Strategic alliances in the renewable energy sector

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Strategic alliances in the renewable energy sector

Master thesis, Msc Business Administration, Strategy & Innovation University of Groningen, Faculty of Economics and Business

August 2013

Jan Hendrik de Jong Student number: 1617168

Nieuwe Sint Jansstraat 56 9711 VK Groningen T: +31 (0)6 54314996 Email: jnhdjng@gmail.com Supervisors: Prof.Dr. D.L.M Faems Dr. P.M.M. de Faria

Acknowledgments

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 2

Abstract

Strategic alliances have become more important over the years and there is limited research about them considering the renewable energy market. To get a start in this field this

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1. Introduction

The energy sector has been a sector that has gathered a lot of attention over the last years. Fossil fuels are getting more exhausted every day and the discussion about the depletion of the earth’s supply for us and the next generations is regularly a debate at the highest levels of the international politics. Furthermore, the emission of greenhouse gasses, which are an effect of using these materials, are a ‘hot’ debate, concerning global warming. For example, in 2009 leaders from over 190 countries joined the United Nations Climate Change

Conference in Copenhagen to discuss cutting green house gas emissions (Wall Street Journal, 2009).

The upside of the depletion is that there is a need to innovate. According to Chesbrough (2003), there are many new opportunities for companies to conduct their business due to the fact that the pace of the environmental change (business environment) is increasing all the time; however, the larger amount of possibilities also bring forth a difficulty for these organizations: How does one keep up with all the new changes?

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 6 As the volume of fossil fuels are declining, structural innovations may be expected in the area of renewable energy. Therefore, this thesis will concern strategic alliances within the realm of renewable energy. Renewable energy is a source of energy that comes from resources that will not exhaust and the usage has no negative effect on future generations. Examples of sources that are used for the creation of renewable energy are wind, water or the sun. That the importance of renewable energy is growing can be seen in the upward tendency concerning the use of renewable energy. An example of this is mentioned by Zhang, Liu, Wang and Zhou (2013), where they state that for China, even though green house emissions have increased as a result of increasing use of energy, the ratio between energy from fossil fuels and renewable energy has gone down. Furthermore, the total global renewable energy investment was 237 billion USD in 2011, which the first year that these investments exceeded the investments in fossil fuel power generation (223 billion USD), according to the report on the renewable energy country attractiveness by Ernst&Young (2012).

Considering the above, this research will look at strategic alliances. Strategic alliances are “inter-firm collaborations over a given economic space and time for the attainment of

mutually defined goals,” according to Glaister and Buckley (1996, p301-302).

To start this thesis, first is looked at how the current market is formed, considering alliances. A quantitative analysis is done, which will search an answer to the following question:

 To what extent do firms engage in strategic alliances?

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After creating the bigger picture of to what extent firms do engage in alliances in the renewable energy sector, the research will first delve into the why of strategic alliances within the renewable energy sector. What are the reasons behind entering alliances within the renewable energy sector, instead of going at it alone. This will be done on a smaller scale (4 renewable energy companies) to create more focus to delve into the topic. However, entering a strategic alliance is not where the interest of this research ends, as companies may have several alliances there is an increasing need to manage these alliances, in order to ensure the optimal results from all of the alliances within the alliance portfolio of a

company. Therefore this will also be looked at in the research. Although these difficulties are interesting, we also want to see how companies within the renewable energy sector tackle these difficulties, which will be the last major interest of this research. Resulting from this are the following three questions that will be answered in the second part of the research:

 Why do companies form strategic alliances?

 What difficulties arise in managing their strategic alliances?  What possible solutions are there to address these difficulties?

The findings are compared to the literature review, which is carried out to give an overview of the existing literature concerning strategic alliances, which is not specifically generated for the renewable energy industry. With the comparison there is looked if the renewable energy sector shows possible gaps in the existing literature, which can be explored in future

research.

According to Yin (2009), the research questions and a thorough literature review is the beginning of the path to what research methodology to use. Furthermore, he states that the choice for a certain research method is based on the following three questions:

- What type of research question is posed? - Is control of behavioral events required?

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 8 Coming forth from these questions, this research will make use of an archival analysis and a case study to answer these questions. Table 1.1 gives an overview of both of the following researches and the bits of literature to be handled in each part:

Table 1.1 Research Methods

Variables Archival analysis* Case study **

Portfolio size X

Portfolio diversity Governance structures X

Functional purposes X

Reasons for strategic alliances X Difficulties in managing alliances X Solutions to address difficulties in managing alliances X

* Archival analysis answers the who, what, where, how many, how much; the environment is uncontrolled; the focus contemporary and non-contemporary

**A case study answers the how and the why; the environment is uncontrolled; the focus contemporary

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2. Literature review

2.1 Strategic Alliances

Before digging into the phenomena of strategic alliances, we first have to establish a shared understanding of the meaning of strategic alliances. Strategic alliances are, according to Glaister and Buckley (1996, p.301-302), “an inter-firm collaboration over a given economic

space and time for the attainment of mutually defined goals.” Rangan and Yoshino describe

strategic alliances as:

“an arrangement that links specific facets of the businesses of two or more firms. The basis of the link is a trading partnership that enhances the effectiveness of the

participating firms' competitive strategies by providing for the mutually beneficial exchange of technologies, products, skills or other types of resources (1996, p7).”

As we can understand from both definitions, strategic alliances are always about a set of more than one business entities that share a common goal that is beneficial for both. Rangan and Yoshino are more extensive than Glaister and Buckley; however, by trying to be complete in their definition, they possibly exclude alliances that do not fall under these conditions, but are formed as strategic alliances. Therefore, the definition as stated by Glaister and Buckley will be used throughout this research.

2.1.1. Forms of strategic alliances

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 10 between the partners) and performance risk (the risk of not reaching the performance objectives). According to them an equity based alliance is the right response to relational risks and contractual alliances are for performance risk. Furthermore, Kogut (1988) describes a benefit of equity sharing alliances in that this is more effective in the sharing of tacit

knowledge. A choice for a certain governance structure depends on the specific situation between the partners, their goals and their preference.

