A Dynamic Theory of Collaboration and Decision Making

The model presented in this paper incorporates various causal and feedback loops in the structure of the dynamic decision-making processes and performance in nonequity alliances. According to this structure, partnership performance is driven mainly by the nature of the decision-making and implementation processes of the partners. These, in turn, are affected by two external influences, the setting in which the partnership is occurring (partnership setting)—such as the legal and market conditions—and the characteristics of the partnership itself (partnership arrangement)—such as whether such partnerships require specific informal and/or formal agreements. While we model these relationships and interactions explicitly, we also portray, in turn, how partnership performance aspects and the implementation processes influence the decision-making processes. 1. Importance to business practice It is a disconcerting fact that many, if not most, partnerships between organizations fail. This is particularly the case when there is a lack of joint (financial) equity in the partnership. Such partnerships can exist as separate corporate entities in which each of the partners holds an equity position or as looser affiliations where the relationship partners take no equity position. Partnerships with no equity position typically have no separate formal organization but rather operate as a loose system of inter-partner roles and responsibilities supported by boundary spanning agreements of coordination, liaison, and decision-making. This lack of a mutual organizational structure can give the partner organizations flexibility and more strategic options in dynamic environments but will impede the effectiveness of traditional governance mechanisms. Collaborative arrangements that govern this type of loose partnership are designed to coordinate and to enhance predictability of each partner’s activities. They 0-7695-1435-9/02 $ aii International Conference on System Sciences (HICSS-35’02) EE can specify with different levels of precision one or more of the following components: each partner’s activities (e.g., customer service provision); partnership-specific marketing objectives (e.g., level of customer retention); revenue sharing agreements; and penalty clauses. Moreover, to clarify particular components they can comprise formal procedures employing explicit arrangements (e.g., written contracts), and informal procedures making use of communicative activities oriented toward the creation of implicit, norm-based understandings between each partner (e.g., face-to-face meetings and resultant handshake agreements). The former—formal arrangements—induce rigidity, while the latter—informal arrangements—allow partners to adapt their effort to changing dynamic circumstances. However, given the proclivity with which this type of fragile partnership fails, we need to understand whether any alternative informal and formal arrangements can enhance partnership performance in dynamic environments. The goal of this paper is to provide such insights. More specifically, this study aims to enhance our understanding of collaborative decision-making processes and related governance arrangements in alliances and to develop sound guidelines for partnership managers to improve their relationship competencies in order to enhance the probability of developing and maintaining successful partnerships that facilitate the achievement of desired objectives. We attempt to offer a straightforward and practical guide that is flexible enough to help managers employ suitable informal and formal collaborative arrangements under varying conditions for the practice of alliance management. This constitutes a contribution of practical relevance as the careful adoption of these guidelines may reduce the number of alliance failures and therefore help organizations achieve stated objectives in dynamic environments. 2. Importance to business theory There has been an increase in research and theorizing about collaborative business partnerships in the general management literature. The literature deals with two types of organizational relationships: vertical 17.00 (c) 2002 IEEE 1 Proceedings of the 35th Hawaii International Conference on System Sciences 2002