The strategic management of multipartner alliances

Managing Multipartner Strategic Alliances, pp. 133–167Copyright © 2015 by Information Age PublishingAll rights of reproduction in any form reserved. 133

Chapter 6

The STraTegic ManageMenT of

MulTiparTner allianceS uncovering the Triadic alliance problem

giovanni Battista Dagnino and giulio ferrigno

aBSTracT

The engagement of firms in multiple simultaneous strategic alliances with various partners has become a ubiquitous phenomenon in today’s business landscape. Prior strategic alliance literature has offered a wealth of perspec-tives on how firms learn to manage individual alliances and build alliance capabilities by developing a dedicated alliance function. However, while such studies are focused on dyadic alliances, scarce attention has been devoted heretofore to the emerging phenomenon of triadic alliances. In order to shed light on such phenomenon, this chapter explores the triadic alliance and unveils some problems that epitomize such kind of alliances; that is, actor mindframes, governance structure, alliance learning problems and conflict management, and strategic and operational problems. Moreover, examining a specific triadic alliance case study (i.e., 3SUN Alliance between Enel Green

134 G. B. DaGnino and G. FerriGno

Power, Sharp, and STMicroelectronics) shows how the dyadic alliance func-tion turns out to be hardly appropriate to handle the bundle of complexities emerging from the four problems of triadic alliance settings. Furthermore, the chapter unveils the triadic alliance problem and presents a comprehensive proposition that emphasizes the need for firms to manage such complexities by creating a specifically contingent set of triadic alliance mechanisms. The chapter provides two significant contributions. First, by starting to unpack the triadic alliance problem, it offers a theoretical contribution that facilitates an improved understanding of this particular multipartner arrangement. Second, it proposes a contribution helpful to practitioners in that it supplies a set of fresh hints to build a flexible set of triadic alliance mechanisms to manage strategically a portfolio of multipartner alliances.

inTroDucTion

The engagement of firms in multiple simultaneous strategic alliances with various partners has become a ubiquitous phenomenon in today’s busi-ness landscape. Prior strategic alliance literature has offered a wealth of perspectives on how firms learn to manage individual alliances and build alliance capability (Kale, Dyer, & Singh, 2002; Schreiner, Kale & Corsten, 2009; Zollo, Reuer, & Singh, 2002). An important factor for successfully generating and deploying alliance capabilities is the creation of a dedicated alliance function, a function that coordinates all alliance-related activities across a firm’s alliance portfolio and allows a firm to achieve better perfor-mance in both the single alliances in which it is engaged as well as at the alliance portfolio level (Kale & Singh, 2007, 2009).

However, if we dig deeper, we can observe that the study of the alli-ance function has been heretofore conducted mainly at the dyadic level, with each alliance involving essentially two partners (Zeng & Chen, 2002). While the use of multifirm strategic alliances has significantly increased in the past few years, to our knowledge, extant research is scarcely concerned with the triadic level. Triadic alliances are a specific form of multipartner alliances in which three partners are involved.

Furthermore, it is noteworthy that the framework of understanding and the specific tools developed as concerns the dyadic alliance function are not easily and automatically replicated at the triadic level. At the latter level, four key aspects need to be taken into consideration that do not necessarily overlap with the dyadic level (i.e., actor mindframes, governance structure, alliance learning problems and conflict management, and strategic and operational problems). First, since the links between a focal firm and the other two partners involved in the alliance is grounded in a more complex threefold framework of interaction, alliance actor mindframes change dra-matically at the triadic level (Ozcan & Overby, 2008).

---------->Au: There is no Zollo, Reuer, & Singh, 2002 reference.

the Strategic Management of Multipartner alliances 135

Actor mindframes are here conceived as the windows through which alliance actors view the alliance. Second, since it involves three differ-ent partners, the choice of the governance structure (Teng & Das, 2008) and its implementation in triadic alliances turns out dissimilar and more critical than in dyadic alliances. Third, for the reasons above, it is more puzzling to address the learning problems and more difficult to solve the conflicts that usually arise in alliance management. Finally, in triadic alli-ances, uncertainty and ambiguity occur not only at the strategic level but also at the operational level. In fact, discrepancies among two or three of the partners involved in the alliance may crop up not only on fundamental issues but also on day-to-day operational management. Accordingly, we posit that the management of the conventional dyadic alliance function is barely appropriate to strategically manage multipartner alliances at the triadic level. The aim of this chapter is twofold. First, it seeks to shed light on the four specific aspects of the triadic alliance function to sketch out a more comprehensive understanding of the contours of this emerging area in the strategic alliances realm. Second, by tapping into a triadic alliance representative case study (i.e., 3SUN, the recent alliance between Enel Green Power, STMicroelectronics and Sharp in solar cells multifunction thin technology), it aims to supply fresh hints on building a set of triadic alliance mechanisms that may be helpful to executives who want to strategi-cally manage a portfolio of multipartner alliances.

The STraTegic ManageMenT of MulTiparTner allianceS

By the turn of the 21st century, many of the world’s largest companies had over 20% of their assets, and over 30% of their annual research expendi-tures, tied up in alliance relationships (Ernst, 2004). A study by Partner Alliances reported that over 80% of Fortune 1000 CEOs believed that alliances would account for almost 26% of their companies’ revenues in 2007–2008 (Kale, Singh, & Bell, 2009).

Studies on alliances carried out in the 1980s and 1990s show that alli-ances have been increasingly used as strategic arrangements between firms (Ahuja, 1996; Anderson, 1990; Hergert & Morris, 1987). Accordingly, in the last two decades, alliances have become a central part of most firms’ competitive and growth strategies (Kale & Singh, 2009). Alliances help firms strengthen their competitive position by enhancing market power (Kogut, 1991), increasing efficiency (Ahuja, 2000), accessing new or criti-cal resources or capabilities (Rothaermel & Boeker, 2008), or entering new markets (Garcia-Canal, Duarte, Criado, & Llaneza, 2002).


Notwithstanding that, alliances also tend to exhibit high failure rates (Dyer, Kale, & Singh, 2001). Studies report that two thirds of all alliances experience severe problems in the first 2 years and reported failure rates range as high as 70% (Das & Teng, 2000; Koza & Lewin 2000). Alliance termination rates are reported over 50% over a 5-year period (Lunnan & Haugland, 2008; Reuer & Zollo, 2005), and in many cases, forming such relationships has resulted in shareholder value destruction for the firms that engage in them (Kale et al., 2002).

This condition creates a relevant trade-off for firms. On the one hand, firms are required to form and launch a much greater amount of alli-ances than in the past and must increasingly rely on them as a means of enhancing their competitiveness and growth as they affect positively the firm performance (Stuart, 2000). On the other hand, firms face significant obstacles in achieving sufficient success with alliances. In other words, man-agers need a better understanding of what really underlies alliance success and how they can manage alliances better (Kale & Singh, 2009).

What really underlies alliance success? is a first issue that has been well explored in prior strategic management research. Indeed, the success of any single alliance depends on some key factors that are relevant at each stage of alliance evolution (Gulati, 1998). These include (a) the formation phase, where a firm that decides to initiate an alliance selects the appro-priate partner; (b) the design phase, where a firm (and its partner) set up appropriate governance to oversee the alliance; and (c) the postformation phase, where a firm manages the alliance on an ongoing basis to seize value (Schreiner et al., 2009).

