In this article we examine how technology and markets affect and how firms collaborate. Essentially there have been two approaches to studying collaboration. This type of research provides useful insights into how technological and market characteristics affect the level, type and success of collaborative activities. The other type of research is based on structured case studies of specific alliances, usually within a specific sector, but sometimes across national boundaries, and provides richer insights into the problems and management of collaboration.
Industry structure and technological and market characteristics result in different opportunities for joint ventures across sectors, but other factors determine the strategy of specific firms within a given sector. At the industry level, high levels of R&D intensity are associated with high levels of technologically oriented joint ventures, probably as a result of increasing technological rivalry. This suggests that technologically oriented joint ventures are perceived to be a viable strategy in industries characterized by high barriers to entry, rapid market growth and large expenditures on R&D. However, within a specific sector, joint venture activity is not associated with differences in capital expenditure or R&D intensity. A study of joint ventures in the USA found that technologically oriented alliances tend to increase with the size of firm, capital expenditure and R&D intensity. Similarly the number of marketing and distribution oriented joint ventures increases with firm size and capital expenditure but is not affected by R&D intensity. At the level of the firm, different factors are more important. For example, there are significant differences in the motives of small and large firms. In general large firms use joint ventures to acquire technology, whilst smaller firms place greater emphasis on the acquisition of market knowledge and financial support.
Joint venture activity is high in the chemical, mechanical and electrical machinery sectors, as firms seek to acquire external technological know–how in order to reduce the inherent technological uncertainty in those sectors. In contrast, joint ventures are much less common in consumer goods industries, where market position is the result of product differentiation, distribution and support. If obtaining complementary assets or resources are a primary motive for collaboration, we would expect alliances to be concentrated in those sectors in which mutual ignorance of the partner’s technology or markets is likely to be high. Similarly joint ventures would occur more frequently between partners who are in industries relatively unrelated to one another, and that such alliances are likely to be short lived as firms learn from each other. Surveys of alliances in so called high technology sectors such as software and automation appear to confirm that access to technology is the most common motive. Market access appears to be a more common motive for collaboration in the computer, microelectronics, and consumer electronics and telecommunications sectors.
However, these data need to be treated with some caution as in many cases partners exchange market access for technology access or vice versa. For example, Japanese firms rarely sell technology but are often prepared to exchange technology for access to markets. Conversely European firms commonly trade market access for technology. In this way firms limit the potential for paying high price premiums for market or technologies because of their lack of knowledge.
A breakdown of alliances by region provides some further explanation. Patterns within and between triad regions are very different. Alliances between US firms appear to be common in all fields. Alliances between European firms are concentrated in software development and telecommunications, but there is relatively little collaborative activity within the European automation microelectronics and computing industries. Alliances between Japanese firms appear to be much less common than expected. This may reflect the weakness of the database, but is more likely to reflect the rationale for strategic alliances. The most common reason for international alliances is market access, whereas the most common reason for intra-regional alliances is technology acquisition.
Alliances between American and European firms are significant in all fields. Alliances between American and Japanese firms are only significant in computers and microelectronics presumably the former dominated by the US partners, and the latter by the Japanese. There appears to be relatively little collaboration between Japanese and European companies, perhaps reflecting the weakness of the European electronics industry.
Given the problems of management and organization, potential for opportunistic behaviour and the limited success of alliances it might be expected that the popularity of alliances might decline as firms gain experience of such problems.
Overall the number of alliances has increased over time, and networks of collaboration appear to have become more stable, being based around a number of nodal firms in different sectors. These networks are not necessarily closed, but rather represent the dynamic partnering behaviour of large; leading firms in each of the sector. The nodal firms are relatively stable, but their partners change over time. Contrary to the claims of globalization the number of domestic alliances has increased faster than international ones.