2.1.2 Strategic Alliance Portfolio Size and Diversity

Furthermore, when considering the possibility of a company having more than one strategic alliance, the term strategic alliance portfolio becomes effective. According to Wassmer (2010) an additive perspective is the most common manner to define the alliance portfolio, that is the perspective that an alliance portfolio is the sum of the strategic alliances of a focal firm (Hoffmann, 2007). Contractor and Lorange (2002) state the importance of alliance in that cooperation delivers superior value. They describe three trends, which will lead to a growth in alliances, namely: “regulatory factors, other changes in the business and economic environment, as well as changes in industry practice and strategy (2002, p498).” The benefits of having multiple alliances are described by many authors; however, several authors also state that the size of strategic alliance portfolios should not be limitless. According to Deeds & Hill (1996), who describe the relationship between number of alliances and new product development, there is a positive relationship between the number of alliances and new product development up to a certain point. After that it becomes harder to manage these alliances effectively and the added value of new alliances becomes lower. By this the costs of new alliances are higher than the benefits. Baum, Calabrese and Silverman (2000) state that the importance of alliances is their efficiency.

Although strategic alliance portfolios can be small in the sense that there are few alliances within the portfolio, if they have a high breadth, they can be more important when these alliances are so diverse that each has a different value, which is needed to reach a

company’s goal (Gulati, 1998).

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Baum et al. (2000) describe the efficiency of variance in functional purposes as that each alliance has to deliver more capabilities and information without redundancy. This relates to Wassmer (2010), who states that one part of estimating the value of alliances is its

heterogeneity in alliance experience, with higher heterogeneity being more valuable. Companies which have homogeneous alliance experience may find more difficulties in benefiting from their experience when the situation of the new alliance is different than the previous alliances.

2.2 Reasons for Strategic Alliances

Cooperation between companies is quite common; however, it is interesting to understand why potential competitors will join their forces and become united in a form of contract or business entity. According to the literature there are different reasons for and against strategic alliances. One of the leading researchers in the field of strategic alliances is Kogut (1988). He describes three different reasons for the creation of joint ventures: transaction cost, strategic behavior and organizational knowledge and learning. These three reasons will be used in this research as the main reasons for strategic alliances and will be explained in the following sections.

2.2.1 Transaction Costs

Transaction costs are the costs made to ensure that an alliance works. For example, investing in setting up contracts and enforcing them, quarrel over claims, stabilize a

relationship, et cetera (Kogut, 1988). Williamson (1985) describes these factors as the costs to minimize the risk of opportunistic behavior from alliance partners. White and Siu-Yun Lui (2005) add to this a different transaction cost not described by Kogut, namely the cost of coordinating and integrating the combined activities. When the transaction costs are lower for creating an alliance, that is the cost of “transaction and the hazards of joint cooperation

are outweighed by the higher production or acquisition costs of 100 percent ownership,” an

alliance is preferable over an acquisition or non-cooperation, according to Kogut (1988, p321). As can be seen the focus here lies on cost minimization.

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 12 company if one of the alliances ends, even though it is cheaper in the short run to obtain the resources through alliances.

2.2.2 Strategic Behavior

By strategic behavior Kogut (1988) means an alliance that is focused on positioning the firm’s competitive position in relation to its competitors and by this maximize profits. Other authors have expanded this objective into conforming to host country policies, shaping competition, accessing valuable resources, facilitating international expansion and creating vertical linkages (Glaister & Buckley, 1996; Lavie, 2006; Das and Teng, 2000). Considering resources Chung, Sing and Lee (2000) state that companies start alliances with partners that have complementary resources to their own. Where the emphasis here lies in combining resources for both parties, Das and Teng (2000) put more emphasis on obtaining resources, otherwise not accessible due to their imperfect mobility, difficulty to imitate and the absence of good substitutes. A different manner of strategic behavior relating to

resources can be seen in the reason to start alliances to countervail alliances made by competitors (Gimeno, 2004). When starting alliances with the partners of competitors one can gain access to the same resources as the competitor has and hereby safeguarding ones competitive position (Silverman & Baum, 2002; Gimeno, 2004).

Furthermore, strategic alliances can be even more significant in gaining accessibility to complementary assets (Glaister & Buckley, 1996), which can create a lock-in for companies to appropriate the highest amount of value on an innovation for an innovating company. An example from this is Heineken’s Beertender, which is a beer draught to be used at home: since only kegs from Heineken brands can fit into the machine, so the Beertender is a complementary asset that ensures the use of Heineken brands when someone has a Beertender in its possession. What Grolsch, a competitor, could do is to form an alliance with Heineken so that they could also produce kegs that can be used in the Beertender. By doing this, Grolsch can deliver the service that people can drink their beer as a draught at home, while Heineken makes money on Grolsch customers who are brand loyal and would never be Heinekens’ customers otherwise.

2.2.3 Organizational Knowledge and Learning

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alliances as ways to learn and internalize information and capabilities from the partners to create new knowledge. If this information is tacit knowledge, otherwise knowledge that is not easily obtained, it can be beneficial for your company; however, because it is imbedded in the other company and not easily codified, the only way to obtain this knowledge is to cooperate. Zhao, Anand and Mitchell (2004) describe that as a source of accruing

advantages, tacit knowledge is a better way than obtaining explicit knowledge. Downside of obtaining the information and creating new information can be knowledge spillovers. Although the knowledge spillover gathered in alliances may be beneficial, the downside is that there might be a knowledge spillover out of the company, improving the position of the competitor (Bonte, 2003). Von Hippel and von Krogh (2006), describe this as the dilemma between the sharing of knowledge and the protection of knowledge within alliances. Ding, Huang and Liu (2012) describe this as open and hidden learning, where they put an emphasis on the benefits of open learning, resulting in trust and goodwill towards each other.

Furthermore, Kale and Sing (2007) relate to the knowledge-based view, that is knowledge as the most strategic resource of the firm, that companies who developed the ability to learn from alliances and have processes to codify learning, are more successful in their alliances.

2.2.4 Combination of Reasons for Alliance Creation

Based on the research above all three reasons can be legitimized objectives for cooperation; however, caution is needed. Although each reason on itself can be a reason for cooperation, one does not exclude the other, but rather enhances it (Kogut, 1988). Although both

transaction costs and strategic behavior are based on economic reasons, they differ in the fact that the first is focused on minimizing costs, while the latter is focused on maximizing profits.