Hows can firm manage alliances to achieve greater, repeatable alli-ance success than others? is a second issue that, only recently, research has started to examine. Actually, what emerges from these studies is that firms learn how to manage individual alliances and build alliance capabili-ties (Anand & Khanna, 2000; Kale et al., 2002), that is, a firm’s ability to identify partners, initiate alliances, and engage in the management and possible restructuring and termination of these alliances (Khanna, 1998). In fact, in an environment where alliances are an important constituent of firm strategy, having a firm-level alliance capability to manage alliances would indeed be a preliminary condition to fuel a source of competitive advantage (Gulati, 1998). Kale and Singh (2009) underscore three main building blocks underlying the development of alliance capability in firms: (a) prior alliance experience, (b) the creation of a dedicated alliance func-tion, and (c) the implementation of firm-level processes to accumulate and leverage alliance management know-how and skills.

First, a firm can develop its alliance capability by accumulating greater experience in doing alliances. Prior alliance experience is something that a firm can acquire by learning by doing alliances, as well as an ingredient


that guides such firm to enhance its likelihood to engender a number of flourishing alliances. Indeed, Anand and Khanna (2000) found that firms with greater alliance experience received a more positive response from the stock markets when they formed or announced a new alliance. According to them, favorable market reaction suggests that firms with greater alliance experience have greater alliance capability and are therefore more likely to succeed with the new alliance they have formed. Accordingly, experience may lead firms to greater alliance success with regard to the creation of shareholder value.

Although a firm builds alliance capability by accumulating greater expe-rience in doing alliances, experience is not always sufficient to generate greater alliance capability. Actually, experience by itself is unable to explain why some firms enjoy greater success with alliances than others do (Anand & Khanna, 2000).

Studies on alliances deal with this gap by underscoring the role of a second mechanism in building firm-level alliance capability. The adoption of higher-order organizing principles, such as creating a separate structure or entity that is responsible for coordinating and managing a firm’s overall alliance activity, is critical in this regard (Kale et al., 2002). A separate orga-nizational unit to manage alliances, commonly referred to as a “dedicated alliance function,” is in fact vital in building an organization’s alliance capa-bility. Studies on firms such as Hewlett-Packard (Alliance Analyst, 1996), Eli Lilly (Dyer et al., 2001; Gueth, 2005), and Philips Electronics (Kale et al., 2009) have shown that it is possible to use this mechanism successfully. Firms can establish this function in many different ways—they can organize it around key partners, businesses, functions, geography, or some combina-tion of these based on the dimensions that are most important.

Recent research provides insights into a third mechanism used to develop firm alliance capability (Kale & Singh, 2007, 2009). Indeed, these authors emphasize the role of certain learning processes in building alliance capability. In more detail, firms can implement four deliberate processes (i.e., articulating, codifying, sharing, and internalizing processes) to learn, accumulate, and leverage alliance management knowledge either from their own alliance experience or from that of others. Collectively, these four learning processes help the firm manage its future alliances more effectively.

Summing up, alliance experience, a dedicated alliance function, and organizational processes to learn and leverage alliance management know-how are three important mechanisms to develop and institutionalize an organization-wide capability in alliance management.

The focus of this chapter is on analyzing and discussing in detail the second mechanism of the three discussed, that is, the dedicated alliance function and its evolution in triadic alliances. The reason motivating us to


devote attention to this mechanism is twofold. First, some scholars (Dyer et. al., 2001; Kale & Singh, 2009; Kale et al., 2002) have shown that a dedi-cated alliance function provides several benefits to firms that use it. The level of analysis they have explored was the dyadic level where an alliance is formed by two partners. Nonetheless, by doing so, such scholars have fallen short in providing evidence concerning the benefits of a dedicated alliance function in the instance of an alliance with more than two partners. In order to understand whether such benefits may endure when moving the focus to a different level of analysis, we study the relevance of the dedicated alliance function at the triadic level, that is, where the alliance structure is formed not by two but by three partners.

Second, empirical studies (Hoang & Rothaermel, 2005; Kale et al., 2002) have shown that the alliance function is a critical mechanism in building a firm’s alliance capability, thus determining the overall alliance success. In fact, firms that have a dedicated alliance function to coordinate their alliance activities enjoy on average a much greater alliance success rate (around 70%) than firms without it (around 40%). Therefore, if they want to leverage on success, firms are required to design and install such alliance function when they form an alliance at the dyadic level.

In the next section, we show in detail the bundle of benefits associ-ated with a dedicated alliance function at the dyadic level. Then we move our focus from the dyadic to the triadic level and provide a definition of triadic alliance. At such a level, we identify a set of key problems (i.e., actor mindframes, governance structure, alliance learning problems and conflict management, and strategic and operational problems) that depict the inner complexity of triadic alliances. Finally, taking into account the complex features that are credited to such key aspects, we explore whether the benefits of the dedicated alliance function are easily and automatically replicated at the triadic level.

froM DyaDic To TriaDic STraTegic allianceS: Key iSSueS

As we anticipated in the earlier section, a dedicated alliance function pro-vides several benefits to firms if we look at the alliance’s dyadic level (Dyer et al., 2001; Kale et al., 2002; Kale & Singh, 2009). First, it is an important mechanism for capturing and storing alliance management lessons, pro-cesses, and best practices from the firm’s own prior and current alliance experiences, as well as for leveraging that knowledge throughout the firms. Alliance managers become repositories of alliance management know-how by virtue of their repeated involvement in the various alliances of the firm. Alliance knowledge that resides experientially within individual managers


is likely to dissipate over time in the face of natural turnover among them. By codifying this know-how and absorbing it, the alliance function plays an important role in retaining the precious knowledge that otherwise might be lost if managers who possess it were to leave the organization.

Second, the dedicated alliance function enhances the visibility and awareness of a firm’s alliances among external stakeholders (e.g., investors, customers, suppliers, public authorities, and government), thus reinforcing their buy-in and support. Such external visibility can enhance the reputa-tion of the firm in the marketplace and create the perception that alliances are adding value. At the same time, the dedicated alliance function makes a difference in screening new potential partners. In fact, it provides a place to screen an array of potential partners and bring in the appropriate parties if a partnership looks attractive.

Third, the dedicated alliance function provides support to a firm’s alliance portfolio and helps gather the internal resources necessary for alli-ance success. Indeed, it allows the firm to solve the problem of mobilizing internal resources to support the alliance initiative in two ways. First, the alliance function has the organizational legitimacy to reach across divisions and functions as well as the resources necessary to support the firms’ alli-ance initiatives. Second, over time, individuals within the alliance function develop networks of contacts throughout the organization. These networks usually develop trust between alliance managers and employees in the organization, thereby facilitating reciprocal exchanges and support for alliance initiatives.

Last but not least, the dedicated alliance function acts as a mechanism to monitor the performance of firm alliances in order to identify potential trouble spots before they become an issue. The dedicated alliance function could motivate the firm to develop alliance evaluation processes so as to supervise the performance of its alliances. When serious conflicts arise, the alliance function can act as a facilitator to help resolve the dispute in a timely manner.

Summing up, the creation of a dedicated alliance function can enhance the firm’s alliance capability by (a) acting as a important point for learn-ing and leveraging both explicit and tacit lessons from prior and ongoing alliances; (b) keeping the various stakeholders, including investors, well-informed of new alliances and thriving events in ongoing alliances; (c) improving internal coordination and resource support of alliances; and (d) monitoring and evaluating alliance performance (Kale et al., 2002).

All these benefits enable firms to engender greater value and success with their alliances. Empirical studies (Hoang & Rothaermel, 2005; Kale et al., 2002) have shown the existence of a positive link between the existence of a dedicated alliance function, a firm’s alliance capability, and overall alli-ance success. Firms that have a dedicated alliance function to coordinate


their alliance activities enjoy a much greater alliance success rate (around 70%) than firms without it (around 40%).

