Partner Related Motives and Strategic Alliance Formation: Evidence from Small and Medium Enterprises in Kenya

Abstract

This study investigates the effect of partner-related motives on firm performance, and the study targeted manufacturing SMEs based in Kenya. The partner-related motives were operationalized as the social factors of reputation-based motives, historical-based motives, and institutional-based motives, while firm performance is operationalized as sales growth and net profit. The target population for the study consisted of 74 SMEs based in Nairobi City County with existing strategic alliances. The study adopted descriptive and explanatory research designs and collected data from company CEOs or senior managers. The survey data was analyzed using descriptive and inferential statistics. The survey findings showed that partner-related motives have been adopted and practiced by manufacturing SMEs to a high extent (M=3.68; S.D.=0.83). The study findings indicate that partner related motives have a significant effect on performance of manufacturing SMEs (Adj R2=0.525, β=0.444, p<0.05). Accordingly, manufacturing SMEs in Kenya are motivated to form strategic alliances by reputation-based motives and institutional-based motives, with the same motives having a positive effect on SME performance. In contrast, historical-based motives have no significant effect on SME performance. Therefore, the study concluded that reputation-based motives push manufacturing SMEs in Kenya to engage in strategic alliances while, historical-based motives and institution-based motives pull manufacturing SMEs in Kenya to form strategic alliances with other firms. The study recommended that top managers in the manufacturing SMEs need to adopt a vigorous diagnostic process to identify and define their partner-related motives. The study observes that such a move will enable the manufacturing SMEs to identify the most suitable alliance partner(s) who can offer complementary resources to improve performance.