The Many Faces of Multi-Firm Alliances: Lessons for Managers

Abstract

One of the most notable business trends in recent years has been the surge in alliance formation. Globalization, escalating R&D expenses, shortening product life cycles, and convergence of technologies are often cited as important factors that contribute to this phenomenon. This article develops a framework for multi-firm alliances. Multi-firm alliances can be classified on the basis of distinct payoff structures, leading to critical differences in their predicted development and final result. This article presents four multi-firm alliance game scenarios to describe the dynamics that underlie the interactions among firms and provides industry examples. It offers a number of lessons to help managers improve their ability to manage multi-firm alliance relationships.