While the alliance function is quite a significant mechanism in building a firm’s alliance capability, the relevance of such function seems to vary across different business and firm conditions. Some studies (Rothaermel & Boeker, 2008) indicate that the existence of a function that coordinates all alliance-related activity helps the development of alliance skills more effectively in larger firms than in smaller ones. Moreover, building effec-tive alliance capability is a time-consuming process that can take between 5 and 10 years (Kale & Singh, 2009). Therefore, the amount of benefits due to such alliance functions could not be achieved in short order by firms.

However, if we dig a bit deeper by considering the level of analysis on which strategic management research has heretofore focused, we observe that the study of the alliance function has heretofore been carried out mainly at the dyadic level, with each alliance involving essentially two part-ners (Zeng & Chen, 2003).

In the last few years, the issue of multipartner alliances has received substantive attention, and several types of multipartner alliances can be distinguished (Hwang & Burgers, 1997). Indeed, multipartner alliance scholars have examined alliance networks, alliance constellations, and mul-tilateral alliances (Das & Teng, 2002; Doz & Hamel, 1998; Gomes-Casseres, 1996; Gudmundsson & Lechner, 2006; Lavie, Lechner, & Singh, 2012; Lazzarini, 2007; Vanhaverbeke & Noorderhaven, 2001). In this line of research, Gudmundsson, Lechner, and van Kranenburg (2013) have listed definitions of alliance networks, alliance constellations and multilateral alliances, and the corresponding references in order to show how the three concepts evolved in the last years. While the use of multifirm strategic alli-ances has significantly increased in the past few years, received research is scarcely concerned with the triadic level. We define triadic alliances (or three-way alliances) as a specific form of multipartner alliances in which three partners are involved. In order to explore the triadic alliances and consequently to reconsider the possible benefits of the dyadic alliance func-tion in such alliances, we focus our study on received alliance literature. Within the literature on alliances, several studies have stressed the impor-tance of actor mindframes (Ozcan & Overby 2008; Zeng & Chen, 2003). Indeed, there is no doubt that alliance actors from different firms have dif-ferent cultural backgrounds, professional training, character, experiences, expertise, roles and responsibilities (de Boer, 1999; van der Werff, 1999). Put differently, alliance actors use different windows though which they see the alliance. Such differences imply that alliance actors have different view-points that are usually hard to integrate (Timmerman & Langaas, 2005). Hence, rather than integrating different actor mindframes, a handful of


studies have focused on the influence that alliance partners may have on actor mindframes of firms, thus influencing their behavior.

In fact, scholars show that multifirm agreements have undoubtedly some intricacies in which the behavior of the firm is influenced by the entire set of traits, motivations, actions, and contributions of the other members of the alliance (De Clerq, Sapienza, & Zaheer, 2005; Lavie, Lechner, & Singh, 2007; Ozcan & Overby 2008; Zeng & Chen, 2003). As a result, firms need to understand how their partners can influence their behavior. In doing so, firms seek to detect the nature and intensity of the relationships with their partners. Such efforts have been paid off at the dyadic level, where relations with only one partner seems quite simple and elementary. In fact, firms are able to coordinate all the activities they share with the other partner in the alliance through the installation of the dedicated alliance function. However, as both the number of alliances that are formed and the number of partners within the alliance grows, the complexity of understanding the relationships with the alliance partners increases dramatically. Indeed, moving from dyadic to multipartner alliances, the relationships of member firms with their partners become more varied because direct relationships are supplemented by indirect relationships among partners (Das & Teng, 2002). Accordingly, in the case of alliance constellations where there are at least three partners involved, member firms will need to go beyond direct reciprocity and rely on generalized reciprocity (Das & Teng, 2002). Hence, moving from dyadic to triadic alliances, firms relationships with partners become more varied because each dyadic link is supplemented necessarily by another indirect link through the third partner. For instance, three dyadic relationships are embedded in the triad: A & B, B & C, and A & C (Dialdin, 2003). However, because individual parties contribute to the triadic alliance as a whole and then derive benefits directly from the group (Das & Teng, 2002), each of these dyadic relationships is inevitably complemented by another indirect link though the third partner. In fact, A & B is affected by the triadic A & B & C, but at the same time A & B & C influences B & C, and A & C.

Subsequently, the increase in the number of relationships between the three partners changes dramatically the actor structural mindframe, thus creating a complexity that cannot be managed by a dedicated alliance func-tion designed for dyadic alliances. In other words, firms cannot manage such complexity simply through the institutionalization of a separate orga-nizational unit to manage alliances. In fact, in the triadic alliance context, the complexity associated with actor mindframes seems to be extremely critical compared to the complexity in a dyadic alliance. In this circum-stance, each partner needs to understand and coordinate all the direct and indirect relationships that may be generated within the triadic alliance. Summing up, we posit that the increase of uncertainty due to the relation-


ships embedded in the triad may render the dedicated alliance function of dyadic alliances unable to manage all the complexities associated to such relationships.

Problem 1: In triadic alliances, as the actor mindframes change be-cause the amount of relationships embedded in the triad is more varied, the dedicated alliance function is unable to manage the com-plexities associated with such relationships.

A second issue that we investigate in exploring the characteristics of triadic alliances is the governance structure. Researchers have been study-ing alliance structures for some time, particularly from the perspective of transaction cost economics (Oxley, 1997; Pisano, 1989). Other theories that have been used to understand alliance structures include game theory (Parkhe, 1993b), risk perception (Das & Teng, 1996, 2001), agency theory (Reuer & Miller, 1997), network theory (Rowley, Behrens, & Krackhardt, 2000), and the resource-based view of the firm (Das & Teng, 2000). All these studies taken together have produced an ample set of governance structures.

Teng and Das (2008) classify the variety of such a set of governance structures into three main categories: (a) joint ventures, (b) minority equity alliances, and (c) contractual alliances. They also demonstrate that the roles of alliance objectives, alliance management experience, and inter-national partners are significant as determinants of governance structure choice in alliances. In other words, what guides firms to adopt a JV rather than a minority equity alliance or a contractual alliance structure depends on three determinants: first, the typologies of alliance objectives (e.g., joint Research & Development and joint marketing); second, the firm’s overall experience in forming and managing strategic alliances (Hoang & Rothaermel, 2005; Sampson, 2007); and last but not least, the presence (or not) of international partners in the alliance framework.

As a consequence, firms should take into consideration all of these determinants in order to choose the proper alliance structure wisely, thus facing complexities that are not trivial. Moreover, such complexities operate at dyadic level. Therefore, since a triadic alliance involves three different partners, the impact and role that alliance objectives, alliance management experience, and international partners play in the choice of the governance structure increase consistently at the triadic level. In fact, compared to dyadic alliances, multipartner alliances entail multilateral interaction among partners, a much more complex governance structure, and distinctive dynamics of collaboration (Lavie et al., 2007). In this sense, Gulati (1995), Garcìa-Canal (1996), Oxley (1997) and Garcia-Canal, Val-dés-Llaneza, and Ariňo (2003) argue that multipartner alliances are more


difficult to govern than dyadic alliances. One of the benefits traditionally associated with the dedicated alliance function is that, at the dyadic level, such alliance function acts as a mechanism to monitor the performance of firm alliances in order to identify potential trouble spots before they become an issue (Dyer et al., 2001; Kale et al., 2002; Kale & Singh, 2009). However, prior research suggests that having more than two partner firms in a particular alliance makes monitoring more difficult and increases the risk of unintended knowledge leakage (Oxley & Sampson, 2004). In triadic alliances, firms should face the complexity of coordinating with multiple partners. Prior research also shows that alliance structure is a critical deter-minant of alliance performance (Parkhe, 1993a). Killing (1988) and Teece (1992) believe structural decisions are among the most important deci-sions alliance partners make. Indeed, structural decisions impact almost all aspects of the alliance, including operational processes, control mecha-nisms, and also exit possibilities (Das & Teng, 1996). Yoshino and Rangan (1995) show that virtually all managers they interviewed believed that an alliance’s success strictly depended on its structure.

