Abstract

http://ssrn.com/abstract=1509461
 
 

References (53)



 


 



The Use of Management Controls to Mitigate Risk in Strategic Alliances: Field and Survey Evidence


Shannon W. Anderson


University of California, Davis - Graduate School of Management

Margaret H. Christ


University of Georgia - Terry College of Business

Henri C. Dekker


VU University Amsterdam - Department of Accounting

Karen L. Sedatole


Michigan State University - Eli Broad College of Business; Wake Forest University, Schools of Business

September 3, 2013


Abstract:     
Transaction cost economics (TCE) theory is widely used to study the governance and management control practices used to mitigate interfirm alliance risk. Following Williamson (1985, 1991), empirical studies typically measure transaction characteristics that proxy for risk in alliances (e.g., asset specificity), and test for a relation between these measures and alliance management control choices. A common criticism of studies in this literature is that they typically focus on a narrow set of governance decisions (e.g., make versus buy) or control practices (e.g., specific contract terms). We posit that an equally limiting aspect of this literature is its reliance on risk proxies measured at the level of the individual transaction. These proxies fail to explicate specific alliance risks, and coupled with an undue focus on transactions rather than the totality of interfirm relationships, limit our understanding of how risks give rise to management controls more broadly defined. In this study we use field-based research and survey methods to develop a comprehensive inventory of the specific risks that managers anticipate and to provide insight regarding their prevalence across different types of interfirm alliances. Our analysis of the data supports an extant classification scheme that dichotomizes alliance risk as relational risk or performance risk (Das and Teng 1996, 2001). However, our analysis reveals another distinct risk category: compliance and regulatory risk, that figures prominently in accounting risk frameworks (i.e., COSO). Our exploratory analysis of correlation in the use of management controls, including contracts as well as pre- and post-contractual control processes, reveals six sets of alliance control practices. Relating these to risks, we find that performance risk is associated primarily with careful partner selection and contractual outcome agreements; relational risk is associated primarily with explicit exit agreements; and, compliance and regulatory risk is associated primarily with informal controls. In addition, we find that as compared to contractual alliances, alliances with shared ownership (i.e., joint ventures) make greater use of financial controls and informal controls. By identifying specific risks and controls used in practice and providing preliminary evidence of their relationships, this study provides a reference for future researchers seeking to provide more meaningful insight into the relationship between interfirm alliance risk environment and control systems.

Number of Pages in PDF File: 43

Keywords: Strategic alliances, risk management, field research, survey research

JEL Classification: D23, M40

working papers series


Download This Paper

Date posted: November 19, 2009 ; Last revised: September 4, 2013

Suggested Citation

Anderson, Shannon W. and Christ, Margaret H. and Dekker, Henri C. and Sedatole, Karen L., The Use of Management Controls to Mitigate Risk in Strategic Alliances: Field and Survey Evidence (September 3, 2013). Available at SSRN: http://ssrn.com/abstract=1509461 or http://dx.doi.org/10.2139/ssrn.1509461

Contact Information

Shannon W. Anderson
University of California, Davis - Graduate School of Management ( email )
One Shields Avenue
Davis, CA 95616
United States
Margaret H. Christ
University of Georgia - Terry College of Business ( email )
Department of Economics
Athens, GA 30602-6254
United States
706-542-3602 (Phone)
Henri C. Dekker (Contact Author)
VU University Amsterdam - Department of Accounting ( email )
Netherlands
Karen L. Sedatole
Michigan State University - Eli Broad College of Business ( email )
270 North Business Complex
East Lansing, MI 48824-1034
United States
Wake Forest University, Schools of Business ( email )
P.O. Box 7659
Winston-Salem, NC 27109-7285
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,693
Downloads: 551
Download Rank: 25,415
References:  53

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.656 seconds