Competing in today’s global economy necessitates companies to question continually existing corporate practices and test out new ideas and skills. One of the best ways to shake up lackluster corporate organizations is by learning and securing the best practices of competitors. The best way to do this is to learn directly about rival’s operating and strategic advantages by incorporating this information through an alliance (Inkpen, 2000). An alliance can be thought of as a relationship between firms in which they combine some or all of their resources to generate greater value than a market transaction. Alliances provide access to far more resources than any single firm owns or could buy (Lewis, 1990). Drucker (1995) suggested that the greatest change in the way business is being conducted is the accelerated development of relationships based not on partnership and not ownership. The occurrence of an alliance can be intra industry or inter industry. Example of an intra industry alliance would be the alliance formed by the three United States automobile manufacturers to develop technology for an electric car. Inter industry can be seen in the United Kingdom pharmaceutical giant GlaxoSmithKline’s alliances with a wide range of firms from a variety of industries such as Canon and Apple (Trott, 2005). Conway and Stewart (1998) identify six generic types of alliance and these are: licensing, supplier relations, joint venture, collaboration (non-joint ventures), Research and Development consortia, industry clusters and innovation networks. The number of strategic alliances has grown considerably over the last twenty five years (Grant and Baden-Fuller, 2004). Reasons for the formation of alliances include the need to spread the costs and risks of innovation, as capital requirements for development projects in industries such as pharmaceuticals, telecommunications and commercial aircraft have witnessed a rise (Mowery, 1988). One of the most widely mentioned motives for alliance partnership, connected to many of those described, is the acquisition of new technical skills or technological capabilities from partner firms (Khanna, 1996). It has also been suggested by Khanna (1998) that an important explanatory factor for the growth of alliances is that they provide a stage for organizational learning, giving firms access to the knowledge of their partners. Through the shared execution of the alliance task, mutual interdependence and problem solving, and observation of alliance activities and outcomes, firms can learn from their partners. (Inkpen, 2000) Unlike other learning contexts, the formation of an alliance reduces the risk that the knowledge will dissipate quickly (Powell, 1987). Thus, alliances provide an ideal platform for learning. An alliance may generate knowledge that can be used by parent firms to enhance strategy and operations in areas unrelated to the alliance activities. This knowledge constitutes the private benefits that a firm can earn unilaterally by picking up skills from its partner (Khanna et al., 1998). As Arie de Geus, Senior Manager at Royal Dutch/Shell, wrote in a paper in which he stated, “the only competitive advantage the company of the future will have is its managers’ ability to learn faster than their competitors”. Information is everything and knowledge is the key to success (Clegg, Kornberger, Pitsis, 2008. Pp342).
Davenport and Prusak (1999) define knowledge as a fluid mix of framed experience, values, contextual information, and expert insight that provides a framework for evaluating and incorporating new experiences and information. It involves the processes through which knowledge is channeled between a source and a recipient. A firm may be either a knowledge source or a knowledge recipient at any given point in time. The main goal of any knowledge-sharing process regardless of the firm’s role is the...