Hence, we posit that at the triadic level, the complexity of governance structure is an important issue that firms should take into consideration in building a triadic alliance. Since governance structure is a critical driver of alliance performance, we posit that a dyadic alliance function is barely appropriate to supervise the triadic alliance performance, thus revealing itself unable to strategically manage multipartner alliances at the triadic level.

Problem 2: In triadic alliances, as governance structure becomes more complex, the dedicated alliance function is unable to monitor the triadic alliance performance.

In order to explore the facets of triadic alliances, we consider learning problems and conflict management that represent a congenital aspect in alliances partners. Yoshino and Rangan (1995) confirm that learning is always an implicit strategic objective for every firm that uses alliances.

In fact, since alliance formation implies the exchange of capabilities, knowledge, and know-how between alliance partners, firms experience a constant tension related to learning such precious resources and capabilities. Firms struggle with learning as much as possible from alliance partners and attempt to protect their own resources and capabilities from them. Indeed, on the one hand, firms seek to absorb and learn the greatest amount of resources and capabilities from partners. Learning success is determined by the maximum amount of resources and capabilities that firms allocate to learn from their alliance partner (Kale, Singh, & Perlmutter, 2000). On the other hand, firms seek to make available to alliance partners


the minimum amount of own resources and capabilities. Naturally, such restriction of resources is usually bigger when an alliance partner is also a competitor (potential or actual). Hence, in the attempt to learn from partners as much as possible, firms try to be opportunistic by concealing their precious resources and capabilities from partners. In other words, firms run a “learning race” (Hamel, 1991; Khanna, Gulati, & Nohria, 1998) in which partners are often engaged in opportunistic attempts to outlearn each other.

As said earlier, the dedicated alliance function is a useful mechanism to control the internal flow of knowledge and information that permeates throughout the organization. One of the benefits associated with such alli-ance function is to allow a firm to solve the problem to mobilize internal resources to support the alliance initiative in two ways: (a) the alliance function reaches across divisions and functions as well as the resources necessary to support the firm’s alliance; (b) the alliance function develops networks of contacts throughout the organization that facilitate reciprocal exchanges between alliance managers and employees in the organization (Kale & Singh, 2009).

In the case of triadic alliances, the learning problems that come out from the different capabilities required to effectively transfer knowledge from the alliance partners turn more complex. The three partners in a triadic alliance may have developed independently different routines for interorganizational learning (Martin & Salomon, 2003). In addition, a partner may learn more and faster than the other two partners when they interact through a triadic alliance. As a consequence, the ongoing tension between “trying to learn” and “trying to protect” (Kale et al., 2000) starts to become much more articulated within a triadic alliance than in a dyadic alliance setting. A problem related to learning races is the potential conflict between the three alliance partners and how they cope with such conflict. Conflict often exists in any alliance relationship on account of the inher-ent dependencies involved in such interactions (Kale et al., 2000).1 In the instance of triadic alliances, monitoring conflicts among the three partners may be more puzzling to realize than in dyadic alliances. Indeed, aligning the goal of a triadic alliance with the goals of each of the three partners is far more difficult than in a dyadic alliance. For instance, firm A and firm B may desire to operate in a market where firm C is not intended to work in. Moreover, conflicts may arise consistently from three different cultures. In fact, since an important element of most conflicts is the organizational or cultural distance between the alliance partners (Harrigan, 1988; Parkhe, 1993b), conflicts are likely to occur among three different organizational and/or national cultures.

To manage the tensions related to learning problems and conflicts successfully, firms must be able to control the flow of knowledge and infor-


mation that goes by the three partners. Hence, such tension should be externally handled by each partner.2 Therefore, we posit that the dedi-cated alliance function is barely appropriate to monitor the complexity associated with managing the flow of knowledge and information among partners at the triadic level.

Problem 3: In triadic alliances, as learning problems and conflict management become more complex, the dedicated alliance function is unable to monitor the flow of knowledge and information among the three partners.

The last aspect we consider here in exploring the facets of triadic alli-ance is the uncertainty and ambiguity that occur at the strategic and operational levels. Indeed, uncertainty and ambiguity may occur in taking strategic decisions on fundamental issues that may affect the performance of the triadic alliance. These discrepancies are due to the increase in the number of partners. In fact, since the partners may have three different visions and strategies to run their businesses, the process that leads key managers of the triadic alliance to adopt a strategy is inevitably affected by the lack of consensus of all the three partners. For instance, firm A and firm B may desire to adopt a strategy that firm C does not intend to accept. Firm B and firm C, however, would take some strategies that firm A may not approve. Finally, firm C and firm A may agree with some strategic deci-sions that are not fully accepted by firm B. Such lack of full consensus may certainly render time-consuming the process to take strategic decisions in a triadic alliance and consequently the period of time required to imple-ment these strategic decisions. Therefore, such discrepancies among the three partners in making strategic decisions may have some effects on the performance of the triadic alliance.

However, discrepancies among two or three of the partners involved in the alliance may crop up not only on fundamental issues but also on day-to-day operational management. Such discrepancies may be generated by different modi operandi, which are the means by which firms operate in executing their strategies. For instance, the three partners may clash in running operational processes, as they are of different nationalities. If alliance partners are of different nationalities, operational discrepancies related to cultural differences may be accentuated.

Firms’ cultures may differ on day-to-day decision-making processes. Some firms are used to gathering opinions and information from the bottom of the organization through several meetings, and this process may have an end by requiring to make accurate strategic decisions. Others circumvent this process by taking inaccurate but continuous decisions on a daily basis. Still others make decisions after a few meetings in a couple


of days, thus operating in a sort of hybrid manner. Therefore we ask, How can opposite decision-making processes converge? Such a problem turns out to be more striking in a triadic alliance, where it turns more baffling to combine three different day-to-day decision-making processes. Teng and Das (2008) argue that international alliances should have flexible structures since they are more risky due to cultural and regulatory factors. Conversely, a dedicated alliance function seems to behave as a relatively static structure. This leads us to argue the following problem:

Problem 4: In triadic alliances, as strategic and operational process-es become more complex, the dedicated alliance function is unable to manage such complexities.

In sum, four different issues depict the triadic alliance problem (i.e., actor mindframes, governance structure, alliance learning problems and conflict management, and strategic and operational problems). We posit that the bundle of complexity associated with each of these issues may not be handled by the received dyadic alliance function, thus determining dif-ficulties and misunderstandings that firms are expected to face in triadic alliances.

In the section that follows, we address such problems by taking into account the analysis of a triadic alliance case study (i.e., the 3SUN case). On the grounds of the analysis of the case at hand, we discuss how it is possible to support firms in tackling the four triadic alliance problems.

