Research Article: 2021 Vol: 24 Issue: 6S
Khaled Mohammed Alkaabi, Universiti Tecknikal Malaysia Melaka
Samer Ali Al-shami, Universiti Tecknikal Malaysia Melaka
Salama Jamal Rafeea, Universiti Tecknikal Malaysia Melaka
Hayder Adil, Universiti Tecknikal Malaysia Melaka
Strategic alliance has been regarded as an effective development approach for healthcare industry development, especially in developing countries. Yet, the proportion of its failure is too high. The literature reported that managing alliance is the key driver for developing sustainable alliance. The literature argues that the dynamic capabilities of the partners form a backbone for strategic alliance formation. Yet, alliance failure goes beyond partners capabilities in terms of resources and know-how to include multiple challenges, which influence alliance development stages rather than formation stage only. In addition, the causes of alliance are varying from one industry to another. Thus, through review, this study found that there are nine main causes for alliance failure in healthcare sector, which include, environmental contingencies, cultural distance, road or narrow, alliance scopes, alliance contract, alliance governance form adopted, emerging alliance instability, management control, quality of the working relationship and earning and knowledge sharing. This study also found that knowledge sharing between partners has the possibility to limit alliance failure gap through providing a mutual understanding between partners.
Strategic Alliance, Causes, Failure, Knowledge, Sharing, Healthcare
The therapeutic potential of healthcare facilities and related assets continue to increase at a rather rapid rate due to the versatile role of technology and scientific innovations (Lewis et al., 2017). The expanding infrastructure, technology, growing population demands, and globalization, have together created the need to move away from fragmentation and pursue an urgent need for consolidation in the sector (Andrews et al., 2020). In any form of alliance between healthcare partners, individual interests, motives, and expectations differ from one to other (Al-Tabbaa et al., 2019). Despite these general assertions, the exact knowledge and insight on the nature of expectations of partners within a healthcare alliance, medical centres and other centres of medical specialisations, is still lacking and under-researched (V?t?m?nescu et al., 2020; Nakauchi et al., 2017). In the field of medical practice, strategic alliances have been defined as mutual agreements between two or more institutions to share a fixed resource in the form of equipment or infrastructure (Bazzoli et al., 2000; Olden et al., 2002; Costantino et al., 2020). In the traditional strategic management field of inquiry, strategic alliances have been defined as:
“a formal organisation among two or more establishments concerning cooperation, gain and risk-sharing” (Zajac et al., 2011).
Strategic alliances have become essential for businesses to corporate and create an influential force within any given industry (Drucker, 2001). Ranging from local to partnership between international parties, alliances are established mainly to make one or more contributions to pre-determined interest areas (Peter, 1995). The prevalence of negative outcomes in equal measure as positive anticipated outcomes of strategic alliances is a clear indication that partner motives in strategic alliances may differ and sometimes oppose, and yet may be in pursuance of a common external cause that requires careful coordination and integration (Pelletier, 2014).
According to Link (2015), strategically aligned organizations are usually in pursuance of common goals even though significant conflicts and inconsistencies arise mainly in terms of partner motives. Ariño (2019); Rowitz (2014) transfer knowledge from mainstream literature on strategic alliance and argue that healthcare alliances may take similar forms of service, opportunistic, or stakeholder alliances (Rowitz, 2014). Others including Das & Teng (2001); Pelletier, et al., (2014) have argued on the need for administrative and institutional factors throughout the alliance stages in order to facilitate alliance success and overall sustainability. In the quest to conceptualize alliance control, the degree of ownership-based control has been argued as proportionally related to the need for knowledge sharing between partners (Bhatti, 2011).
Prior to further elaboration on the need for knowledge sharing in healthcare strategic alliance, it is important to mention that general evidence indicates that over 50% of all alliances fail to achieve the purpose of the alliances (Tjemkes, Vos & Burgers, 2013). A number of reasons have been cited; however, the fundamental concern is that the alliance motives are often different and the achievement of common grounds benefiting to all parties is difficult to attain. It is often difficult to measure the contribution of parties, whilst other parties act as free riders either due to perceived importance over counterparts (Gao et al., 2017). Other factors including differences in culture, management values, markets and the lack of clear coordinating mechanisms threaten the success of alliances. The failure rate of strategic alliances and the peculiarities of an alliance in the healthcare sector continue to remain of critical academic interest (Roehrig, 2016). According to Bazzoli, et al., (2000); Olden, et al., (2002), strategic alliances was introduced into the healthcare sector just about 2 decades ago; however, rapid interest is being established among healthcare managers. In a recent report, over 66% of healthcare executives were willing to engage in some form of strategic alliances to improve productivity and overall competitiveness (Judge, 2001).
