom certain tasks are performed are also necessary in this regard.

Not having a shared culture therefore had a major impact on the agreements made for the alliance between KG and Khumex.

Despite the all the clear agreements that were put in writing, the alliance is not yet functioning as Khumex would like. Quick decisions can be made by Khumex due to its corporate culture. The opposite can be said about KG, in which decisions have to pass through very many layers. This causes irritations for Khumex and a lag behind competing parties. Having no shared culture therefore also has a direct impact on the performance of the alliance.

3. Storteboom Introduction

Storteboom is a poultry processing company with locations in the Netherlands and in Poland. In the Netherlands, they have two slaughterhouses, two filleting factories, a factory where they process chicken products for retail, and a factory to cook their products. In Poland, they have two large factories in which slaughtering, processing and packaging is done at each factory. Storteboom has around 2.5 thousand employees, spread across the different locations. The interviewee is commercial director of these different locations and has been working for Storteboom since 1995. Storteboom has an alliance with KFC. KFC is discussed earlier during our previous case. Storteboom and KFC have an alliance since 1999.

Storteboom and KFC started an alliance to grow together in volume and quality. Storteboom has invested a lot since the start of this alliance, mainly in machinery. An entire department in one factory of Storteboom is specifically equipped for KFC. These investments are major investments for Storteboom. In order to earn back those investments, the goal of growing together in quality and volume had to be achieved. The inputs provided and outputs expected can therefore both be marked as high.

The goal of growing together is clearly included in the agreements made between Storteboom and KFC. KFC has set out a ‘code of practice’ for Storteboom. This contains

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the conditions to which the delivery of Storteboom must comply. They also have made contracts together stating how much Storteboom must deliver, how much KFC must purchase, the time frame in which certain goals must be achieved, and growth expectations from KFC. Within these contracts, consequences are laid down if a partner does not comply with the agreements. These contracts also state who is responsible for tackling a problem. They never use these consequences laid down in contracts but problems are seen and resolved early through regular meetings with a permanent team. This permanent team meets on average twice a month. These meetings are not fixed, but they are so important that the interviewee indicated that they cannot work well together without these meetings. Since these meetings are so important, the partners meet on a regular basis. Due to the high investments and the relevance of good cooperation, Storteboom sees the contracts in which agreements are put in writing as indispensable. For Storteboom, a certainty on the commitment from KFC is necessary to cover the risks. Agreements are sometimes updated because new investments are made, in which Storteboom again wants to ensure certainty from KFC with new agreements. Because of all these agreements, the level of programming and hierarchy can both be marked as high. The level of feedback can be marked as medium, since the partners do not have fixed agreements but still meet on a regularly basis.

As noted above, Storteboom sees the contracts in which agreements are made as necessary to achieve their goals. According to the interviewee, agreements that guarantee action plans and progress are essential to the performance of the alliance. These agreements give Storteboom and KFC the opportunity to be ahead of problems and to monitor the progress of the alliance properly. As a result, Storteboom scores highly on all three components of performance.

In achieving the targets set, having close interaction between the partners plays a major role. As a result of the intensive communication, problems are detected on time and confidence is created that both parties are actively involved in the alliance. Furthermore, having a high level of interaction has led to new projects such as the development of new products. These interactions also created an open atmosphere in which both parties were able learn from each other’s specialties.

Since Storteboom supplied KFC through other partners, they heard about this company before. Therefore, without having a shared experience, Storteboom knew that KFC was a reliable customer. By knowing this, there was already a basic level of trust that made

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Storteboom interested in starting an alliance with KFC. According to the interviewee, this level of trust can be seen as the basis of all their investments and agreements made. Without this trust, they would not have made the high investments in new machinery.