The TriaDic alliance proBleM in The 3Sun caSe

Albeit firms form dyadic alliances, a proliferation of triadic alliances has emerged in the last decade as a noteworthy phenomenon (see Table 6.1). Such proliferation embraces international alliance partners (American, European, and Asian partners) which operate in various sectors (e.g., energy, offshore, media, health care, automobile, and food and beverage) to develop or deliver jointly products or services to the market. As we have mentioned previously, extant alliance literature that has accrued especially in the last decade offers a comprehensive understanding of how firms can develop alliance capabilities to perform alliances in a successful fashion. In this vein, firms forming alliances can create a dedicated alliance function to coordinate fruitfully all the activities concerning alliances (Kale & Singh, 2009). Several benefits are associated with such alliance functions at the dyadic level. At the same time, on the basis of the alliance literature, we suggest that by increasing the number of firms in the alliance, four key aspects need to be taken into consideration (i.e., actor mindframes,


governance structure, alliance learning problems and conflict management, and strategic and operational problems). As a consequence, firms building triadic alliances are expected to face a bundle of complexities associated with the four key aspects. The complexities of a triadic alliance may downplay virtually all the potential benefits that are traditionally associated with the dedicated alliance function at the dyadic level. In order to reach a more detailed understanding of the four key issues of a triadic alliance, we have decided to tap into a representative triadic alliance case study.

Table 6.1. Triadic alliance instances in the last Decade

Triadic Alliance Partners

Alliance Foundation Year Industry Operation

Enel Green Power 2010 EnergyJoint development of photovoltaic panels

STMicroelectronics

Sharp

Found Ocean 2010 Offshore Offshore construction projects

IEV

Tamboriha

Samsung 2010 MediaDelivery of a complete 3-D home

Technicolor entertainment solution

Dreamwork Animation

GlaxoSmithKline 2012 Health CareDelivery of advances in treatment and care

Pfizer for people living with HIV

Shionogi

Renault 2013 AutomobileJoint development of electric vehicles

Nissan

Mitsubishi

Illy 2013 Food &Joint development of coffee machines

Kimbo Beverage

Indesit

Sources: www.3sun.com; www.foundocean.com; www.samsung.com; www.viivhealthcare.com; www.bloomberg.com; www.ilsole24ore.com.


research Setting and corporate Background

As earlier indicated, the focus of this chapter is to explore the configura-tion of triadic alliances in terms of the bundle of complexities associated with actor mindframes, governance structure, learning problems and conflict management, and strategic and operational problems. In this perspective, we performed an in-depth analysis of a single case (Eisen-hardt & Graebner, 2007; Siggelkow, 2007). This choice occurs for several reasons. First, the analysis of a single case study represents a unique and critical case in testing a well-formulated theory (Yin, 2009). Second, since only limited theoretical knowledge exists concerning triadic alliances, an inductive research strategy allowing theory to emerge from the data can be a valuable starting point (Siggelkow, 2007). Third, the investigators have access to a situation previously inaccessible to scientific observation (Yin, 2009). Hence, it seems that a single case study may be considered as a revelatory case in exploring the triadic alliances.

Theoretical Sampling

The selection of the case relies on one on the basic principles of theo-retical sampling (Glaser & Strauss, 1967; Mason, 1996; Pettigrew, 1990). A handful of important reasons have driven us to study 3SUN—the alli-ance between Enel Green Power and Sharp in solar cells multifunction thin technology and STMicroelectronics. First, 3SUN is an alliance that combines three partners that appear pretty different in terms of a variety of items, such as businesses, firm foundation, firm nationality, cultures, performances, decision processes, risk propensity, and customer base (see Table 6.2). We discuss these differences below.

Enel Green PowerEstablished in 2008, Enel Green Power is part of Enel Group. Enel

Group is headquartered in Rome (Italy) and develops and manages energy generation from a range of renewable sources at the global level, with a geographical presence in Europe and the Americas.3 Enel Green Power is a major global operator in the field of energy generation from renewable sources, with an annual production of 25 TW/h, mainly from water, sun, wind, and earth’s heat, meeting the energy consumption of over 8 million families.4

SharpFounded in 1912 and headquartered in Osaka, Japan, Sharp is today

a global firm that develops and delivers consumer/information products


Table 6.2. a comparison among 3Sun alliance partners (enel green power, Sharp, and STMicroelectronics)

Enel Green Power Sharp STMicroelectronics

Business Development and management of power generation from renewable sources

Production and distribution of consumer products (LCD TV, LED TV, etc.)

Development of semiconductors

Firm foundation 2008 1912 1987

Headquarters Rome, Italy Osaka, Japan Geneva, Switzerland

Industry Energy Consumer electronics

Semiconductor

Scale of Business Year 2010 (3SUN foundation)

Euro Yen USD

Revenue 2.179 billion 2.756 trillion 10.346 million

Operating Income 794 million 51.903 million 687 million

Net Income 452 million 4.397 million 619 million

Total Assets 13.13 billion 2.836 billion 14.664 million

Employees 2,955 53,999 53,300

Contributions to 3SUN alliance (in terms of competences)

Financial capabilities

Technology capabilities

Operating capabilities

Decisional processes Accurate and long planning

Inaccurate and short planning

Very accurate and long planning

Risk propensity Low High High

Customers Individuals Individuals Firms

Source: Enel Green Power, Sharp, and STMicroelectronics Annual reports, 2010.

(LCD TV, LED TV, video recorders/players, mobile phones, health and environmental equipment, information equipment, and so on) and other electronic components (LCD, solar cells, and electronic devices). For its leadership in the photovoltaic sector (solar cells and electronic devices),


Sharp contributes to 3SUN by offering its technological know-how to produce multijunction thin-film panels.5

STMicroelectronicsFounded in 1987 and with its headquarters in Geneva, Switzerland,

STMicroelectronics is among the seven largest semiconductor firms in a broad range of businesses, including semiconductors for industrial applica-tions, inkjet printheads, MEMS (micro-electro-mechanical systems), MPEG decoders and smartcard chips, automotive integrated circuits, computer peripherals, and chips for wireless and mobile applications. STMicro-electronics has 12 main manufacturing sites in the world and advanced research and development centers in 10 countries. STMicroelectronics offers to 3SUN their manufacturing site, based in the Catania area, and its operating capabilities.6

The understanding of the key features of the three firms, such as diver-sity of businesses, foundation, nationality, culture, performances, decision processes, risk propensity, and customer base will allow us to grasp better the bundle of complexities that are associated with the four issues that epitomize triadic alliances vis-à-vis dyadic issues (i.e., actor mindframes, governance structure, alliance learning problems and conflict manage-ment, and strategic and operational problems).

Second, 3SUN is, in our opinion, a representative triadic alliance (see Table 6.3). In fact, 3SUN is an equity JV created in 2010 by Enel Green Power, Sharp, and STMicroelectronics, in which the three partners gave birth to the biggest Italian factory in solar cell production, based in the Catania area, for jointly manufacturing photovoltaic panels. In particular, these panels are designed to meet the demand of solar markets in Europe, the Middle East, and Africa.

Third, we selected the 3SUN case because of data access. The existence of significant amounts of information provides an important opportunity to dig deeper in the understanding of the key features of a triadic alliance.