2.3 Difficulties in Managing Alliances

It is important to manage alliances, since there lies a difficulty in enforcing their success. This is presented by Kale and Singh (2009), stating that over 80 percent of the Fortune 1000 firms’ CEOs state that alliances contributed to almost 26 percent of their companies’ annual revenues, while at the same time thirty to seventy percent of the strategic alliances fail. Given this stated failure rate and the positive contribution of successful alliances to

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2.3.1 Contract Formation Difficulties

As stated before, certain costs have to be made to ensure that an alliance works, like investing in setting up contracts and enforcing them, quarrel over claims and stabilizing a relationship (Kogut, 1988). When a company wants to start an alliance they form a contract as a bases to work on, but a wrong decision for a certain framework to build upon can bring difficulties. Hagedoorn and Duysters (2002) describe the previous experience in cooperation as a danger in the formation. They state that this past experience is part of the decision between cooperation and acquisition, and companies have a tendency to go with the strategy most familiar to them, which can make the decision biased. Furthermore, Hennart (1988) names the incorrect chosen governance structure as reason for failure. Concerning the governance of alliances, Faems, Janssens, Madhok & van Looy (2008) identify two

perspectives in which literature has looked towards the governing of alliances: the structural perspective and the relational perspective. The former looks more towards the design of the alliance, the latter will be addressed in the following section.

Nair and Stafford (1998) mention the difference in working methods between the USA and China on forming alliances. They state that “the whole issue of relationships versus legal structure is a major difference. Parties from the U.S.A. in particular want neatly tied legal documents, but the Chinese don’t really do business that way. They depend more on a network of relationships and trust built over time (1998, p142).” Choosing in this case for a wrong design can lead to difficulties. This case also relates to cultural diversity, which will be discussed later on. Other issues in the design can be exclusivity agreements, made during the formation of the contract. With these agreements one agrees to not enter a market, which harms your possible market potential. Furthermore, Alvarez and Barney (2001) describe the risk of partners becoming stronger than you in the markets you are allowed to compete in, resulting in that they help you grow; however keeping you small due to their own strengths.

2.3.2 Opportunistic Behavior in Strategic Alliances

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each other. Arino and De La Torre (1998) state the risk of lack of trust within strategic

alliances, that is, the lack of trust in the partner that he will not behave opportunistically, but puts the importance of the alliance ahead. When starting an alliance while there is a lack of trust in each other and a constant fear of the other using the alliance to gain knowledge, which will harm your market position, the alliance is destined to fail. This is because both companies will not use their full potential to make it work; however, instead of this they will be guarding themselves and thus harming the alliance. This is in relation with transaction cost theory that states that one makes costs in creating a relationship between the partners, setting up contracts and enforcing them and quarrel over claims (Kogut, 1988). These costs, as described by Williamson (1985) as the costs to minimize the risk of opportunistic behavior from alliance partners may be minimized with a trusting relationship; however, they can be harmed when there is no trust.

Salk (2005) states that in a good trusting relationship, learning of one of the parties can lead to greater results for both and is even more important than the design of the alliance. Den Hertog & Thurik (1993) state that companies without alliances face less danger of important information flowing out of the firm, this can be a high risk for knowledge based companies. As mentioned before, Kogut (1988) described knowledge spillover as a positive effect. Bonte (2003) recognizes this positive effect of strategic alliances, but also states that when

knowledge spillover goes to the strategic partner this might make it easier for the

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2.3.3 The Risk of Dependency Created by Specialization

As stated above, a reason for cooperation is economies of scale and access to resources. If the goal is to create these economies of scales in a strategic alliance, all the partners specialize on a few steps in a process or part of a product. Considering difficulties in managing alliances, this specialization (Bonte, 2003) brings a risk that when firms are beginning to rely more and more on external competences, the firm becomes hollow from within and will have difficulty to remain when one of the external competences is not accessible anymore (Blanc & Sierra,1999). Alvarez and Barney (2001), describe the danger in the partner stepping out of the alliance having learned your skill, but leaving you without the possibility to compete with them, e.g. when you have a lot of employees working for you to provide your skill, but you have no financial back-up for marketing or employees with marketing skills you will be harmed by the ending of an alliance. Your partner with these skills will outperform you with the gained skill from your company. Hamel (1991) describes this as the race for learning, where if the partner learns your skills, but you could not keep up with learning his skills, you will lose the race.

2.3.4 Cultural Diversity

The final difficulty we will discuss in this study, is referred to as ‘cultural difference’ . This factor is stressed by a number of authors as the most important cause of alliance failure (Adler & Graham, 1989; Parkhe, 1991). Several researchers (Parkhe, 1991; Salk, 1996; Bird and Osland, 2005) mention different culture-related factors that may impact the

performance or managerial complexity of a strategic alliance. In an extensive overview study, Parke (1991) mentions factors that relate to societal cultures as well as to corporate cultures, whereby the latest is often influenced by the former. However, before even creating an alliance the decision for the correct partner is made. When companies are too different in their essence – that is their culture, decision making process and way of

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Bird and Osland, 2005) is difference in communication style. Bird and Osland argue that differences in communication could lead to a lack of trust (2005), which is discussed in earlier research by Das and Teng (1998). For example: “Whereas people from cultures with a

direct style tend to say what they mean, those with an indirect style hide what they mean, leaving it to the other party to decode their words” (Bird et al., 2005, p122). Not only the

style of communication could lead to a lack of trust, also a difference in national or corporate language could increase the experienced diversity. Nair and Stafford (1998) emphasize the importance of a ‘common’ language spoken by a local interpreter in their article about Strategic Alliances in China. This local interpreter could not only translate the meaning of a sentence, but also interpret the culture meaning of what is being said. More recent research of Julian, Wachter and Mueller (2009) on International Joint Venture Top Management indicates that ‘the greater the differences among team members on cultural

factors such as nationality, country of education, and language, the less likely it is that team members are willing to openly provide new ideas and information. The existence of cultural barriers for interpreting not only words themselves, but also context or frame of reference, greatly reduces the level of openness in communication that transpires (2009, p124).’

2.4 Solutions to Address Difficulties in Managing Alliances

The former paragraph was focused on the possible difficulties in managing strategic

alliances. This paragraph will focus on the possible solutions to deal with the given problems, according to the existing literature.

