Forming an International Strategic Alliance

Abstract

International strategic alliances are used as effective vehicles to enter a host country’s market when the host government places some restrictions on other forms of market entry. This chapter assumes that forming an international strategic alliance in China is normally associated with bringing together different combinations of participating firms’ resources, knowledge and capabilities. Foreign firms may provide resources regarding advanced technology, management and financial capital, while the local partner may provide resources regarding the host country’s markets, infrastructure and political framework. By pooling these resources, it is possible to increase their long-term business presence vis-à-vis competitors. An international strategic alliance’s resources, knowledge and capabilities exchange will rely on all participating firms’ management being involved to achieve strategic, cultural and operational fit in the operation of the strategic alliance. Three associated theories are perceived to provide primary insights into a partner firm’s endowments of ownership investments: they are resource-based theory, resource dependence theory and ownership, localization and internalization theory.