The surge in alliance failures has been attributed to a number of reasons but mainly the lack of adequate attention to knowledge sharing which inhibits patterns’ lack of collaboration and commitment to the partner’s agenda or motives. In pursuant of partner’s individual motives, disagreements with set expectations must equally be observed in a similar manner as positive expectations (Rashed et al., 2019). Some alliance parties understand very little about their expectations and motives have the propensity to change or evolve to higher needs over the course of the alliance. These complexities create a complex environment which scholars have since struggle to gain a grip (Lutz et al., 2020). However, consensus exists that if knowledge is shared across parties and they understand each other, partners may know where to agree, where to differ, the assistance the other party needs and other need to pursue their different goals. As Maitland (1985) observe, attention must be on “mutually compatible strategic interests regardless of the orientation”; thus, interests and motives which would not necessarily be the same or may consist of positive and negative elements, but nonetheless require alignment through knowledge sharing. Due to the fact that there are many reasons for alliance failure and factors for alliance success, this review study aims to identify the reasons for alliance failure and the potential factors that may influence alliance success in value creation.
Causes of Alliance Failure
Ferreira, et al., (2014) assert that strategic alliances occur for a purpose and that these purposes usually emanate from two main strategic points of view; that is, the need to acquire competitive advantages and survive during difficult times. In the earlier discussions, it has been established that strategic alliances are critical weapons within the firms’ competitive arsenals (Kang & Sakai, 2001). The number of alliances in the last decade has increased dramatically mainly in the area of strategic technology. Anand & Khanna (2000) report that between the years of 1990 and 1993, over 9,000 alliances were established in the US manufacturing sector alone. Other evidence supports the assertion that alliances occur among a particular group of companies such as those in the high-tech sector (Dyer et al., 2008). The earlier discussion focused on the contribution of strategic alliances to the value creation process, and the staggering similarity between the alliance capability view and the dynamic capability view. There is the need to take a step further to observe the ultimate outcome of competitive advantage. In this elaboration, it is important to mention that evidence supports the observation that the chance of alliance failure increases as the alliance becomes more integrated (Hoang & Rothaermel, 2005). Evidence indicates that more than 30%-70% of all alliances fail (Bleeke & Ernst, 1995; Calhoun & Harnowo, 2015). The premature alliance termination has been attributed to some factors, a number of which are presented in Table 1.
Table 1 Reasons for Alliance Failure |
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Cause of Failure | Description | Source |
Environmental Contingencies | Expected situations within the alliance environment that inhibit smooth operations of the alliance | (Koza & Lewin, 1998) |
Cultural Distance | The culture in the partner organizations are very different and does not recombine easily in the alliance; partners are unwilling to change from their traditional ways of doing things | (Barkema et al., 1996); (Lane et al., 2001) |
Broad or Narrow Alliance Scopes | The alliance combination areas too large or too narrow to result in value creation and exploitation capabilities | (Khanna et al., 1998) |
Alliance Contract | The formal documentation of alliance purpose, expected outcome, governance and decision-making channels | (Hagedoorn & Hesen, 2007; Hagedoorn et al., 2018) |
Alliance Governance form adopted | Chain of command and decision-making behaviour | (Cole et al., 2009) |
Emerging alliance instability | Instability is traditional aspects of alliance; proper management of emerging instability is critical | Das & Teng (2000b) |
Management Control | The body in charge of the day-to-day management of the alliance must see to the alliance success | (Yan & Gray, 1994) |
Quality of the working relationship | Friendliness of the parties to the alliance, good working atmosphere, positive work ethics, removal of suspicion among other factors add to the quality of working conditions in the alliance | (Ariño et al., 2001) |
Learning and knowledge sharing | Opening up to one another on the motives, expectations and readiness to commit to the alliance. Sharing insight to cover each other’s weaknesses | (Lane et al., 2001) |
It is important to add that these causes of alliance failures may have a particular association or linkage with one or more aspect of the alliance development process. At each stage of the alliance development process, partners must pay dedicated attention to unique aspects of the alliance design and management decisions. Secondly, failure of an alliance may be attributable to unawareness of the unique challenges imposed on them by different alliance objectives, diverging partner firm characteristics and unique alliance contexts. Finally, proper institutionalization of alliance exploratory and exploitative capabilities is equally important to success. Tjemkes & Burgers (2013) assert that exploitative and exploration capabilities help institutionalize the alliance know-how and know-what. Systematically addressing all these three concerns is critical for overall success.