2.4.1 Combine Structure With Relation Instead of Structure vs. Relation

As stated before, Faems et al. (2008) identify two perspectives in which literature has looked towards the governing of alliances: the structural perspective and the relational perspective. Where the relational perspective may be important for companies that put an emphasis on this, like Chinese companies that depend more on a network of relationships and trust built over time (Nair & Stafford 1998), this has the risk of leading to opportunistic behavior. On the other hand Faems et al. state that under the structural perspective, “alliance

performance is driven by the quality of the initial structural design (2008, p1055). Companies

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 18 importance of both; however, not the exclusion of both. Therefore, Faems et al. (2008) state that the two are linked together and not to be seen as independent ways. They state that contracts and trust can enhance the performance, since a good contract that fits the alliance activities has a higher chance of creating good relationships on both operational and

managerial level. By this the opportunistic behavior, as described by Quelin (2000) and Deeds and Hill (1998), can be diminished and companies can benefit from both structural alliance performance (Hennart, 2006) and relational alliance performance (Salk, 2005).

2.4.2 Building Alliance Management Capabilities

Another important factor for successful alliances is, according to Anand and Khanna (2000), previous alliance experience. Previous alliance experience helps a company not to make the same mistakes again within alliances. Dyer and Sing (1998) suggest that due to the learning experiences within alliances, companies can develop a ‘relational capability’, which they can use for managing alliances. Even more, when there is a strategic need for a company to use alliances, then a company would benefit from creating the capability to manage alliances, because this would be a source of competitive advantage (Gulati, 1998). Kale and Singh (2009) also state that alliance capability is good for the success rate of an alliance. They state that alliance capability will be gained through three factors:

1. Greater alliance experience 2. A dedicated alliance function

3. Processes to learn and accumulate know-how.

According to Kale and Singh greater alliance experience “helps build alliance management skills through tacit ‘learning by doing’ (2009, p51).” This is supported by Anand and Khanna (2000), who state that companies that formed or announced new alliances gained a more positive response from the stock markets when they had more experience in alliances. With a dedicated alliance function, the experience gained from alliances will be stored and transferred through the company through one channel, which keeps the flows consistent, redundancy is diminished, best practices useable and troubles foreseen, due to the

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knowledge capturing can be achieved, which can create benefits from people within the company to learn from the alliances and because everything is put in the same processes it easier to compare and use by different people (Kale & Sing, 2009). These three points will attribute to the growing of the alliance capability, which in turn will help find the right alliance partner of choice and lead to a greater alliance success rate (Kale & Sing, 2009). On the other hand, some authors also describe a danger to alliance experience. Hagedoorn and Duysters (2002) describe the danger in that companies will tend to choose to handle

situations in a same manner as done before, because that way is familiar to them, even if it might not be the best manner. Park and Kang (2013) go even further and state that the chosen strategy of the company is not a result of a reasonable chosen decision, but the result of organizational inertia. This would mean that organizational learning is not a

solution, but the problem to begin with. For this research we will see organizational learning is a solution, because by improving the ability to define the right alliance partner one can also prevent entering into an alliance that is difficult to manage or redundant concerning extra added value (Deeds & Hill, 1996) and the correct strategy can be chosen based on theory and pas experience; however, caution is needed to prevent inertia.

2.4.3 Diminishing the Risk of Dependency Created by Specialization

Considering the difficulty of dependency due to specialization, there are several strategies which can be used to counter this difficulty. Although gathering resources outside of the company and focusing self on one specific part can lead to hollowing out a firm, on the other hand, one can make use of multiple alliances, with all different partners, to complete your business strategy. The strategic alliances can be used for risk sharing and by this reduce uncertainty, which can lead to better results of strategic alliances (Hoffmann, 2007; George, Zahra, Wheatley, & Khan, 2001). Losing one alliance can be overcome by the other alliances. Furthermore, Alvarez & Barney (2001) name four strategies for smaller companies to

prevent larger companies to take advantage of the dependency of smaller companies, namely:

1. Slow the large firm’s rate of learning

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 20 4. Bring other resources to the alliance besides a single technology.

By slowing the large firms rate of learning one limits the access to the entrepreneurial firms technology and only some technology is made accessible, but not the core technology. Using detailed and elaborate contracts stand on themselves; however, as stated before they might hurt the relationship. Therefore the third reason is building a relationship of trust, which is key according to most authors. Finally bring other resources to the alliance means

maintaining to deliver new technologies to the relationship, making it interesting for larger firms to keep investing in the alliance.

2.4.4 Extensive Partner Selection, Cultural Awareness and the Sense-Making Process

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3. Exploration of Alliance Portfolios in the Renewable

Energy Sector – a Quantitative Approach

3.1 Introduction

The renewable energy sector is growing. As stated before, the total global renewable energy investment was 237 billion USD in 2011, which was the first year that these investments exceeded the investments in fossil fuel power generation (223 billion USD), according to Ernst&Young (2012). As stated in the introduction of the research, alliances might be a way of responding to rapid market dynamics and a way of learning to keep innovating. The literature showed that these, and more reasons, fall under three main reasons, namely cost minimization, strategic behavior and organizational learning (Kogut, 1988). Because of the high market dynamics of the renewable energy sector, this section of the research looks into the extent that firms engage in strategic alliances within the renewable energy market at the moment. In order to gain this insight, 50 stock-listed renewable energy companies are researched for their patterns in alliance strategies to see how the current renewable energy market is formed and if there are certain trends. This is done through a quantitative study. Considering the extent that firms engage in strategic alliances within the renewable energy sector, the portfolio size and the diversity will be researched to see if the specific renewable energy market characteristics have led to a certain pattern in their alliance behavior. The variable Portfolio Size is researched to see if there are patterns concerning the number of alliances per company, which could hint towards a certain need of alliances in the renewable energy market. The Portfolio Diversity is researched to see if there is a pattern in which companies in the renewable energy sector enter into alliances considering their governance structure and functional purpose.

3.2 Methodology Quantitative Research

3.2.1 Data Sources

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 22 Source Premier and Google Scholar. Furthermore, news articles will be used that can be obtained through LexisNexis.

3.2.2 Sampling Method

For the sample of the research the companies in the SDC-database will be used. Their information on their alliances will be the input for the analyses. The renewable energy companies will be companies that are on the stock exchange and they are from countries all around the world. A total of 50 companies will be selected. These companies are from Wikipedia’s list of renewable energy companies by stock exchange (Wikipedia, 2012), which one of the supervisors pointed out as a list of companies who have their core business in the renewable energy sector. See appendix 1 for the list of the companies that are used for this research.

