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Strategic Alliances Essay

Accounting Notes > Strategic Finance, Digitization and Extended Enterprises Notes

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"A common way of viewing hybrid organisations is to represent them as equity or non-equity alliances which implies the adoption of certain governance and financial control arrangements." Discuss the different approaches to achieving alliance controls commenting specifically on how far alliance structure is defined by the alliance's strategic objectives. In today's modern world, organisations are becoming ever more complex and interconnected. Drivers such as globalization, rapid technological transformation and increased technical complexity of products are leading to the formation of inter-organisational relationships to share the fixed costs and risks associated with these modern influences (Kraus and Lind, 2007). In some organisations, such as NGOs, the formation of strategic alliances is being forced upon them as competition for funding increases. At the same time, available funds are decreasing as governments in the developed world implement austerity measures. Control mechanisms are becoming increasingly important for the strategic success of both alliances and alliance partners. As a result, many academics and researchers have proposed theoretical frameworks in order to study strategic alliances. Alongside management control system (MCS) frameworks and taxonomies such as the formal and informal MCS taxonomy (Chenhall & Morris, 1995) and 'levers of control' framework (Simons, 1995), a number of organizational frameworks have been developed. One such structure, which complements MCS studies, is that of the distinction between equity and non-equity alliances (Das and Teng, 2001). Equity alliances are best understood as those that are legally separate entities owned by two or more partners. Non-equity alliances are more informal relationships often formed through contracts and other such mechanisms. This structure provides a strong foundation on which to discuss controls in strategic alliances because the distinction between equity and non-equity alliances is well defined by Das and Teng (2001), allowing us to focus our study and critique on the approaches to achieving alliance controls within such structures. Although we find that often there are no standard set of controls that work for all alliance structures, there are particular forms of control that are more suited to equity or non-equity alliances. Equity alliances have long been seen as the conventional governance structure for strategic alliances. Their stand-alone nature provides many advantages to firms that undertake such

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