Data collection

The analysis of the 3SUN case relies on a wide set of data, which permits the triangulation of data types (Jick, 1979). We collected data from primary sources such as the financial reports of each of the three partners, the financial reports of the alliance, and the ethical code of the alliance. At the same time, we included in the data collection various secondary sources, such as press releases, press conferences, managerial articles, and informa-tion extracted from various websites. Finally, we integrated the previous sources with a set of focused interviews performed in person by the authors


Table 6.3. a Snapshot of 3Sun

Business Joint development and manufacturing of photovoltaic panels

Alliance formation July 2010

Headquarters Catania, Italy

2012 2013 2014 (predicted)

Units 1.46 million 1.46 million 1.46 million

Throughput 80 MW 160 MW 240 MW

Marketing 30% Enel Green Power

Arrangements 70% Sharp

Sales Territories Europe, South Africa, Chile, India, and Malaysia

Assets €382 million

Shareholders 33.33% Enel Green Power

33.33% Sharp

33.33% STMicroelectronics

Employees 300 Source: 3SUN Annual Report 2013.

of this chapter (Merton, Fiske, & Kendall, 1990). We conducted focused interviews with a range of key informants at 3SUN. In particular, we inter-viewed 10 highly knowledgeable informants from different functional areas (Eisenhardt & Graebner, 2007). We included interviewees who were posi-tioned at various significant managerial levels. At 3SUN, we interviewed the chairman, the chief executive officer, the assistant to the CEO, the chief financal officer, the chief operating officer, the chief technology officer, the head of human resources, the sales and marketing director, the senior engineer, the chief manufacturing engineer, and the chief field engineer.

The focused interviews were conducted on-site in the 3SUN headquar-ters, located in the Catania industrial area, in the period from November 2013 to January 2014, and ranged from 45 minutes to 1.5 hours. A report of the interviews performed at 3SUN is summarized in Table 6.4. In order to increase the chances that investigators will view case evidence in diver-gent ways, interviews were conducted by two-person teams (Eisenhardt, 1989; Eisenhardt & Bourgeois, 1988). In fact, one author handled the interview questions, while the other tape-recorded and transcribed notes and observations. Interviewees were assured about the confidentiality and anonymity of responses to encourage accurate disclosure of information.


Interviewees started by describing their business unit and position in which they were involved. At the same time, we asked information about their background and the positions they covered before the formation of the alliance.

Table 6.4. a Snapshot of the interviews With 3Sun officials

Interviewees DateDuration of

Interview (in Minutes)

Chairman 11/07/2013 61

Chief Executive Officer 12/13/2013 73

Assistant to CEO 12/13/2013 84

Chief FinancingOfficer 01/15/2014 59

Chief Operating Officer 01/15/2014 88

Chief Technology Officer 01/15/2014 48

Head of Human Resources 01/22/2014 73

Sales and Marketing Director 01/22/2014 45

Senior Engineer 01/27/2014 69

Chief Manufacturing Engineer 01/27/2014 89

We used a pretested interview guide, asking the interviewees about the information we gathered from various archival data sources. In particular, we asked for confirmation about the main characteristics of the alliance such as the nature and scope of the alliance, its performance, the organi-zation of the alliance, and the motivation of the partners to engage in the alliance. At the alliance partners level, we asked for detailed information from each partner in order to garner the heterogeneity of businesses, deci-sion processes, risk propensity, and cultures. Then we placed 33 unique questions around the complexities associated with the four aspects we wanted to investigate that specifically relate to the triadic alliance problem (i.e., actor mindframes, governance structure, alliance learning problems and conflict management, and strategic and operational problems). A list of the questions we asked during the interviews is summarized in Table 6.5. The interviews also included open discussions, which produced some insightful observations. We included such observations in the triangulation of information in order to enhance the reliability of our data.

Data analysis was carried out in an iterative manner. Indeed, we used the technique of brainstorming to interpret the different sources and put them in relation to each of them. Each source was analyzed separately by


Table 6.5. interview Questions1 What is your governance structure?

2 What are the key aspects that you have considered in the adoption of this governance structure?

3 What are the complexities of greater thickness that influenced the choice of this governance structure?

4 What made it possible to manage such complexity?

5 What were the elements that made the choice of this governance structure easier?

6 How long has it taken to select the firm’s governance structure?

7 What were the governance structures of each of the three partners?

8 Does the governance structure of 3SUN coincide with that of one of the three partners of the alliance?

9 Once the governance structure has been designed, has its implementation been difficult?

10 If yes, what were the biggest obstacles?

11 What has allowed you to overcome them?

12 What are the differences between the designed and the implemented governance structure?

13 What are the aspects that characterize the learning processes?

14 What are the elements that slow down these processes?

15 What are the elements that speed up these processes?

16 Were there any conflicts between the key players of the alliance?

17 If so, what were they?

18 How were they solved?

19 Which are the elements that characterize the operation management of 3SUN?

20 Does it differ from the operation management of STMicroelectronics?

21 Does it differ from the operation management of Sharp?

22 Does it differ from the operation management of Enel Green Power?

23 How has the operational management of 3SUN affected that of STMicroelectronics, Sharp, and Enel Green Power?

24 What are the most complex elements to manage at the operational level?

25 What is due to the presence of these elements?

26 How are they faced?

27 Have you already exceeded all of these complexities?

28 If so, how?

29 If not, how you intend to overcome them?

30 Have you encountered difficulties due to the presence of cultural differences?

31 If yes, what were and how have they influenced the choice of governance structure at the 3SUN?

32 How did they have an effect on the processes of learning?

33 How did they have an effect on the operational management?


the two authors and only later were matured ideas combined and recom-bined in a large map. In mixing separate ideas, the authors tried to reach a common understanding of the content. Such a process has made it pos-sible to increase the internal and external validity of the study (Yin, 2009).

DiScuSSion of The 3Sun caSe

As previously mentioned, the triadic alliance problem arising from alliance literature provided the basis for reconsidering the limits of the benefits that are associated with the dedicated dyadic alliance function. We used an inductive-case-based approach because we considered empirical evidence as a way to address empirical problems. Hence, the analysis we report is explorative rather than conclusive. In all the subsections of this section, each of the four triadic alliance problems we have identified and discussed in the previous section are subjected to detailed analysis based on the results obtained from the thorough examination of the 3SUN case study. Then we shall offer a comprehensive proposition that sheds new light on the emerging alliance literature focused on triadic alliances, and solicit alliance managers to reflect on the contingent subtleties and complexities of triadic alliances.

actor Mindframes

Based on the rigorous analysis of the 3SUN case study, in this subsection we examine the complexities concerning actor mindframes. Our analy-sis clearly shows that an increase in the number of partners generates a substantial change in actor mindframes. In particular, the increase in the number of partners in triadic alliances underscores the difficulty of each partner to understand the needs of and contributions to the alliance of the other two partners. In fact, moving from a dyadic to a triadic alli-ance framework and mindset, the number of partners brings about some immediate difficulties in grasping and monitoring the needs of the three partners. The 3SUN case study sharply unveils that, since the triadic alli-ance onset, the three partners had different objectives: Sharp had the goal of building a solar cell factory in Europe; Enel Green Power, because of its growth strategy in the photovoltaic sector, wanted to find a reference location that could provide panels with a certain level of technology; and finally, STMicroelectronics had a quasi-built (but still empty) industrial facility that had to be filled. The different needs of the three partners produced such a framing complexity that made it difficult to achieve a shared understanding of the alliance mission and strategy among the three


partners. Indeed, the 3SUN analysis shows that, in a triadic alliance, it is much more difficult vis-à-vis a dyadic alliance to find an agreement that balances the needs of the three partners.

A triadic alliance is more complicated than a dyadic alliance because even if two get along there’s always a third party who does not get along. A three-way JV is a highly complex alliance because it must balance the needs of three partners…. Complicated is that each partner has own objective and miraculously these three objectives found a synthesis with the creation of 3SUN. (3SUN Chairman)

However, increasing the number of the partners not only has an impact on the amount of the partners’ needs, but it also affects the quality of the contribution that each partner brings to the alliance. In the 3SUN case, STMicroelectronics brought a factory facility base called M6; Enel Green Power provided its distribution network; while Sharp developed the specific solar cell technology. The three partners’ contributions resulted in an overly complex framework that made it difficult to achieve a shared understanding of the alliance mission and strategy among the three partners. In fact, the 3SUN case study clearly shows that what each partner brought to the alliance was systematically underestimated by the other two partners.

