Competitive Advantage in Alliance Constellations

Abstract

What determines the success of a firm competing as part of an alliance constellation? Is it the strategy and structure of the constellation? Or the capabilities of the firm and its partners? Or the actions of rival constellations? Or perhaps the actions of the firm’s own partners? The answer is: all of the above. But that is not a satisfying answer. It leaves us without a framework for analysis and management. In search of a framework, we might turn to traditional models of strategy and organization. But there we find mostly models predicated on the firm as the unit of competition; the notion of a firm competing within and as part of a larger constellation is rarely addressed (Ghemawat et al., 1999; Saloner et al., 2001). Yet this kind of competition is becoming increasingly important, as alliances have spread in many businesses. The competitive game in these businesses is often transformed from firm versus firm to group versus group. Recent examples of this pattern can be found in airlines, automobiles, telecommunications, and computers (Nohria and Garcia-Pont, 1992; GomesCasseres, 1996; Suen, 2002). When this happens, what determines the total profits of an alliance constellation? And given those profits, what determines the share that any member of the group can appropriate? Any theory of competitive advantage in constellations must address these questions. Luckily, the elements of such a theory are emerging, as I will show below. Even so, we do not yet have an explicit, comprehensive framework to tie together these pieces. The two most important elements, in my view, are: first, the nature of the groupbased advantages that shape constellation success; and second, the forces that determine the claim of a firm on its group. Together these elements determine the competitive advantage of firms in a constellation. This essay intends to spark debate on these issues and SO! is an ideal place to do so. The questions I ask do not fall neatly in the field of strategy nor in that of organization: they require the integration of perspectives from both fields. An alliance constellation is a particular kind of organization created to pursue a particular kind of strategy; the results thus depend on the design of both aspects and on the interaction between them. In this context, and probably in many others, it is limiting to think about strategy without thinking about organization, and the reverse. In the spirit of Strategic Organization, I STRATEGIC ORGANIZATION Vol 1(3): 327–335 PAGE PROOFS, JUNE 2003; TO BE PUBLISHED AUGUST 2003 1476-1270[200308];1:3;327–335;035288 Copyright ©2003 Sage Publications (London,Thousand Oaks, CA and New Delhi) www.sagepublications.com