Factors affecting a

partner’s perceived
effectiveness of business
alliance: some
Singaporean evidence

B Ramaseshan, Puay Choon Loo

(1998)
Introduction
• Given functional specialization and a scarcity
of resources

• Organizations would seek to reduce

environmental uncertainty

• By entering into strategic alliances with other

organizations for exchanging resources for
mutual benefits

• This paper investigates factors affecting a

partner’s perception about the effectiveness
of their business strategic alliance.
Alliance?
• Strategic business alliances are described as
form of coalition between 2 or more separate
business entities working together to achieve
mutual objectives.

• With growing globalization of business

transactions, the scope of many national
business alliances has expanded from
domestic to international.
Success / Failure? (1)
• However, many of these alliances never
reached their potential performance level.

• Most of the alliances failed before any mutual

benefits are reaped.

• Although Franko (1971), Gomes-Cassaras

(1987), Harrigan (1987), Killing (1982) suggested
that alliances in which satisfaction was not
mutual among partners should be considered
unsuccessful.

• One of more partners believe it to be ineffective.

Success / Failure? (2)
• A positive correlation was found between
partners’ satisfaction for same alliance -
implied that a partner’s response is sufficient
to provide a reliable source for analyzing the
effectiveness of an alliance.

• A study by Killing (1982), Geringer & Hebert

(1991) found a positive correlation between
objective and subjective measures of
performance. One could be used in place of
the other.

• Therefore, a subjective measure instead of

objective measure (profitability) is used.
Hypothesis 1…(1)
Power imbalances in the alliance are
negatively related to the partner’s perceived
effectiveness of the alliance.
• Outcome of exchange behavior in an alliance is
the issue of dependencies upon resource
between partners.
• Resource dependence provided the stimulus of
power and thus alter the balances of power.
• Partners endowed with unequal resources are
likely to experience power imbalances.
• It would affect a partner’s perceived
effectiveness of their alliance.
Hypothesis 1…(2)
• According to Muller (1970), organizations with
superior power will act to exploit power.
• Weaker partner in the alliance would try to
limit their weaknesses and adopt a very
defensive stance.
• And would resort to tactics to erode the power
that stronger partner has.
• Stronger partner may also pursue similar
strategies to vanquish the weaker partner.
• Or even resort to take-on or acquisition upon
the defeated/weaker partner.
• Thus, power imbalances will have negative
effect on perceived effectiveness.
Hypothesis 2…
A partner’s commitment to alliance is
positively related to the partner’s
effectiveness of their alliance.
• Commitment has been found to decrease
employee turnover, leads to higher motivation,
and increased organizational citizenship
behaviors.
• Is defined as an enduring desire to maintain a
valued relationship.
• Commitment development between partners
within an alliance would act as a counter-
balance against failture.
Hypothesis 3…
The level of trust that a member has of its
partner is positively related to the perceived
effectiveness of the alliance.
• Trust is defined as the willingness to rely on an
exchange partner in whom one has confidence
(Morgan & Hunt, 1994).
• Trust of a member of an alliance about their
partner would exist when the member has
confidence in the partner’s reliability and
integrity.
• Reliable, trustworthy, high integrity –
benevolence, competence, consistent, honest,
fair, responsible, helpful.
• Level of trust that an organization has of their
partner will have positive influence on
perceived effectiveness.
Hypothesis 4…
Excessive dysfunctional conflicts between the
partners are negatively related to a partner’s
perceived effectiveness of their alliance.

• Conflicts – functional / dysfunctional

• Functional conflicts defined as disagreements
between alliance partners that could be resolved
amicably. – enhance effectiveness
• Dysfunctional conflicts defined as disagreements
between the alliance partners that could not be
resolved. – affect effectiveness
• Therefore, excessive dysfunctional conflicts have
negative influence on perceived effectiveness.
Hypothesis 5…
Inter-organizational communication is
positively related to a partner’s perceived
effectiveness of their alliance.
• Inter-organizational communication –
formal/informal sharing of info between firms.
• Exchange of info ensure partners are kept
informed of each other’s role and development
with respect to effectiveness of alliance.
• Thus, lesser probability and tendency of
misunderstanding.
• To facilitate greater understanding and
improves perception of their collaboration.
• Higher the inter-organizational communication
between partners, greater the perceived
effectiveness.
Conclusion
• Current study looks into the factors affecting
partner’s perceived effectiveness of their
alliances in Singapore were similar to factors
found in previous studies in US/western
economies suggest that factors are not
necessarily country/region specific.

• Though these 5 variables may not have

completely covered a complete explanation of
partner’s perceived effectiveness of alliance, but
it may sufficiently explain the partner’s
perceived effectiveness.

• Researching may also be considered for different

locations that may have a very different set of
environmental factors that would affect a
partner’s perceived effectiveness of alliance.