It has been quite complex to find the balance between the various contributions of the members. Each partner had imagined that what it brings to the triadic alliance was much more valuable than what was given by the other two partners. The complexity is to make sure that the assessment of what was brought and what was taken to and from the triadic alliance were steely and not unbalanced towards no coordination. (3SUN Chief Executive Officer) [QA: The last part of the last sentence is unclear. Please recheck source (translation).]

Based on what was observed and confirmed by both the 3SUN chairman and CEO, we revised Problem 1:

Reformulation of Problem 1: In triadic alliances, as the actor mind-frames change because the relationships embedded in the triad are more varied, the dedicated alliance function is unable to manage the complexities associated with such relationships. In fact, the increase in the number of partners leads to a difficulty in understanding the needs and contributions of each of the three partners. This complex-ity cannot be handled at the structural level via a dedicated alliance function. Rather, firms need to manage this complexity at a more

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contingent level. This also may bring about increased discussion and negotiation among the three partners for prolonged time periods.

governance Structure

Based on the thorough analysis of the results extracted from the examination of the 3SUN case study, in this subsection we examine the complexity associated with a triadic alliance governance structure. Our analysis shows that firms that seek to select an adequate triadic alliance governance structure face an avalanche of complexities that arise from the need to maintain an equal representation of the partners. Indeed, while in the 3SUN case each partner possessed 33.33% of the shares, which means that a fair representation of the partners was achieved and maintained, on the other hand it was much more complicated to define a governance structure of the alliance that gathered all three partners under the same roof equally and fairly. In fact, the analysis of 3SUN shows that it was dif-ficult to mediate between the interests of the three partners to design a shared governance structure.

A three-way alliance is quite complex to govern. . . . It’s all based on the equal representation of shareholders. It’s all perfectly equal and therefore all quite ungovernable. It was difficult to draw the governance structure because it was necessary to draw all the mechanisms by which these misalignments of partners were mediated. (3SUN Chief Executive Officer)

Hence, the 3SUN case study shows the inability of the partners to draw easily the governance structure of a triadic alliance framework. Such gov-ernance complexity seems far from being manageable by a dyadic alliance function. If in a dyadic alliance the dedicated alliance function seems to successfully monitor and supervise the performance of the alliance, in a triadic alliance this mechanism no longer works. The complexities of the triadic alliance governance structure are so high that they cannot be handled by using a structural mechanism that is static. In fact, firms need to manage these complexities by developing a set of contingent mechanisms that are created ad hoc for running the triadic alliance in a more dynamic fashion. In other words, not a dedicated alliance function, but a set of ongoing contingent mechanisms expressly designed for managing a triadic alliance are needed over its course.

Based on what was observed and confirmed by the 3SUN CEO, we revise Problem 2:


Reformulation of Problem 2: In triadic alliances, as governance structure becomes more complex, the dedicated alliance function is unable to monitor the triadic alliance performance. In fact, an ungovernable triadic alliance nullifies the effectiveness of a dyadic alliance function. The benefit of controlling the performance of a previous alliance through a dyadic alliance function no longer exists. The firms that form a triadic alliance need to develop a set of ongo-ing mechanisms expressly designed for the management of a triadic alliance in a more dynamic fashion.

learning problems and conflict Management

The analysis of 3SUN also shows that both the learning problems and conflict management arise in the context of a triadic alliance. In fact, learn-ing problems arise from the learning race in which the three partners are quite inevitably caught in to compete. In fact, as literally all the interview-ees confirmed, each partner tried to protect its knowledge as well as to learn from the other two partners, thus revealing itself as an opportunistic actor in the alliance. “Each partner tends to extract value from this JV. And that forces the outspread of the natural learning processes that character-izes each alliance” (3SUN Assistant to the CEO).

Moreover, the three partners usually have to face potential conflicts that arise from the different firm cultures epitomizing the three firms. Since the three partners originate from different continents (Sharp is Asian, while Enel Green Power and STMicroelectronics are essentially European firms but with different cultures), potential cultural conflicts emerge in the triadic alliance.

While we spoke a common language, there is somewhat of a misunderstand-ing about a few issues.… That is due to our different firms’ cultures.… Sharp, Enel Green Power, and STMicroelectronics have diverse internal dialects … languages. And that creates a conflict between partners. (3SUN Chief Manu-facturing Engineer)

Hence, in the triadic alliance, some conflicts may emerge from cultural differences between and among partners. Because of the misunderstand-ings related to cultural differences, each partner is literally unable to control the external flows of knowledge and information in the triadic alliance.

Based on what was observed and confirmed by the 3SUN Assistant to CEO and the Chief Manufacturing Engineer, we are able to revise Problem 3:


Reformulation of Problem 3: In triadic alliances, as learning prob-lems and conflict management become more complex, the dedicated alliance function is unable to monitor the flow of knowledge and information among the three partners. Actually, if the three partners are culturally different, learning problems and conflict management dramatically emerge in triadic alliances. Such problems are due to the inability of each partner to manage successfully the resources and capabilities that the other partners may want to share. Firms need to create contingent triadic mechanisms that can solve such problems.

Strategic and operational problems

The last problem we extracted from alliance literature is the uncer-tainty and complexity associated with various strategic and operational processes. Our analysis shows that 3SUN faced uncertainty and ambiguity in making strategic decisions on fundamental issues, such as the definition of the price of the solar cell panels to sellout. In fact, Enel Green Power was essentially indifferent to fixing the price of the solar cell panels, while Sharp was pretty keen in setting a higher price than the price STMicroelec-tronics required. Such complexity is credited to the different visions that the three partners involved in the alliance had. Moreover, the three firms had difficulties in making strategic decisions that affected the performance of the triadic alliance. This reveals an inability of the partners to control the performances of the triadic alliance. In fact, as it emerged from the set of interviews with 3SUN top managers, the strategic decisions that will inevitably affect the performance of the alliance were quite difficult to make because of the repeated interactions with the (number of) partners.

It is the strategy that is complicated because if I have to decide whether to raise or lower the price, employ 100 people, or not is an issue that con-cerns the parties who may have very different visions . . . Complexity is at the strategic decision-making level because of three different strategic vi-sions. Moving from two to three partners, the decision-making complexity increases exponentially. The negotiation of any kind of strategic decisions is complicated, much more than what happens in a dyadic alliance…. This negotiation here took two years. (3SUN CEO).

Hence, the 3SUN case study shows that in a triadic alliance, the partners have to face a bundle of decision-making uncertainties and complexities, which makes the process of defining a shared strategy more complicated. In addition, from the analysis of the 3SUN case, it emerges that the part-ners adopted three different operational processes and times for making


decisions. In fact, in order to operate in the energy industry, Enel Green Power buys a huge quantity of oil from Saudi Arabia at a price that is pre-defined for the future months or years. Hence, while Enel Green Power may have standard operational decision processes, the carrying out of such processes to completion usually takes extended periods of time. Con-versely, STMicroelectronics purchases many machines and equipment from various suppliers every week. As a result, their operational decision pro-cesses are less standardized than those that were adopted by Enel Green Power. However, such processes are quite swift. Sharp has an intermediate position between the other two partners. In fact, the Japanese firm adopts operational decision processes that are neither too rigid and slow nor too flexible and swift. From the analysis of the 3SUN case, therefore, we note that complexity emerges in the coordination of the different decision pro-cesses adopted by the three partners.

