Globalisation, organisational modes and the growth of international strategic technology alliances

Abstract

The growing use of strategic technology partnering (STP) as a means to undertake technological development is often regarded as a hallmark of globalisation. We attempt to understand and explain this growth. We also attempt to understand the reasons for the choice of different types of organizational modes by firms undertaking STP. In particular, we analyze the growing use of non-equity agreements. Our analysis suggests that the preference for non-equity STP has occurred uniformly across firms of all nationalities, and differences that exist in this propensity are determined by industry-specific differences, rather than country-specific differences. Globalisation, organisational modes and the growth of international strategic technology alliances Introduction The advent of globalisation is by no means a very recent phenomenon. It is only recently, however, that its effects have been recognised as pervasive, with the explosion of international trade and investment by companies of almost every nationality. By now only some aspects of modern commerce are purely domestic. There are few companies that are not engaged in buying inputs or selling outputs in overseas markets and there are even fewer firms who are not affected in some way by economic events in other countries. Relatively unrelated economic phenomena in far-off lands affect even the smallest entrepreneur in the most remote location as goods and services are traded on a global basis. This effect naturally varies across industries, and is particularly acute in those sectors where consumption patterns are increasingly homogenous across countries, those which are capital and knowledge-intensive and those that depend on new and fast-evolving technologies. These are sectors where firms have expanded internationally fastest, as they are thus able not just to compete in the various markets simultaneously, they are also able to exploit and acquire assets and technology that may be specific to particular locations. The oft-cited examples of silicon valley in the US as a haven for information technology firms, and the Baden-Wurtenberg region in Germany for chemical firms are just some of the best known cases of this agglomeration effect of innovatory activities. It is axiomatic that firms in many sectors need to innovate in order to survive, which in this day and age also implies being present in all the major international markets where competitors are present. Unfortunately, given the capital-intensity of these activities and the inherent risk of innovation, most firms cannot afford to be omnipresent. Undertaking all or even most aspects of value-adding activities through wholly owned subsidiaries in all locations, is no longer possible, and in many instances not even desirable. Over the past two decades firms have increasingly sought to undertake activities through collaborative efforts. Although collaborative activity is undoubtedly an ancient practice its recent popularity is relatively new. It is undeniable that there is clearly a process of evolution whereby the use of alliances as an explicitly strategic activity represents a ‘new’ form of commercial activity. What is particularly unique about the current stage of capitalism is the use of alliances to undertake innovative activity, and doing so not just at a centralised location but in international locations often with international competitors. It seems that within strategic technology partnering (STP), there has been a gradual shift away from equity-based partnering to non-equity forms of agreements (Hagedoorn, 1996). The rest of this article focuses on evaluating some of these trends. We do so through the use of the MERIT CATI database, which contains information on almost 8000 instances of STP (see appendix for a description). This paper examines the changes that have taken place due to globalisation, from three perspectives. First, we try and explain the reasons behind the growth of STP as a phenomenon related to globalisation. Second, we try and understand why firms undertake STP, and particularly, international STP. Third, we evaluate the reasons that determine the choice of different organisational modes of STP why do firms increasingly prefer non-equity agreements over equity agreements. Although the analysis is of a tentative nature, we try and show that differences are mediated more by industry-specific factors rather than geographic-