Study on Formation and Performance of SME Alliances with Special Reference to Indian Manufacturing Firms

Abstract

The rate of strategic alliance formation has proliferated in recent years as firms have begun to understand the scope that exists for value creation by combining complementary skills and capabilities (Zhao, 2014). Small and medium enterprises (SMEs), which lack the requisite resources necessary for achieving competitiveness, can gain access to them through alliance formation, but remain vulnerable to potential partner opportunism which can even erode the value of their existing competencies (Alvarez and Barney, 2005; Franco and Haase, 2013). While extant research has determined the necessity and risks associated with alliances for SMEs, consistent insights on their alliance management process- as to what causes variation in alliance formation, how the performance of alliances can be measured, and what causes variation in performance outcomes- are missing. The aim of this study was to determine the antecedents which influence the alliance formation tendencies of SMEs, to develop measures for analyzing the performance of SME alliances, and to determine how the antecedents affect these measures of SME alliance performance. Indian manufacturing SMEs were chosen as the target population for the purpose of the study. newlineFirstly, the extant literature pertaining to SME alliance management was reviewed, whereby the relevant antecedents of alliance formation in SMEs, the measures used for assessing alliance performance, and the antecedents which affect these measures of alliance performance, were identified. As the literature insights on the Indian manufacturing SMEs, which are idiosyncratically defined, were found to be missing, exploratory case studies were undertaken on four Indian manufacturing SMEs to gain a practical understanding. Based on the insights from the literature review and exploratory case studies, conceptual models for analyzing the impact of antecedents on alliance formation and performance were developed. Survey questionnaire was subsequently developed and personal interview method was adopted for data collec