3.2.3 Procedure & Measurements

At first 50 stock listed renewable energy companies will be selected and researched if they are engaged in strategic alliances. Thereafter, they are examined whether their strategic alliance portfolio has increased in size or diversity. For the size of the strategic alliance portfolios the research will look at the number of alliances per portfolio. For the diversity the functional purposes, and governance structures of the alliances are the main focus.

3.2.4 Assumptions

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The second assumption concerns the governance structure of the alliances within the portfolio. Regarding portfolio diversity, this research looks for a tendency towards a specific kind of governance structure that a company uses in its alliance portfolio or not. To do this, the distinction between equity based and non-equity based alliances are made for the governance structure. In the analyses made, as can be seen in the appendix, the term Joint Venture (JV) is used for equity based alliances and Strategic Alliance (SA) for non-equity based alliances. This does not imply that a joint venture is not a strategic alliance, but the difference in terms gives a clear overview in the long list of cooperation between all the firms and is to prevent mistakes due to esthetic similarity. A governance focus is assigned to each company in the analyses, based on their alliances in their portfolio. By this we want to divide the companies into groups that have the same approach to governance structures within the alliance portfolio. The four groups in which the companies are divided are: JV Focus, SA focus, Equal and Combination. For the division the following assumptions are used:

- Focus JV: At least 75% of the alliances in the portfolio are JV’s - Focus SA: At least 75% of the alliances in the portfolio are SA’s - Equal: Equal amount of JV’s as SA’s in the portfolio

- Combination: mixture of JV’s and SA’s in the portfolio, in which both do not have a majority of at least 75%

Lastly, an assumption is made on the scope of businesses relating to internationality. The four dimensions in this case are: domestic, international, multinational, global. Domestic companies are the ones that only have alliances in their home country; international

companies have alliances between the home country and some host countries, multinational companies have set up businesses in several countries for the specific region and global companies are the ones that have parts of their companies and alliances around the world, to also facilitate around the world.

3.3 Results

3.3.1 Portfolio Size

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 24 alliances were made, in which year the alliance was formed and if so in what year the

alliance was terminated using the five year lifespan assumption (see Appendix 1 for a shortened version).

To look at the evolution of the portfolio size, the average amount of alliances per portfolio over time is calculated over the full sample to see if there are patterns to be found in which renewable energy companies build up alliance portfolios. In appendix 2, there is a list of all the companies with the years in which they have alliances and how many alliances they have in each year. Resulting from this is graph 3.1, which shows the evolution of the average portfolio size, from its first record in 1982 until the latest ones in 2012. As shown, the average portfolio size fluctuates over time with an average portfolio size over time of 3.26 alliances. In the early 1990s there were the highest average portfolio sizes with the average of 4.76 alliances per company for the period of 1991-1995. The time when the average sizes were lowest were in the late 2000s with an average of 2.33 between 2005-2009. At the ending in 2012 the average was 3.19, which is only .07 below the average over time.

Graph 3.1 Average Portfolio Size per Year, Considering the Entire Sample

As is seen in the graph, there is no specific evolvement to be shown in the average size of alliance portfolio’s over time.

Considering the total number of alliances, the number has increased over the last decades (graph 3.2). Although this is true, the number of companies in the sample have gone up too, but the average number of alliances has not gone up as shown before.

0 1 2 3 4 5 6 7

Average # of alliances per company

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Graph 3.2 Total Number of Alliances Throughout Time of the Entire Sample

Division of the Sample Relating to Renewable Energy Source

Because the renewable energy market consist out of different types of energy sources, the 50 companies are divided according to the source of renewable energy that is the focus of the company. There are four categories, namely Solar energy, Wind energy, Water energy and Biofuel. The division of the companies and the associated alliances results in graph 3.3, which shows the alliances per division and the number of companies within each division in graph 3.4.

Graph 3.3 Number of Alliances per Division Graph 3.4 Number of Companies per Division

0 20 40 60 80 100 120 140 160 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Number of alliances

Number of alliances 0 10 20 30 40 50 60 70 80 90 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Biofuel Solar Water Wind

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 26 The above shows that within the sample most companies have solar energy as their main energy source and coherent to that, most of the alliances fall under the Solar division. Graph 3.5 shows the average alliance portfolio size per division over the years. For this graph three companies have to be taken out of the sample due to their strong increase in number of alliances that vary strongly from the other companies within each of the divisions.

For the solar division this was Energy Conversion Devices, for the wind division Enbridge Inc. and for the water division Ballard Power Systems.

Graph 3.5 Average Alliance Portfolio Size per Division, per Year

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Graph 3.6 Average Alliance Portfolio Size per Division Compared to the Overall Average of the Division

Division of the Sample Relating to Portfolio Evolvement

When looking for other patterns relating to size, the companies were divided into four different groups, relating to their individual portfolio size evolution to see if patterns are to be found on a different level. The four groups that describe the evolution of the alliance portfolio size are: 1. Equal in size; 2. Growing in size; 3. Fluctuating in size; and 4. Up-and-down in size (Appendix 3). Where the first two are pretty straightforward, we want to add as an explanation to the last two that the up-and-down evolutions just went up and down, where the fluctuating have gone up again for at least a second time. In the group Equal there are some irregularities towards an equal amount over time. This is because we also have counted companies into this group that always have had the same amount of alliances, with the exception of one year, which can be seen as an overlap year where one alliance is created while another is terminated.

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 28 primarily started recently with forming alliances, thus may change their pattern in the

upcoming years. Apart from this last group it seems that there is a pattern that the alliance portfolio of companies at first grow, than go down and in time go up again. The downside to this is that it is not possible to check if this is also going to hold for the companies that started most recently with forming alliances and if the rising group will actually go down. When looking at the average size of the portfolios for companies out of the four categories, there is to be found that companies that fall under the growing category have a significant higher number of alliances in 2012 than the other companies (graph 3.7)

Graph 3.7 Average Alliance Portfolio Size Relating to Portfolio Evolvement

Reasons for this difference may have their bases in the indication for a pattern as described before, namely that their downward evolution might not have begun yet. Another reason may be that companies that started later with alliances see more necessity for them. This will have to be researched more thoroughly with the indication of the size evolution pattern given before.

