Performance criteria of strategic alliances between MNCs and NPOs

Diploma Thesis , 2005 , 72 Pages , Grade: 1,0

Business economics - Business Management, Corporate Governance

Strategische Allianzen zählen zu den wichtigsten Gebieten der Organisationsforschung sowie des Strategischen Managements. Untersuchungen konzentrieten sich bisher auf Partnerschaften von Unternehmen. In den letzten Jahren stieg die Anzahl von Kooperationen zwischen Firmen und Non-Profit-Organisationen (NPO) wie Vereinen oder Sozialen Gruppen. Unilever, GlaxoSmithKline oder Microsoft zählen zu den Unternehmen, die mit NPOs (auch NGOs) wie dem World Wildlife Fund for Nature, Medicines for Malaria Venture oder Greenpeace zusammenarbeiten. Besonders in den Bereichen der AIDS/HIV-Bekämpfung, dem Umweltschutz oder der Agrarwirtschaft arbeiten Firmen vermehrt mit NPOs zusammen. Problematisch ist bis heute, wie der Erfolg oder Misserfolg derartiger Allianzen zu fassen ist, da sowohl ökonomische als auch soziale Ziele in die Messung einfließen müssen.

Björn Gehrmann untersuchte und entwickelte erstmals, welche Kriterien Erfolge von Partnerschaften zwischen Multinationalen Unternehmen (MNCs) und NPOs sichtbar machen können. Mit Hilfe einer Balanced Scorecard strukturiert der Autor die Erfolgskriterien und liefert Unternehmen sowie Organisationen aus dem sozialen Sektor ein Werkzeug, gemeinsame Projekte in den Bereichen Corporate Social Responsibility, Corporate Citizenship oder Nachhaltigkeit zu messen. Diverse Beispiele aus der Praxis verdeutlichen und unterstreichen die Ergebnisse. Das Werk wurde vom Lehrstuhl für Organisation und Unternehmensführung der Universität Paderborn mit der Bestnote ausgezeichnet und basiert auf den Top-Journals der deutschen sowie amerikanischen Management und Strategie Forschung.

TABLE OF CONTENTS

FIGURES

TABLES

ABBREVIATIONS

1. Introduction

2. Forging Strategic Alliances across Sector Frontiers
2.1 The Framework of Alliances between MNCs and NPOs within the Social Context of Organizations
2.2 Introducing the NPO as potential Alliance Partner for MNCs in Cross-sector Alliances
2.3 Development of a Working Definition for Cross-sector Alliances between MNCs and NPOs
2.4 Motives of MNCs and NPOs to engage in Cross-sector Alliances

3. Developing Performance Criteria from a bilateral Theoretical Perspective..
3.1 Literature Review on Alliance Performance
3.2 Theoretical Approaches of Alliance Performance
3.3 The Resource-based View as Theoretical Foundation
3.3.1 Historical Development
3.3.2 Main Assumptions and Conceptual Framework
3.3.3 Performance Criteria in Cross-sector Alliances derived from the Resource-based View
3.4 The New Institutionalism as Theoretical Foundation
3.4.1 Historical Development
3.4.2 Main Assumptions and Conceptual Framework
3.4.3 Performance Criteria in Cross-sector Alliances derived from the New Institutionalism
3.5 Combining Performance Criteria derived from the Resource-based View and New Institutionalism

4. Structuring Performance Criteria in Cross-sector Alliances
4.1 The Balanced Scorecard as Tool to assess Performance in an Environment of multiple Interest
4.2 Modifying the Balanced Scorecard to measure Cross-sector Alliance Performance
4.3 Performance Conflicts emerging from Combination of Resource- based View and New Institutionalism

5. Concluding Remarks
5.1 Summary
5.2 Limitations and Implications

APPENDICES

REFERENCES

FIGURES

Figure 1: Topic of Diploma Thesis embedded in the Field of Alliance Research

Figure 2: Overview of Strategic Alliances based on the Three Sector Model

Figure 3: Performance Criteria in Cross-sector Alliances between MNCs and NPOs developed from the Resource-based View

Figure 4: Performance Criteria in Cross-sector Alliances between MNCs and NPOs developed from the New Institutionalism

Figure 5: Combining Criteria to assess Performance in Cross-sector Alliances between MNCs and NPOs

Figure 6: Modified Scorecard to assess Performance Measurement in Cross-sector Alliances between MNCs and NPOs