KFC and Storteboom were not familiar with each other's corporate culture at the start of the alliance. KFC is a large company with many more alliances than only the one with Storteboom, as with the alliance with CFG we discussed previously. Therefore, KFC also had a plan prepared which they wanted Storteboom to comply to. This influenced the way in which Storteboom and KFC have made agreements. However, it should be noted that the interviewee indicated that there was enough room to talk about adjustments in the agreements for the specific alliance with Storteboom.

KFC is also a very young company in terms of staff. Within a young company functions are regularly replaced since young people change jobs more often. Storteboom cannot afford that agreements with one person are not accepted by another person. For this reason, the interviewee indicated the importance of not only agreements verbally agreed upon, but also put in writing. It can thus be noted that the corporate culture of KFC and their experience with alliances played a major role in the agreements made between the partners.

4. Vreugdenhil Introduction

Vreugdenhil is a producer of dairy products, in particular milk powder. Vreugdenhil is a family business, founded in 1954. Vreugdenhil consist of an office in Nijkerk and three production locations in Slachtebrug, Gorkum and Barneveld. The company currently has around 400 employees, spread across the different locations. The interviewee is business unit manager since 2005. The products from Vreugdenhil are exported to 130 countries, especially countries around the equator where it is too hot for cows. Milk powder is a good alternative in these countries. Vreugdenhil has an alliance with Nestlé, for whom they produce dairy foods.

Nestlé is a Swiss food and drink company headquartered in Vevey, Switzerland. Vreugdenhil and Nestlé have an alliance since 2006.

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Vreugdenhil has made many more investments during the collaboration. New machines have been purchased for the factory in which products for Nestlé are produced. Furthermore, several departments within Vreugdenhil are specifically designed for Nestlé and linked to departments of Nestlé, so that questions and problems can be resolved quickly. For this reason, the inputs provided can be characterized as high.

Because buying the factory was a big investment, it was very important for Vreugdenhil that this investment would be earned back. The factory was set up to meet Nestlé’s requirements since it was their factory first. This made Nestlé a suitable and important customer for Vreugdenhil. By forming an alliance, Vreugdenhil could also be more certain, with Nestlé as a permanent customer, that volumes would be achieved so that the investments would be earned back. Outputs expected within the alliance with Nestlé can therefore be characterized as high.

Due to the importance of the alliance, a lot of time was put into making clear agreements between the partners. According to the interviewee, a clear distinction has been made between tasks that are within the responsibility of Nestlé and tasks that are within the responsibility of Vreugdenhil. Once Nestlé has placed an order with Vreugdenhil, the subsequent process is the responsibility of Vreugdenhil, until it has been delivered to the port. After that, it is the responsibility of Nestlé to sell the products. Within the process of Vreugdenhil, the partners are in regular contact with each other since certain aspects of the production also fall under the responsibility of Nestlé. Packaging is an example. Because Nestlé knows the market, they know what should be on the packaging. Vreugdenhil is responsible for making the packaging, but Nestlé tells them what to write down on it. The agreements are written down in contracts. These contracts also describe in detail the requirements that products must meet and within which time Vreugdenhil must deliver. In addition, KPIs are set out in these contracts. Examples of these KPIs are percentages that must be achieved in terms of volume, and a maximum percentage that Vreugdenhil may have in terms of complaints. These KPIs are monitored and adjusted on a monthly basis. Within the contracts permanent persons are appointed who are responsible if something does not go well and who must ensure that these matters are improved on. The partners also have made agreements at different levels about the content and frequency of their communication. Every month there is a meeting with all stakeholders, in which fixed topics are discussed. The schedule department has weekly consultations with Nestlé’s schedule department to discuss current orders, delays and issues. Furthermore, the interviewee blocks an hour in his agenda every week to go through current issues with his colleague, the main contact person from Nestlé. Thanks to these clear agreements in all three areas, for Vreugdenhil the risks of the large

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investments were covered by a commitment from Nestlé. By clearly dividing tasks, having clear guidelines and having close contact with permanent people, progress of the alliance with Nestlé is guaranteed for Vreugdenhil, and the right people can be approached in the event of problems. Due to the high investments and the importance of the alliance, the interviewee indicated that he considers these agreements to be very important and therefore has spent a lot of time on them.