Division of the Sample Relating to Date of Inception and Date of First Alliance.

When looking at the difference in years between the date of inception and the first alliance made by a company (appendix 4), there are 4 categories created into which companies can fall. Category 1 consists of companies that made their first alliance within the first five years after the inception of the company. Category 2 consists of companies that started between their sixth and tenth year after inception. Category 3 goes from eleven years to twenty years

0 0,5 1 1,5 2 2,5 3 3,5 4 4,5 5

growing equal up-and-down fluctuating

N u m b er o f a lli an ce s

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and category 4 is twenty+ years.

When looking at the results it is not remarkable that category 4 only consist of companies from the 1980s or before; however, it is remarkable that there are no companies from the 1980s or before that have had their first alliance within the first ten years of existence of the company. This can mean that stock listed companies nowadays are more eager on alliances then was the case in the 1980s and before. For the 1990s and later on, no such conclusion can be derived from the results given by the research.

3.3.2 Portfolio Diversity Governance Structure

Starting to look at the diversity of alliance portfolios, this research looks at the governance structure of the alliance, a SA or a JV (appendix 5) and with what purpose the alliance was set up. For a result to the chosen structure, the analyses showed that these 50 companies have a combined total of 304 alliances, divided into 134 JV’s and 170 SA’s. 11 companies have a JV focus, 12 a SA focus, and the remaining companies have an equal amount of, or a combination of JV’s and SA’s. This shows that there is a slight favor of SA’s in the renewable energy market, as could also be seen at the amount of SA’s vs. JV’s (55.9% vs. 44.1%). Although, there is not a large difference throughout the entire sample, when focusing on countries specific some countries do seem to favor a certain governance structure.

Considering the home countries of the companies in the sample, there are seven countries that have more than 10 alliances. From these countries, there are 5 countries with a strong tendency to either JV’s or SA’s (see percentages in bold in table 3.1)

Table 3.1 Governance Structure Preference per Country

Countries JV SA Grand Total JV SA Grand

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 30 When relating the governance structure to the source of renewable energy, no specific preference comes forward (see table 3.2). The table shows that within these divisions the preference leans towards the SA’s, as is the case with the entire sample, but the difference is minimal.

Table 3.2 Governance Structure Preference per Main Energy Source

Renewable Energy Source JV SA Grand Total

Biofuel 15 19 34

Solar 51 71 122

Water 13 16 29

Wind 55 64 119

Grand Total 134 170 304

Furthermore, there is no relationship to be found between the choice of SA’s and JV’s. Also not in relation to the date of the first alliance or the difference between inception of the company and the first alliance.

Purpose

The goal of this section is to see why renewable energy companies start alliances, according to the data provided by the SDC database. The database shows three purposes for

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Table 3.3 Main Energy Source Related to Purpose

Table 3.3 shows the number of alliances within each division and how much companies within each division have started alliances for the purpose of gaining a foothold, R&D or an increase of the domestic market. From the results come forth that both solar energy companies and water energy companies do not make use of alliances for the purpose of increasing the domestic market. The most remarkable thing concerning the purpose of an alliance is that all the companies that use water energy use alliances for R&D. Furthermore 70% of the solar energy companies use alliances for this purpose. This may be related to the technology growth potential of both energy forms according to graph 3.8 by Ernst&Young (2012)

Graph 3.8 Technology Growth Potential

Source: Ernst & Young. Renewable Energy Country Attractiveness Indices, 2012

Furthermore, almost 80% of the solar energy companies start alliances with the purpose of gaining a foothold. This hints towards the international potential of solar energy.

Renewable Energy Source

# of companies

Foothold R&D Increase Domestic

Market

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 32 A second division is done on the bases of the international scope of the companies. Different international scopes may lead to different needs for strategic alliances. The companies are divided into groups that use alliances for: 1. Domestic use; 2. International use; 3.

Multinational use; and 4. Global use. The purposes for starting strategic alliances by companies within the different dimensions are depicted in table 3.4.

Table 3.4 Scope Related to Purpose Scope # of

companies

Foothold R&D increase domestic market

Foothold % R&D% increase domestic market% Domestic 9 0 4 5 0,00% 44,44% 55,56% International 10 1 6 4 10,00% 60,00% 40,00% Multinational 21 20 13 0 95,24% 61,90% 0,00% Global 10 8 8 0 80,00% 80,00% 0,00%

Considering gaining a foothold, a logical conclusion for the companies that only have domestic alliances is that they have no need to gain a foothold within a different country. Remarkable is that looking at the companies in the international dimension, only one out of ten (10%) considers this as a purpose of starting alliances. Like domestic companies they do not see a reason in gaining a foothold, although they are cooperating with companies outside of their domestic market. This is very low, compared to the other two dimensions that start alliances across borders, where it is a purpose for about 95% of the multinationals and 80% for the globals.

Considering research and development, companies from all four dimensions see this as a purpose of alliances (Table 3.4). Globals stand out here where 80% of these companies start alliances with this purpose.

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Coming forth from this it shows that regarding to scope and the purpose of alliances, there are some indications of patterns to be found. Most companies with alliances that are used multinational and global start alliances to gain a foothold. On the other hand, the ones with alliances with international use do not use these for the purpose of gaining a foothold. Furthermore, all dimensions contain companies that use alliances for research and

development; however, the percentage of companies within the group differs from another. Most globals also see this as a reason for starting alliances. Companies with alliances that are used domestically and internationally also start alliances for the purpose of growing in the domestic market; however, this number is around half of the companies within the

dimension.

Relating both the purpose of the alliance and the main governance structure within the alliance portfolio to see if these different purposes may need specifically a JV or a SA does not give a conclusive result (see table 3.5). Not one form has a specific preference for a specific purpose. The companies seem to make a choice based on what seems the best possible fit for each situation at the time.