Figure 7: Performance Criteria in Strategic Cross-sector Alliances between MNCs and NPOs

TABLES

Table 1: Typology of NPOs

Table 2: Typology of Performing and Non-performing Resources

Table 3: Performance criteria applied on modified Balanced Scorecard

ABBREVIATIONS

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1. Introduction

Strategic alliances have been one of the most important organizational forms during the past decades.¹ Traditionally, alliances or partnerships were formed as strategy to enter new markets in mostly developing countries.² Today, strategic alliances have increas- ingly been used in advanced market economies in order to achieve multiple sources of competitive advantage.³ The phenomenon of alliances has led to an intensive research by scholars within the field of strategy and organization who examined causes and consequences and recognized strategic partnerships as appropriate remedy to create value.⁴ Most of the alliance research concentrates on inter-firm collaborations, such as alliances among competitors, or between suppliers and customers.

Recently, multinational companies (MNCs) have crossed the border of market econo- mies and started to create strategic alliances with non-profit organizations (NPOs). Unilever, Cisco Systems, or GlaxoSmithKline are among several multinational compa- nies which have forged strategic partnerships with the World Wildlife Fund for Nature, Medicines for Malaria Venture, or other non-profits.⁵ While alliances beyond the mar- ket sector grow in scope, depth and importance, theoretical foundation and empirical research remain limited.⁶ The aim of the diploma thesis is to identify performance crite- ria of this specific form of strategic alliances across market economies.

The fundamental question is: Which concrete indicators are capable to show the success of strategic alliances between multinational companies and non-profit organizations? These criteria, which will be developed from a theoretical approach, focus on alliance outcome that is either intended or emerges through partner interaction. This paper does not consider drivers of performance, because they only lead to alliance outcome. In or- der to achieve the aim of this paper, the performance framework is built on the resource- based view and the new institutionalism. Two theories have been selected in order to determine external performance as response to the complex social context, in which organizations are embedded, without neglecting each partner’s performance require- ments on the individual organizational level.

Among researchers, alliance performance still belongs to one of the most vexing questions of organizational partnerships.⁷ I will show that the term performance has been used differently and without consensus of what alliance performance actually is. The problem already starts with the word itself, which can either be understood as fulfillment of targets or as expression how the alliance is carried out.⁸ Albeit various studies on alliance performance, this field of research remains ambiguous and characterized by heterogeneity. Despite of the tempting question to disclose generally accepted alliance performance, I focus exclusively on performance in strategic alliances between multinational companies and non-profit organizations. Figure 1 illustrates how the topic of this paper can be placed into already existing alliance research.

Performance criteria and an appropriate way how to evaluate alliance outcome are of interest for both the MNC and the NPO including their external constituents.⁹ Currently, non-profits have to face an intensifying competition for donations and are confronted to account for measurable outcome and effective spending.¹⁰ On the corporate side, institu- tional investors, which have noticeably increased in number and importance, reward firms that actively address and improve social and environmental matters, for example, through alliances with non-profit organizations.¹¹ Graves/Waddock (1994) found em- pirical support that improvements of performance in social affairs reduce the risk of costly sanctions, legal actions and consumer retaliation and enhance stock investment.¹²

In order to identify performance criteria, the diploma thesis is structured as follows: First, the social context of organizations will be outlined in order to give an orientation of how collaborations between multinationals and non-profits have to be placed into the field of alliances. Then, the non-profit as the firm’s alliance partner will be introduced in order to show peculiarities that may have an impact on performance. After a working definition of cross-sector alliances has been developed, motives of partnering will be outlined. In chapter three, performance criteria will be derived in greater detail from the resource-based view and the new institutionalism. I suggest in chapter four a modified Balanced Scorecard as instrument to structure performance in alliances between multinationals and non-profits and reveal an inevitable performance conflict. After a short summary of results, the diploma thesis closes with limitations and implications and will give an outlook on future research.

Figure 1: Topic of Diploma Thesis embedded in the Field of Alliance Research

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Source: Idea of illustration based on Mellewigt (2003) p. 50.

