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Explicitly mentioning business identity increases confidence in an alliance

Date:19 March 2018
Author:Floor Rink
Floor Rink
Floor Rink

It is seen as the way for organizations to strengthen their market position, acquire knowledge and become more innovative: an alliance with a partner. Alliances can have many advantages, but organizations do not always benefit from one. Experience has shown that, as with a merger or acquisition, the result regularly disappoints. Much has already been written about this, but unanswered questions remain, such as whether it is better to emphasize one joint identity or for each party to retain its own?

Academic research in this field emphasizes that it is essential to keep a close eye on mutual agreements if an alliance is to succeed. The chances of success increase if the two parties record the legal, financial and operational terms of their collaboration in a contract. But research has also shown that a proper contract alone is not enough. What is more, a rigid contract has often proven to be one of the reasons for an alliance to fail. Working with another organization means working with people, which makes it important to build up mutual trust.

Trust is easier said than done. How do you create trust between the employees of both parties? And how do you ensure that setbacks in the collaboration do not lead to big disappointments and ill-will. Researchers from Groningen HRM Expertise studied this question. The key question was whether trust can be created by adding relational agreements to an alliance contract.

The literature suggests that knowledge of the culture within an organization, or its identity, can help with managing the expectations of the two parties. However, no study had yet been conducted into whether it makes a difference if parties have a similar identity. The merger and acquisition literature assumes that it is important to focus on agreements to create trust. However, with an alliance, in which the partners will not form a single organization, this may play less of a role. What may be most important is for both parties to have a clear idea of what the other stands for.

To test this idea (knowledge of each other’s identity) we carried out two studies. The first was of regular employees of various organizations and the second was of directors of SMBs who had experience of an alliance. In both cases the participants were asked to evaluate a fictitious alliance between two partners based on business information, a summary of contractual agreements and a description of an incident in which one of the parties misses an agreed delivery date. With both, the participants were divided into three groups, each of which received a different version of the contract:

  • Group 1 evaluated a contract with a collaboration clause emphasizing similarities and a joint identity
  • Group 2 evaluated a contract with a collaboration clause emphasizing differences and the unique identity of both parties
  • Group 3 evaluated a contract without a collaboration clause.

Our studies delivered interesting results. Including a collaboration clause with identity information is clearly worthwhile. This gave the participants a clearer idea of both parties and thus increased their confidence in the alliance.

What was apparent was that it makes no difference whether the collaboration clause emphasizes similarities or differences. What is more, we found that people preferred information about differences to a contract without collaboration information. For instance, they responded most negatively to the incident in the latter situation (condition 3). This finding suggests that in an alliance people are open to differences and a unique approach as long as this is well documented beforehand.

The research therefore shows that a collaboration clause that explicitly mentions the similar or different organizational identities is worthwhile. It can prevent a breach of trust.

For more information on this research please contact Floor Rink. Rink works at the Faculty of Economics and Business and conducts research into diversity, hierarchical differences in groups, staff mobility and the functioning of management boards.