Table 3.5 Governance Structure Related to Purpose Focus # of

companies

Foothold R&D increase domestic market

Foothold % R&D% increase domestic market% JV Focus 11 5 3 5 45,45% 27,27% 45,45% SA Focus 12 8 9 2 66,67% 75,00% 16,67% Equal 6 3 3 2 50,00% 50,00% 33,33% Combination 21 12 14 0 57,14% 66,67% 0,00%

3.4 Conclusions & Discussion

3.4.1 Discussion

The goal of this research is to do a preliminary research on how the current renewable energy market is formed around the globe, considering alliance portfolio size and diversity. Multiple analyses are used to identify relevant patterns, which will be discussed below. When looking at the size of the alliance portfolio, at first there does not seem to be a

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 34 per company has stayed around the average of 3.26. This is remarkable considering the renewable energy market and the reasons given by Contractor and Lorange (2002). The renewable energy market is growing (Ernst&Young, 2012) and considering the three points of Contractor and Lorange that result in the growth of alliances – regulatory factors, other changes in the business and economic environment and changes in industry practice and strategy – one could expect to see an increase in the number of alliances. Although, as stated before, there are more alliances, the question remains why the average portfolio size per company has not increased largely over the last years. However, when dividing the companies into four groups relating to the renewable energy source that is the focus of their company, the average portfolio size of solar energy companies and wind energy companies have increased significantly since 2006. This can be a result of the Chinese Renewable Energy Law of 2006 (Wall Street Journal, 2006) and the Green Paper of the European Commission in 2006 (European Commission, 2006), which put an importance on the production and use of renewable energy in China and Europe. Further research on this could conclude the impact of such regulations.

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When looking at the difference between date of inception and first alliance there is also a remarkable thing, namely that companies that are from the 1980s or before waited all for at least ten years before starting with their first alliance. This can mean that the importance of alliances for companies nowadays is larger, that alliances were not common before, that the barriers are lower now, or that there was no disclosure yet about all alliances. When

considering the 1990s and later on no such difference is to be found, so a pattern is not present; however, researching the reasons given above can give an insight in the development of alliance portfolios.

Looking at the diversity of the alliance portfolios we can state that no specific reason for companies can be found to choose for a JV or a SA. Although there are slightly more SA’s (56% versus 44%) each company seems to make a decision on what seems best for their company in the given situation. Division of the renewable energy companies of the sample into groups relating to the renewable energy source that is the focus of each company shows that here is also no specific preference. Between countries there are some differences though. For some countries there seems to be a tendency to either JV’s or SA’s that could be related to cultural diversity. Oxley (1999) researched possible factors that may impact the decision between equity versus non-equity based alliances. One of the factors she mentions are the characteristics of a country. As influential characteristics she named property rights, cultural differences, political risks, investment regulations, level of education and societal trust. It is possible that one of these characteristics are of influence on the differences between countries. Further research is needed to find if this holds.

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 36 Another division of the sample is division according to the scope of the use of the alliance (domestic, international, multinational and global), which could give more focus to find a pattern. Research and development is a reason for companies from each out of the four groups; however, only from the globals a large majority (80%) sees this as a purpose. Considering gaining a foothold both multinationals and globals see this as an important purpose (95.24% and 80%). Remarkable about this is that companies with an international alliance portfolio do not seem to create alliances with the purposes of gaining a foothold (only 10%). It would be interesting to research further what the reason is that these

companies do not focus on gaining a foothold or to find out if the data presented by the DSC database is inconclusive about this issue.

Summing it all up, we found first indications for patterns in this study, however more data and years of data gathering are necessary to confirm all the initial patterns and to derive conclusions here from. Seeing as no direct result are to be derived from this quantitative approach we will look for more answers by use of a qualitative approach in the next chapter.

3.4.2 Limitations

The first limitation of this research is that in finding patterns over time, some companies are too young. Where we can look at fluctuations of alliance portfolio size from companies that are around for thirty years, the newly incepted companies did not have the time yet to undergo these fluctuations. Although there might be a specific pattern, this cannot be concluded yet, until the necessary time elapsed for companies to undergo these fluctuations.

The second limitation of this research is that there is no specific data on when an alliance is terminated, so the 5-year assumption had to be made. Therefore, the size and fluctuations in size of the alliance portfolios may vary from the actual numbers.

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3.4.3 Future Research

The analyses of the fifty stock-listed companies gave an indication of a pattern under which the portfolio size evolves over time. The size of the portfolio seemed to grow, decrease and then grow again for the companies that had their alliances the longest and when

categorizing the companies in terms of their first alliance, it seems that within the different time categories the companies are in the same ‘stage’. The fact is that we cannot really speak of stages yet, since only the companies which were first with their alliances have walked through this entire stage. It would be good to research in future if these companies from later time categories have the same kind of portfolio size fluctuations. Interesting in this is to know the reason behind the decrease in portfolio size. Is this due to the economic situation? Do companies overvalue their own strength after years of having alliances? Has managing all alliances become difficult and going at it alone seemed less inconvenient? Furthermore, the influence of conjuncture and political treaties is interesting to research as a possible reason for changes in size.

Also the evolution of portfolio size relating to the renewable energy source that is the focus of the companies is an interesting factor. Both solar energy companies and wind energy companies have seen a growth in the average alliance portfolio size. It would be interesting to research why these two have grown over the last years, while the other two have not. More remarkable is that the alliance portfolio size of both solar energy companies and wind energy companies have increased significantly since 2006. As possible reasons this research mentioned the Chinese Renewable Energy Law and the European Commission’s Green Paper. It would be interesting to research if political decision-making has an impact on the renewable energy market throughout time.

When conducting a more thorough research with these fifty companies it would be

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 38 Furthermore, it would be interesting to research why older companies waited for at least 10 years with their first alliance after the inception of the company, while that is not the case anymore today. Is there a greater importance nowadays? Is it more common nowadays? Are the barriers lower? Or is information on alliance formation not disclosed until a certain year?

Considering governance structure and cultural diversity, more research could create insight in the different tendencies of companies to prefer either joint ventures or strategic alliances. The factors described by Oxley (1999) could be related to as possible determinants for either of the choices.

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4. Exploration of Alliance Portfolios in the Renewable

Energy Sector – a Qualitative Approach

4.1 Introduction

After the creation of the big picture in the last chapter, this section will delve more deeply into the management of strategic alliances in the renewable energy sector. This section will concern qualitative research to obtain insight in the reasons for strategic alliances,

difficulties in managing alliances and possible solutions to this difficulties. In order to gain this insight a case study is conducted at four renewable energy companies, by means of interviews. The reasons for strategic alliances, the possible difficulties faced and the possible solutions to the difficulties are compared with the existing literature to see if both are coherent, or if there are gaps in the literature and further research is required. The results of the interviews will be discussed according to the three main topics discussed above and the issues that fall under them as found in the literature research.