As analysed extensively above, the level of programming, hierarchy and feedback can all be marked as high. These agreements laid down in contracts had a major role in the performance of the alliance, which can be characterized as high on all three aspects. Before Vreugdenhil and Nestlé started the alliance, they were already doing trade with each other, but less intensively and with far fewer agreements. During this trade, Vreugdenhil often received criticism by Nestlé, such as non-compliance with quality requirements. By having clear agreements, they can grow together and really be mutually valuable partners who learn from each other. The clear division of tasks ensures that everyone is focused on the part that everyone is good at. The clear KPIs and people who are responsible for this ensure that all components are actually running smoothly. Having communication on a regular basis is is mentioned by the interviewee as the main reason that the alliance is going well. This allows them to steer each other, learn from each other and introduce new projects.

The partners would like to expand their alliance even more. Vreugdenhil would like to receive more information from Nestlé about what is going on in the market. Information about what Nestlé drives to sell a certain product and with what issues Nestlé is confronted. By sharing this information, Vreugdenhil can support Nestlé even better with new ideas. To achieve this, the partners are working on more ways to communicate with each other.

The partners already did business with each other before the alliance started, but at a much lower level. According to the interviewee, Vreugdenhil was hardly familiar with Nestlé as a company. Because the partners had no shared experience, they were not really familiar with each other's corporate cultures. No influence of this unfamiliarity can be found in the agreements made.

Agreements, however, have been influenced by Nestlé's corporate culture. Nestlé is a very large organization that is involved in many more alliances than only the alliance

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with Vreugdenhil. As a result, they already had a clear structure of how they would like to implement the alliance. There have been no adjustments in this regard as the partners became more familiar with each other's corporate cultures, which do not differ greatly from each other. The agreements were already so comprehensive that no new agreements had to be made.

Cross-case analysis

This analysis is done by comparing the within-case results on the basis of the three different relationships, as used in the within-case analysis, to explore themes, differences and similarities. After the analysis of each relationship, hypotheses originating from the analysis are proposed based on the analysis method of Eisenhardt (1989).

Relationship between cooperation and formal coordination

Comparing the scores in table 4, it can be seen that three firms score a high on the inputs provided, and one firm scores a medium. On the outputs expected, all firms score a high. When combining the inputs provided and outputs expected, all four firms score a medium to high on average. This means that the level of cooperation for all firms is largely comparable.

CFG Khumex Storteboom Vreugdenhil

Inputs High Medium High High

Outputs High High High High

Table 4: Level of cooperation

Comparing the scores in table 5, it can be seen that all firms score a high on programming and hierarchy. On feedback, two firms score a high and two firms scores a medium. When combining the three components of formal coordination, all four firms score high on average. This means that the level of formal coordination for all firms is also largely comparable.

Programming High High High High

Hierarchy High High High High

Feedback Medium High Medium High

Table 5: Level of formal coordination

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cooperation, a lot of time was put into making clear agreements between the partners. All partners felt a necessity to put these agreements in writing, to be sure of commitment from their partners.

All partners made clear guidelines in contracts what actions need to be carried out by each partner, who exactly is accountable for each task, and a timetable for implementing them. These agreements state, for example, that a partner is obliged to purchase or supply a fixed quantity for a certain amount of time. By having these agreements, commitment from the partner is recorded. Within the contracts set up by the firms, guidelines are defined which the partners must adhere to. For all firms applies that these contracts also state who is responsible for tackling a problem. All companies have recorded how problems are resolved, to ensure that progress of the alliance is monitored and secured. All four companies, however, view feedback mechanisms as more essential to guarantee progress within the alliance

than having clear guidelines on how problems should be solved. All interviewees indicated that they have a long-term collaboration in mind with their partners. Therefore, they indicated that they consider having personal meetings on a regular basis as more effective than solving problems by enforcing the established consequences in contracts. Thanks to these meetings problems are detected on time and a confidence is created that both parties are actively involved in the alliance. Not all companies have established fixed meetings in contracts. However, all companies meet on a regular basis with permanent staff within the alliance.

