Risk Management in Strategic Alliances: Field Evidence

Abstract:     
This paper provides field evidence on the management control practices used to mitigate risk and enhance cooperation in strategic alliances. The data are extensive field interviews with 38 managers in three large U.S. companies that have significant alliance risk exposure. Interviews are used to probe the specific forms of risk that firms face as well as the use of alliance management controls. Content analysis of the interview transcripts aimed at mapping the use of alliance management controls is structured by three widely used frameworks: Simons (1995), Merchant and Van der Stede (2007) and, Jensen and Meckling (1992). Each framework contributes a distinctive understanding of how alliance management controls are shaped by risk. Consistent with transaction cost economics and with the agency-based framework of Jensen and Meckling, management controls play an important role in mitigating opportunistic behavior. However, we provide evidence that management controls play an equally important role in facilitating coordination and communication between exchange partners, a role that fits more easily with the resource-based view of alliance formation and with the Simons and the Merchant and Van der Stede control frameworks.

Number of Pages in PDF File: 46

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

JEL Classification: D23, M40

working papers series