Do extant management control frameworks fit the alliance setting? A descriptive analysis

Abstract

We examine the portfolio of management controls used to mitigate alliance risk at three separate firms in order to analyze the suitability of management control frameworks proposed by Simons (1995), Merchant and Van der Stede (2007), and Jensen and Meckling (1992) as descriptors of controls used in interfirm alliances. We find that, for the most part, these frameworks generalize to fit the data on how firms manage risks of strategic alliances. However, in applying these frameworks successively to the same data, we find that the researcher's theoretical lens imparts a distinctive understanding of the function of alliance management controls in relation to alliance risk. Specifically, we conclude that alliances that have value-creation at their root engender management controls that are well described by the management control frameworks of Simons (1995) and Merchant and Van der Stede (2007). These frameworks comprehend both economic and behavioral aspects of interfirm exchange and place much weight on coordination and communication between alliance partners. The management controls employed in alliances focused on transaction efficiency and cost minimization are described equally well by the framework of Jensen and Meckling (1992), which relies heavily on economic theory.