2. Forging Strategic Alliances across Sector Frontiers

2.1 The Framework of Alliances between MNCs and NPOs within the Social Context of Organizations

Zukin/DiMaggio (1990) classify the complexity of the social context, in which organi- zations are embedded,¹³ into four groups: structural, cognitive, cultural and political embeddedness.¹⁴ The cultural embeddedness is understood in an economic manner where culture limits rationality and shapes strategies and goals. The position that an organization occupies in the overall structure of the network is seen as structural em- beddedness and focuses on direct ties between members and the information flow through the structure.¹⁵ The focus of this paper will be laid upon the political em- beddedness which can also be characterized as institutional embeddedness. Zukin/DiMaggio (1990) define political embeddedness as “the manner in which eco- nomic institutions and decisions are shaped by […] economic actors and nonmarket institutions, particularly the state and social classes”¹⁶. In other words, beside influence of the state on corporate decisions through its legal framework (tax code), a third group exists which is neither a government agency nor a market entity that also influences a multinational’s behavior.¹⁷

Etzioni (1973) was among the first scholars who came up with the idea of a third sector. Apart from the public and the private sector, an alternative sector to the state and the market has grown that neither replaces one of the others nor abolishes private and state sector completely.¹⁸ The initial objective to establish a third sector was to combine the flexibility and efficiency of markets with equity and predictability of public bureaucracy to balance both the disadvantages that occur from profit maximization (private sector) and bureaucracy (public sector).¹⁹

Since then, the third sector has interchangeably been used as civil society²⁰ and can be defined as “an area […] in which citizens can organize to pursue purposes that are im- portant to them, individually and collectively”²¹. Visible and ongoing action organized by groups of individuals that reflects a development of social change can be named so- cial movement. This is not tied to the national level, but increasingly occurs across bor- ders through transnational networks and creates in many cases its own structural form affecting both the state and the private sector.²² Thus, the triangular sector model can be used as a kind of overall social context in which firms and organizations are embed- ded.²³ More over, their behavior is constrained or even shaped in such a way that it can- not be seen independently.²⁴

Most research examines strategic alliances mainly within the private business sector explaining motives, forms, and dynamics in order to enhance a firm’s position in the competitive environment.²⁵ Richards/Indro (2005) analyzed alliances between compa- nies and governments, which underlie complete different purposes than those formed among firms. One result of their research is that in alliances between governments and firms cultural and law-specific objectives play a far more significant role than industry specific factors.²⁶ Non-business performance criteria may also be seen as more impor- tant in alliances between the third sector and the private (market) sector. Following London/Rondinelli/O’Neill (2004) and Richards/Indro (2005), the overall term of stra- tegic alliances will be divided into sector alliances and cross-sector alliances.²⁷ This reflects that alliances occur within the private (market) sector, but are likely to be forged across sectors, as well. For instance, a joint venture between two independent firms has to be classified as sector alliance, as well as a partnership between two non-profit or- ganizations. Both cooperations are forged within the same sector and do not cross the borders of their host sector. Consequently, alliance partners operate within the same sector and share similar constraints.

When, however, a governmental agency and a firm or - as in this case - a multinational company forges a collaboration with a non-profit organization, sector frontiers will be crossed with specific impact on the alliance. Building the framework of strategic alli- ances on the three sector model enhances to understand alliance performance in two ways. First, it does not only concentrate on a partnership between two organizations, but takes their specific background into account. This is of importance in order to define performance indicators which are determined differently in each sector. Second, it fa- cilitates to distinguish specific alliances from the permanently used term strategic alli- ances. Figure 2 illustrates the idea of cross-sector alliances.²⁸ It is important that this framework does not abolish commonly accepted types of alliances, such as joint ven- ture, non-equity, and equity alliances.²⁹ These types still occur and classify both cross- sector and sector alliances in greater detail.

Figure 2: Overview of Strategic Alliances based on the Three Sector Model

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Source: Based on London/Rondinelli/O’Neill (2004); Teegen/Doh/Vachani (2004).

2.2 Introducing the NPO as potential Alliance Partner for MNCs in Cross-sector Alliances

From now on, the focus will be placed on just one particular form of strategic alliances, namely cross-sector alliances. Although this term covers three forms of collaborations,³⁰ in this paper only cross-sector alliances between multinationals and non-profits will be examined. In this chapter, first, the multinational’s partner, the non-profit organization, will be introduced in order to understand its distinctiveness and ideas determining its actions. Second, it is of interest whether all or only a few number of nonprofits are potential partners for multinationals.