With the causes of alliance failures covered, the remaining discussions in this section highlight key benefits in the form of ultimate outcome where alliance challenges are overcome, and measures are properly employed. According to Andhini, (2017); Tidd & Bessant, (2013) alliances enable organizations to address situations and problems that would otherwise prove complex to comprehend by themselves. Yasuda (2015) adds that this provides the firm or partners with the additional elements required to achieve competitive advantage. The elements required may be in the form of resources, competence, reputation, or other elements that cannot be bought on the market Yasuda (2015). Ultimately, partner firms can combine complementary knowledge sets and develop unique products which cannot be easily imitated by competitors (Andhini, 2017).
In strategic alliances, firms exchange a resource they have in abundance with what may be considered scarce for them. This newly acquired resource is cheaper than investing in a new facility, constructing a new set of valuable networks, but presents sudden expansion in capacity in-house (Gundolf et al., 2018). In a typical instance, whilst one firm might have a shortage of production capacity or some form of resource, another partner firms might have more of such resource or abundant production capacity to spare and be willing to participate. In the UAE, hospital alliances have often witnessed the cases where the UAE has full financial commitment to provide quality healthcare; however, renowned healthcare facilities such as Mayo clinic often lack the financial commitment to suddenly expand into the region (Browning et al., 2016). This often leads to an alliance where international parties bring on board their reputation and healthcare expertise and the regional partner models the overall profitability of the venture.
Due to the versatile role strategic alliances play in helping reach resources and locations that would otherwise prove challenging to internalize, strategic alliances have often been labelled as a strategic choice among decisions made to either buy or sell (Huston & Sakkab, 2006). The need to consider firm-specific situations is however critical to make a proper decision whether to buy, sell or ally to close a firm’s strategic gap. As emphasised as part of the problem statement, in order to address strategic alliance motives, learning and knowledge sharing has a direct implication to this effect (Gundolf et al., 2018).
Knowledge Sharing
Knowledge, unlike physical resources, has qualities significantly different from physical resources. This difference makes their development, access and integration unique compared to the processing of other physical resources. As observed by Chowdhury, et al., (2014), knowledge as a resource may either be considered tacit or express. Tacit knowledge is usually implied and difficult to codify. Moreover, it may come with some amount of ambiguity and may be difficult to interpret. On the other hand, explicit knowledge is based on face value with little to no implied meaning.
Whether implicit or explicit, it is critical that knowledge sharing is thorough to warrant some amount of success in the strategic alliance. As defined by Kogut & Zander (1992), knowledge creation, knowledge transfer, knowledge sharing or learning have been used interchangeably in the available pool of literature on this area (Bartlett & Ghoshal, 1989; Anthony et al., 2005; Hedlund, 1994). Every firm has its own knowledge base which it continues to build and expand as it learns from its internal and external environments. This knowledge may not only be held by management but may exist among the workers and employees of the firm. The knowledge-based view considers that knowledge held within the organization is a fundamental source of competitive advantage (Spender, 1996).
In an alliance, the knowledge possessed by the various parties of the alliance needs to be shared and learning conducted together. Shared knowledge encompasses both implicit and explicit knowledge. However, an attempt must be made to help alliance partners understand the meaning derived from implicit communication to ensure that miscommunication is reduced significantly.