4.2 Methodology Qualitative Research

4.2.1 Data Sources

The primary data is obtained from four different companies within the renewable energy sector and these companies are selected for a qualitative preliminary research. The

companies chosen are companies that actually create means of creating renewable energy, because these are also the companies used in the quantitative research. From each

companies 2 alliances will be discussed. The interviews were held in person and by

telephone. The preference was with interviewing in person; however, this possibility was not always available, for example due to a business trip to China for several weeks by one of the participants.

4.2.2 Sampling Method

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 40 for this is the impracticality of reaching the responsible people for alliances at international stock-listed companies. Therefore, we decided to chose four renewable energy companies from The Netherlands that represent our sample with their diversity of energy sources. They are better to reach and the possibility of reaching them again for extra questions or

feedback is much more likely to happen, which can help in ensuring the right quality and response on the interviews and thus on the research. These companies are from three out of the four means of renewable energy, namely solar power, wind power and water power. For the fourth mean (biofuel) that is present in the sample of the quantitative analysis, there were no companies that responded or were willing to cooperate to the research.

The four participants are Deepwater Energy, EWT International, HR Solar and Siemens Wind Power and will be introduced in the following paragraph. The reason why these companies are chosen is firstly that they all create means of generating energy, just as the 50

companies in the sample of the quantitative analysis. Secondly their diversity within this first reason is a reason on itself. Deepwater Energy is a small and new entrepreneurial firm in the renewable energy sector, HR Solar and EWT International are medium sized companies and Siemens Wind Power is a global leader in the field of renewable energy. The reason that we chose for four companies is to maintain a focus and diminishing the chance of an overflow of information for this exploratory research. Where the quantitative analysis also did focus on the alliance portfolio size, for the qualitative analysis it chosen to only delve into two alliances per company, for the same reason of focus as described before.

4.2.3 Participants

As stated above, the companies that participated are Deepwater Energy, HR Solar, EWT International and Siemens Wind Power. A brief description of the companies will follow. Table 4.1 shows some characteristics about the companies.

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watermill can be used in both sweet and salt water, as long as the current has enough speed.

EWT International: EWT is a producer of wind turbines. The create, install and service them. EWT is an international player with clients in several countries around the world; however, on a small scale, compared to Siemens Wind Power.

HR Solar: HR Solar is a company which manufactures solar boilers. Solar boilers use solar panels to heat up tap water so less gas is needed for this, saving costs on gas and decreasing the use of fossil fuels. HR Solar develops and assembles the boilers in after obtaining the parts from several places in Europe and beyond if possible.

Siemens Wind Power: Siemens Wind Power is a company that produces, installs and maintains wind turbines globally. When starting in the wind power business they did the assembly and received the parts from manufacturers; however, nowadays they produce them themselves for sites that are both onshore and offshore. In the global market they are the third party in onshore wind turbines and the number when it comes to offshore wind turbines. Next to manufacturing them, they also service the wind turbines.

Table 4.1 Overview of Participating Companies.

Company Year of inception # of employees Power source Focus

Deepwater Energy 2011 2 water power international

EWT International 2004 55-60 wind power international

HR Solar 2002 10 solar power domestic

Siemens Wind Power

1980 7000 wind power global

4.2.4 Procedures and Measurements

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Master Thesis Strategy & Innovation - Jan Hendrik de Jong Page 42 For the analysis we look at the reasons, difficulties and solutions named by the companies and if they match with the existing literature. When no literature is able to match the answers of the interviews, we will see this as a gap within the existing literature and an opening for future research.

4.3 Results

4.3.1 Reasons for Strategic Alliances

In the theory we described the reasons for strategic alliances fall under the categories: transaction costs, strategic behavior and organizational knowledge and learning.

Transaction Costs

Two of the four companies use strategic alliances as a reason for cost minimization. Both HR Solar and Deepwater Energy use the cooperation to gain parts in a cheaper way than they can produce themselves:

“…we wanted a partner in China, because we were looking for cheaper ways of getting specific parts, because cost minimization seemed as an easy way to save money…”(HR Solar)

Strategic Behavior

Next to transactions costs the companies also have strategic behavior as the reason for strategic alliances. Even more so, all the companies declared in their interview that at least one of their alliances was with strategic intent at its basis. One of the alliances of Siemens Wind Power was to confirm to country policies, regarding the local support the partner already had obtained in the Netherlands for the build of the wind park. Besides that, with their other alliance, part of the reason of the alliance is the creation of a vertical linkage in the supply chain that ensures revenue:

“.. They help us with funding, by means of guaranteeing a specific amount of sales..” (Siemens Wind Power)

EWT International’s alliances were primarily based on strategic behavior, since both countries form which their partners are, are not accessible for companies like EWT

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turbines in that specific country. To facilitate international expansions it was for them a must when considering companies within these specific markets.

“..to gain a foothold we have to create an alliance with a partner who can produce wind turbines locally.”(EWT International)

Furthermore, part of one of the alliances was to license their technology to building wind turbines to a local company, which would create easy cash for EWT international.

One of the reasons for both alliances from Deepwater Energy is the valuable resources that they obtain from their partners. These partners are part of the only few that are able to produce these quality parts and that can deliver these parts around the globe, since their partners are global players, which helps them in facilitating international expansion.

“..there are basically no other parties that can deliver the right components for us with the needed quality … they are international and can deliver parts internationally without any difficulties..”(Deepwater Energy)

The strategic reason for HR Solar with their alliance is the advantage of vertical linkages, since their partner incorporates their product into their final product.

Organizational Knowledge and Learning

When looking at organizational knowledge and learning it is interesting to see that this is also a reason for each of the companies to start an alliance; however the function of this knowledge is different between the companies. Considering Siemens Wind Power they start one of the alliances to guarantee sales; however, this revenue is needed to develop their wind turbines. Deepwater Energy on the other hand has profited from a lot of knowledge spillover, which their partners were happy to give so they could improve their product. HR Solar has gained organizational knowledge, specific on professionalizing their business conduct. EWT was looking for the advantage that one of the partners would deliver them a new type of generator, which can be seen as a valuable resource, but also knowledge on the technology.

Government Enforced Alliances

Strategic alliances in the renewable energy sector