To begin with, there are various organizational labels that occur within the third sector. Some of them are: “non-governmental organization”, “civil society organization”³¹, “private voluntary organizations”, or “community associations”³². The most common label is probably non-governmental organization (NGO), which was officially an- nounced by the United Nations Economic and Social Council on 27th February 1950.³³ The idea was to distinguish these organizations from any governmental affiliation and defined it as a non-profit and voluntary citizen’s group that may be organized on a local, national or international level.³⁴

In the literature the term NGO is used interchangeably with private voluntary organiza- tion and non-profit organization.³⁵ Likewise will be proceed in this paper. The term non-profit organization requires a closer look, because in some countries the term non- profit organization is commonly used due to qualification for tax exemption and for tax- deductible donations, whereas in other countries the term is less common and tax privi- leges do not apply.³⁶ From an economic point of view and in contrast to firms, no mem- ber of a non-profit organization is entitled to receive excess income such as dividends or capital gains.³⁷ In case the organization’s earnings exceed the costs, the difference (profit) has to remain with the organization for its purpose. Although there have been attempts to run non-profits more professionally by employing managers,³⁸ their primary mission neither consist of profit maximization nor of cost efficiency. Consequently, the lack of owners and less economic interest may have an impact on defining goals and, more important, may cause conflicts by assessing performance in alliances with partners from the market sector and those specific constraints.

The core aims of non-profit organizations focus on humanitarian, environmental or so- cial issues, economic development, poverty relief, and/or help after natural disasters.³⁹ Following Vakil (1997) and Parker (2003), the initial broad definition will be expanded concentrating on non-profits which help those who are perceived as disadvantaged in the realm of humanity, society or environment.⁴⁰ The awareness of those who are per- ceived as disadvantaged may root in either empirical data, e.g., payment less than 1 US- Dollar per day,⁴¹ or in public opinion. This point reveals two fundamental and unique aspects of NPOs. First, it is the external context in form of public opinion or commonly perceived imbalance that creates the mission of a non-profit organization. Consequently, performance may not be assessed by economic factors, but by the social approval of their constituents to act on their behalf. And, second, non-profits are not found on a set of strategic core resources, which is of relevance for firms.

Since their official recognition in 1950, a huge number of various NPO types have been spawned which can be classified by the benefits they create. Table 1 gives an overview of the most common types of NPOs.⁴² Missions and strategies vary to great extent. Ac- cording to that, not all non-profits are willing to forge cross-sector alliances. Opera- tional NPOs, for instance, are considered as reluctant to engage with multinationals be- yond fund-raising, whereas advocacy non-profits represent an even antagonistic role by addressing and, in some cases, blaming multinationals aggressively. After having implemented structures for mutual respect and constructive relationships, hybrid nonprofits create a strategic entry point for collaborations with multinationals.⁴³

Table 1: Typology of NPOs

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Source: Based on Parker (2003) pp. 84-89; Teegen/Doh/Vachani (2004) pp.467-469.

As multinationals’ counterparts, the focus will be directed on an examination of interna- tional hybrid non-profits and their motives. The main reason is the fact that international NPOs’ visibility has substantially increased due to their growing size, scope and focus and, on the other hand, the less influential power of small local organizations which are not interconnected with each other.⁴⁴ International NPOs have altered the globalpolitical landscape and have been gradually recognized as actor within the international business.⁴⁵ Albeit their moral authority⁴⁶, non-profits have increasingly been under pressure due to lack of performance measurement of their elusive activities⁴⁷ and concerns about their effectiveness and accountability.⁴⁸

2.3 Development of a Working Definition for Cross-sector Alliances between MNCs and NPOs

There are two major problems with cross-sector alliances. First, albeit vast research on partnerships, no common and generally accepted definition of the term strategic alli ance is available. This, however, is essential in order to develop performance criteria.⁴⁹ Due to the fact that the term strategic alliance has not only been used in the economic and management literature but also in sociology journals, the situation to identify a clear definition has been aggravated.⁵⁰ Second, albeit a number of available definitions, none covers the peculiarities of cross-sector alliances. Thus, the development of a precise definition seems to be inevitable in order to assess performance.