Knowledge Sharing in Strategic Alliances
The knowledge sharing requirement of strategic alliances is associated with the endogenous components of the alliance and strongly knitted to the knowledge-based view theory to strategic alliance conceptualization discussed as part of the theories of the present study. Nonetheless, it is important to add that knowledge sharing is observed from the unique perspective of strategic alliances. In an alliance, both or all parties to the alliance can be considered as knowledge seekers and knowledge holders at the same time. Sharing knowledge, therefore, help partners learn from each other (Powell et al., 1996). Others including Doz (1996) argue that knowledge about collaboration develops over time and remains a key outcome of the collaborative outcome.
Earlier studies have tackled the critical need to share knowledge in inter-firm cooperation (Hamel, 1991). Nonetheless, the lack of absorptive capacity on the part of alliance parties may render learning inconclusive or ineffective (Szulanski et al., 2004). The properties of knowledge to its transfer have been neglected to a large extent as a very small number of studies have been conducted on this area. The presence of knowledge across specialised domains remains a challenge yet to be properly understood in the literature context of strategic alliances. Knowledge sharing does not only exist within the formal scope but must exist within informal contexts between individuals and groups of the alliance (Inkpen, 1996). The transfer of knowledge between partners and the continues creation of new knowledge within the alliance system is a critical aspect of alliance formation without which alliances may fail abysmally (Tjemkes, Vos & Burgers, 2013).
It is important to add that the alliance parties can also explore knowledge through joint research and development efforts (Hennart, 1991) – exploration capability of the alliance. The sharing of these costs, risks and technologies in research and development implies that organizations can afford to pursue more R&D to improve the overall competitiveness of the alliance. In strategic alliances, knowledge can thus be acquired by jointly developing knowledge; likewise, knowledge can also by learning from the partner firm (Holmqvist, 2004; Lane et al., 2001). Besides adding value through pursuing joint R&D, strategic alliances can be used to add production capacity to the organization (Hagedoorn et al., 2018).
Strategic Alliances in Healthcare Service Provision
After the discussion main themes that underlie the study, the time is right that some attention is directed at how the concepts have been applied within the context of healthcare-related literature; this is fundamental to arrive at contextual gaps which the present study aspires to contribute. Starting from the subject of strategic alliance in healthcare, it must be mentioned that the need for collaboration and strategic alliances in the healthcare industry is not new. A number of studies have tacked this area, and these include Carnwell (2008) observation on the concept of partnership and collaboration within the practice of health and social care. Healthcare alliance may be characterised by key attributes such as trust, confidence, teamwork, empathy and other unique principles essential to healthcare partnership and collaborations.
The healthcare environment is knitted with a strong urge for a competitive edge. With this, strategic alliance, therefore, offers the chance to go beyond the comfort zones of the firm to reach into areas that redefine ways to meeting consumer taste and create product and service evolution (Van Den Bosch et al., 1999). In the healthcare sector, constant innovation and technology application is on-going to make humans healthier and create a better earth for all humans. When technology or some aspect of the environment changes, the firm's products and existing technology capabilities become obsolete (Ferreira et al., 2020). There is a need for constant evolution and reconfiguration of assets to remain relevant within the healthcare industry (Moonesar, 2018).
The dynamic nature of the industry also necessitates that key capabilities are within reach to help create value within the technologically and competence is driven sector in efforts to overcome institutional uncertainties as observed by (Lewin et al., 1999). In such an environment, the rate of change is unpredictable and forcefully adapted based on industry-leading trends such as technology and human resource competency requirements. The reasons that force alliance in the healthcare industry may be similar to that discussed in the earlier sections even though close attention to specific cases is discussed in the later sections of this chapter. It must be mentioned at this point that even though the literature has reported about healthcare, most of the past studies were written in the form of industry reports with little to no empirical support. McMonagle (2016) assert that strategic alliance in the healthcare is driven by a number of factors including increases negotiation power for insurer-provider contracting, price of healthcare and market power. Through alliances, companies are able to achieve cost savings, improved clinical integration, higher care quality and easier acquisition of advanced technology.