All in all, the level of cooperation seems to influence the level of formal coordination considerably.

Hypotheses:

1. The level of cooperation creates a form of interdependence between partners, since each partner’s expected benefits from the alliance depends on the partner’s commitment.

2. With a high level of cooperation in place, more agreements are put in writing to ensure that commitment from partners is recorded and progress of the alliance is monitored and ensured.

3. Within an alliance with a high level of cooperation, feedback mechanisms are seen as more effective in a long-term alliance than having hierarchy mechanisms.

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Relationship between formal coordination and performance

Table 6 demonstrates that no firm scores a low on the performance of the alliance. All firms have a medium to high score on the level of performance. When combining the three components of performance, three firms score on average a high on the level of performance, and one firm scores on average a medium.

Initial objectives

High Medium High High

Knowledge accumulated

Opportunities created

Table 6: performance of the alliance

As described earlier, all four firms score a high on average on the level of formal coordination. All interviewees indicated that this high level of formal coordination influenced the performance of the alliance. Through these agreements the partners had clear guidelines on how they could achieve the goal of their alliance. For example, by having clear guidelines on what actions need to be carried out by each partner, it was clear to both partners for which part of the goal they were responsible. Furthermore, by having a formal role with authority and decision-making ability to oversee ongoing interactions, progress was monitored which facilitated the achievement of targets within the alliance. Having contact on a regular basis was most often mentioned by the interviewees as reason for the success of the alliance. Due to feedback mechanisms, partners were able to gain a great deal of knowledge in the field of their partners’ specialities and were able to provide their partners with new ideas, which resulted in improved products for the end consumer.

All in all, it can be stated that the level of formal coordination had a significant influence on the performance of the alliance.

Hypotheses:

1. Formal coordination mechanisms are important because partners can use these mechanisms to unify and structure partners’ efforts, and to combine partners’ resources in productive ways.

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Relationship between relational coordination and formal coordination

Whereas the level of cooperation, the level of coordination and the performance of the alliance are quite comparable, the level of relational coordination is rather divergent among the four firms. For Storteboom both aspects of relational coordination are not applicable. For Vreugdenhil those aspects are applicable only to a very low extent, whereas the aspects are applicable to a very high extent for CFG. For Khumex a shared culture is not applicable, whereas a shared experience is highly applicable.

Shared experience

High High Completely not Low

Shared culture High Completely not Completely not Low Table 7: level of relational coordination

Two firms score a high on the level of shared experience. In both firms, a basic level of trust was created as a result of these shared experiences which led to a willingness to form an alliance.

Storteboom and their partner KFC do not have a shared experience. However, since Storteboom supplied KFC through other partners, they had heard about this company before. Therefore, despite not having a shared experience, Storteboom knew that KFC was a reliable customer. By knowing KFC’s reputation, there was already a basic level of trust that made Storteboom willing to start an alliance with KFC.

The interviewees indicated that trusting a partner can be seen as the basis of all the investments and agreements made. However, even with this level of trust, the interviewees still felt a necessity to put clear agreements in writing, to be sure of commitment from their partners. Yet, without that basic trust in a partner, there would have been more agreements or even no alliance, according to the interviewees.

During the interview with Khumex, the influence of having no shared culture was mentioned several times. Because both parties work in a completely different way due to a different corporate culture, different expectations often arise towards each other. By having a lot of consultation, these expectations are expressed and explained. Clear agreements on paper on how and by whom certain tasks are performed are also perceived as necessary in this regard. Not having a shared culture therefore had an impact on the agreements made between KG and Khumex.

We are in this together; cooperation and coordination in international strategic alliances