A problem with three partners is that of the industry culture in which the three partners operate…. This difficulty has been demanding to overcome. It has been difficult to coordinate three processes that are completely differ-ent … and this has resulted in a higher cost. These are things we could have done more quickly. (3SUN CEO)

In summary, coordination of the different decision processes cannot be carried out by a dedicated dyadic alliance function. In fact, such a function seems to be a relatively static structure that is barely appropriate to handle successfully the divergences that arise from these three different decision processes. Instead, firms are required to face such divergences by creating a much more flexible structure that can embrace the operational processes of the three partners.

Based on what was observed and confirmed by 3SUN CEO, we revise Problem 4:

Reformulation of Problem 4: In triadic alliances, as strategic and operational processes become more complex, the dedicated alliance function is unable to manage such complexity. Actually, the three partners adopt three different strategic and operational processes and times for making decisions. Such divergence creates a complex-ity that cannot be handled by a dedicated dyadic function. Instead, the three partners need to create a flexible structure that can handle easily such decision divergence. In fact, a flexible triadic alliance structure that guarantees the rotation of the partners in making strategic and operational decisions may reduce the complexity that structurally permeates a triadic alliance.


Overall, the set of four problems that we extracted from alliance litera-ture emerging in the case of triadic alliances vis-à-vis dyadic alliances are corroborated from the analysis of the 3SUN case. In essence, the evidence from this case study allows us to reformulate accurately the nature of triadic alliance problems and the way they can be tackled more effectively.

Summing up, we seek to gather the nature of such triadic alliance prob-lems that we have reformulated here so as to advance a proposition that may be a guide for further study of triadic alliances.

Proposition A: The dyadic alliance dedicated alliance function is barely appropriate to handle the bundle of complexities emerging from the triadic alliance problems (i.e., actor mindframes, gover-nance structure, learning problems and conflict management, and strategic and operational problems). In these contexts, firms are re-quired to create a set of contingent triadic alliance mechanisms. The triadic alliance set of mechanisms may be realigned to the design and installment of a flexible structure that is created ad hoc for a triadic alliance. Such a flexible triadic alliance structure is not open-ended, but contingent and temporary. Hence, the flexible structure is not located in the organization chart of each alliance partner. Instead, it is positioned away from the three corporate headquarters, but at the level of the triadic alliance. Moreover, the flexible contingent structure has two key characteristics. First, a flexible triadic alliance structure is a set of ongoing mechanisms that foster—in formal and informal ways—the dialogue among key managers of the three part-ners, thus circumventing governance structure complexities. Second, such a triadic contingent structure may solve emerging strategic and operational problems by insuring the rotation of partners in taking key roles pertaining to strategic and operational decisions.

concluSion

In this section, we show how this chapter makes both theoretical and prac-tical contributions to, respectively, strategic management research and practitioners. Then we illustrate its limitations and suggest a few intriguing avenues for future research.

Theoretical contribution

This chapter makes two valuable contributions to strategic manage-ment alliance research. First, it is one of the initial few empirical studies


that explores the triadic alliance context. In fact, since scarce literature has devoted attention to such triadic kinds of alliances, this chapter attempts to unveil the “mysterious context,” where the alliance is joined by three part-ners. From the study of the alliance literature applied to the 3SUN case, we have managed to extract four relevant problems that firms should take into consideration when they form a triadic alliance (i.e., actor mindframes, governance structure, learning problems and conflict management, and strategic and operational problems). We think that such problems, by which we define the triadic alliance problem vis-à-vis the dyadic alliances, ought to be explored in a more detailed way in future studies.

Second, this chapter shows how a popular mechanism applied to dyadic alliances to develop alliance capabilities may not be appropriate to a more complex framework such as in a triadic alliance. In fact, this chapter shows that a dedicated dyadic alliance function is barely appropriate to a triadic alliance because it is unable to manage the bundle of complexities that is associated with four problems that emerge in a triadic context. A dedicated alliance function is not adequate to handle changes in actor mindframes, since the increase in the number of partners leads to difficulties in under-standing the needs and contributions of the three partners. In addition, the effectiveness of such a function is compromised by the complexities associated with the problems in governing a triadic alliance. Moreover, a dedicated alliance function is not able to monitor the flow of resources and knowledge among the three partners, thus revealing itself inadequate to guarantee equal learning levels to each partner as well as to avoid conflicts between partners. Finally, a dyadic alliance function seems too static to manage successfully the complexity emerging from different strategic and operational processes in triadic alliance settings.

practical contribution

As concerns the practical implication of the study, we advance a novel mechanism to develop alliance capability in the triadic alliance. In fact, by gathering the problems proposed via alliance literature and reformulated via the 3SUN case study, we extrapolate from this chapter a final proposi-tion that underscores the need for partners to install contingent mechanisms in a triadic alliance.

limitations and future research

Since it explores a relatively new subfield of study (the one of triadic alliances), this chapter has some limitations. First, since this study is based


on a single case—3SUN—its generalizability needs to be confirmed by examining multiple case studies.

Hence, future studies may explore the triadic alliances framework on the basis of a comparison among multiple case studies (as predicated by Eisenhardt & Graebner, 2007; Yin, 2009). Second, we have identified in the triadic alliance four different problems (i.e., actor mindframes, governance structure, learning problems and conflict management and strategic and operational problems). We have also shown that the problems tied to triadic alliances require a contingent set of mechanisms to deal with their internal complexities. However, there is a fifth and further aspect—the trust among partners—which if properly dissected and explored, may contribute to uncover additional important features of triadic alliance dynamics. Indeed, when moving from two to three partners, the third partner may pave the way for the appearance of risky pair-coalitions between the partners (Garcia-Canal et al., 2003).

Based on this study, we believe that research that deals with triadic alli-ances may be extended in a number of ways. One way to develop this line of research is to explore whether firms may create and appropriate value from a triadic alliance and to detect whether there are differences in terms of value creation and appropriation between dyadic, triadic, and multipartner alliances. Further research should be oriented to identify the process that leads firms to form a triadic alliance. In particular, it would be interesting to determine whether partners are more likely to employ steering commit-tees to help partners guide their interactions and address unanticipated contingencies that may emerge from the formation of a triadic alliance. Another suggestion for future research avenues is to investigate the ben-efits of the triadic alliance and to explain whether a firm prefers to form a triadic alliance rather than two dyadic alliances with two different partners. Lastly, a future research line would be to test empirically the performance of the triadic alliance and to track whether this performance increases or decreases over time.

noTeS

1. Conflict is inherent to alliances because of partner opportunism, goal diver-gence (Doz, 1996), and cross-cultural differences. Since conflict is inherent to alliances, how such conflict is managed is an important issue (Borys & Jennison, 1989).

2. The sentence fragment “externally handled” refers to the capacity of each firm to control the flow of knowledge and information to outside the firm. In particular, such external flow of knowledge and information goes past the dyadic relationship where the other partners are involved.

3. Enel Green Power is part of Enel Group. Established in 1962, headquartered in Rome, Italy, and controlled by the Italian Government, Enel Group is by far the biggest Italian firm and one of the first four groups in Europe operat-


ing in the electric power industry producing, distributing, and commercial-izing electricity and gas in more than 40 different countries. In 2012, Enel Group revenues totaled €81,697 million and workforce accounts for 73,700 units. This information is taken from the Enel website: www.Enel.com

4. Such data are available on Enel Green Power institutional website: www.En-elgreenpower.com.

5. Such data are available on Sharp’s institutional website: www.sharp-world.com

6. Such data are available on STMicroelectronics institutional website: www.st.com

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The strategic management of multipartner alliances