It is important to add that strategic alliances may assume the form of alignment of intent, critical tasks, competences, structure control and rewards, leadership or culture (O’Reilly & Tushman, 2004); this is particularly characteristic of the healthcare industry. Even though all areas of the alliance may not be considered compatible, some form of compatibility must be established for alliances to succeed (Zimmermann et al., 2018; Andriopoulos & Lewis, 2009). In global regions such as Australia, the Collaborative Framework is overseen by the North-Western Melbourne Government Initiative, the Royal Melbourne Hospital, the Meri Community Health Services, and cohealth; this collaboration is seen as a strategic path outlining collaboration strategy over a period of 5 years from 2012 to 2017 and subsequently from 2016 to 2020 (Carter & Goodlier, 2012). In this strategic document, Carter, et al., (2012) assert that the foundation principles of collaboration must be person-centred. Partners must have equal standing and responsibilities, joint learning, have the commitment to participate, possess positive working relationships, complement each other, ensure transparent while remaining independent and focusing on the set outcomes (Figure 1).
In addition to the collaboration principles, it is equally important that specific roles of partners are specified, a defined governance structure is installed, and a good market insight is established to guide the alliance. Others including Browning, et al., (2016) focused on the unique areas of healthcare leadership key partnership areas peculiar to quality and companionate patient care through collaborative leadership; these principles include collaborative partner care team, resource stewardship, talent transformation, boundary spanning, capacity for complexity innovation & change, and finally engagement & well-being.
Aside from the consideration that neither Carter, et al., (2012); Browning, et al., (2016); nor Carter, et al., (2012) have empirical support for their assertions, it is important to add that these principles are no near exhaustive with regards to the underlying principles of healthcare strategic alliance and collaboration.
Strategic alliance has been regarded as an effective development approach for the development of healthcare industry through facilitating value creation among all partners. Yet, strategic alliance is always fraught with risk and most of them tend to be terminated before achieving their goals. Even though many studies suggested several causes that influence alliance stability such as partner opportunistic behaviour, mistrust and commitment, the reasons for failure are not well classified due to the fact that alliance works differently from industry to another. With regard to healthcare alliance, in this paper we found that there are nine main areas where alliance strategy is exposure to failure. Those causes are environmental contingencies, cultural distance, road or narrow, alliance scopes, alliance contract, alliance governance form adopted, emerging alliance instability, management control, quality of the working relationship and earning and knowledge sharing.
To mitigate alliance failure, the literature suggests that knowledge sharing between partners is important to maintain alliance agreement. Knowledge, unlike physical resources, has qualities significantly different from physical resources. This difference makes their development, access and integration unique compared to the processing of other physical resources. As observed by Chowdhury (2005), knowledge as a resource may either be considered tacit or express. Tacit knowledge is usually implied and difficult to codify. Moreover, it may come with some amount of ambiguity and may be difficult to interpret. On the other hand, explicit knowledge is based on face value with little to no implied meaning.
Whether implicit or explicit, it is critical that knowledge sharing is thorough to warrant some amount of success in the strategic alliance. As defined by Kogut & Zander (1992), knowledge creation, knowledge transfer, knowledge sharing or learning have been used interchangeably in the available pool of literature on this area (Bartlett & Ghoshal, 1989; Westney, 1993; Hedlund, 1994). Every firm has its own knowledge base which it continues to build and expand as it learns from its internal and external environments. This knowledge may not only be held by management but may exist among the workers and employees of the firm. The knowledge-based view considers that knowledge held within the organization is a fundamental source of competitive advantage (Spender, 1996).
Through knowledge sharing partners will get to know their partners’ motives in the alliance, share their individual motives, and thoroughly debate how these motives will be achieved whilst pursuing a common objective to rival other competitors within the industry (Gooch, 2016; Kyongpitzer, 2019). Knowledge sharing is therefore critical to ensure that an alliance is consensus-driven in all aspects of decision making and representation of parties within the alliance, and overall commitment of the management of the installed systems within the unique constraints of healthcare provision. Through the sharing of knowledge, partners will be able to rule out their differences and ensure that they are compatible at the desired breadth of cooperation (Pelletier et al., 2014).
The authors would like to thank Universiti Teknikal Malaysia Melaka (UTeM), Institute of Technology Management and Entrepreneurship (IPTK) and Centre for Technopreneurship Development (CTED) for funding the research.