Underlying a broad classification of alliances as “cooperative arrangements between organizations”⁵¹ may, on the one hand, have the advantage of including various forms of alliances, such as those among business and non-business entities. On the other hand, it does not contribute to extract the core elements of alliances and, consequently, does not establish a clear foundation for developing performance criteria. Some researchers suggest a more precise definition underlying that alliances refer to collaborations in which parent organizations are bound in a substantive manner without losing each ones identity.⁵² Gulati (1998) defines strategic alliances as “voluntary arrangements between firms involving exchange, sharing, or codevelopment of products, technologies, or ser- vices”⁵³. From the academic literature including different forms and aims, Spekman et al. (1998) suggest that a strategic alliance is “a close, long-term mutually beneficial agreement between two or more partners in which resources, knowledge, and capabili- ties are shared with the objective of enhancing the competitive position of each part- ner”⁵⁴. To some extent, Ariño (2003) liberates strategic alliances from pure market pe- culiarities, such as “developing products”⁵⁵, “interfirm collaborations”⁵⁶, or “enhancing the competitive position”⁵⁷ saying that a strategic alliance consists of “a formal agree- ment between two or more business organizations to pursue a set of private and com- mon interests through the sharing of resources in contexts involving uncertainty over outcomes.”⁵⁸ The word “common” may cause misunderstandings. Ariño (2003) inter- prets “common” as “shared interest”, but does not clarify whether these interests are only shared among partners, or whether they are (unwillingly) shared due constraints of the community which may be affected.⁵⁹ Ariño (2003) only assumes that the act of for- mulating goals is not carried out by the management team alone, but is constrained to some extent by the social environment every partner is connected to.⁶⁰

Albeit Ariño’s (2003) attempt to include social constraints in the definition of strategic alliances, neither her nor other available and precise definitions are capable to be ap- plied on cross-sector alliances. Consequently alliances between NPOs and MNCs can- not be simply subordinated to one of the available definitions, because they do not match pure economic conditions.⁶¹ For that reason, available definitions shall be modi- fied resulting into the working definition of cross-sector alliances between multinational companies and non-profit organizations as cooperative, formal agreements between at least one for-profit and one non-profit organization to pursue a set of interests through the sharing of resources in order to enhance the position of each organization within the environment they are embedded in.⁶² This definition reflects each organization’s specific narrow environment, as well as the constraints of a general social context in which alliance partners are embedded. Performance criteria have to meet the needs of both the narrow and wider environment of alliance participants and individual organiza- tional interest.

2.4 Motives of MNCs and NPOs to engage in Cross-sector Alliances

Why should multinationals forge partnerships with non-profits? To some extent crosssector alliances may be formed due to the same motives which are also relevant for inter-firm alliances. The most important drivers in joint ventures, for example, have been to improve the competitive position within an existing or a new market, access to knowledge and resources, or to reduce costs and risk.⁶³ To some extent, non-profits similar to for-profits can be classified as a system of interdependent core elements.⁶⁴ Thus, their willingness to engage in alliances may also be driven by access to knowledge or to enhance the organizational position.

Among multinationals, core drivers of alliance formation across sector borders are rooted in motives such as access to public change, reduction of corruption, monitoring shifts in public opinion, or influence in legislation processes and agenda setting (lobbying through non-profits). An increasing number of multinationals ally with non-profits to improve the firm’s corporate social responsibility.⁶⁵

In contrast to multinationals, non-profits, firstly, intend to balance multinational power. While markets have increasingly been global, governments remain to be local. Espe- cially in emerging markets which are of vast interest for multinationals, governments fail to provide information, a secure political framework, or legislation. Non-profits, then, aim to increase public security based on international principles and reduce corporate omnipotence.⁶⁶ Secondly, independent of state failure, non-profits monitor and publicly target corporations in order to achieve that firms operate in an environmental and social responsible way.⁶⁷

The motivation of non-profits to engage in a cooperation are less focused on organiza- tional improvements, but are formulated by social movements or public opinion. In- stead, they intend to act on behalf of their beneficiaries aiming at being unnecessary after goals have been accomplished. In other words, it is not the improvement or sur- vival of the organization itself that motivates an NPO to set up an alliance, but the belief the recipient will benefit and this without the non-profit organization’s support, in the long-run.⁶⁸ For example, as response to the Montreal Protocol’s call to use less ozone destructive chemicals for refrigerators, the chemical industry concentrated its research and development efforts on hydrochlorofluorocarbons (HCFCs). The German non- profit-organization, Greenpeace, created a partnership with DKK Scharfenstein, an ap- pliance manufacturer, to develop a refrigerator based on liquefied petroleum gas (LPG), which has no damaging effect on ozone. While DKK Scharfenstein’s motivations based on the development of a competitive product, Greenpeace intended to create a non- polluting refrigerator. The German consumer market that can be seen as environmen- tally conscious prefers the new environmental friendly technology that has been devel- oped in this strategic cross-sector alliance. Finally, Bosch and Liebherr, the largest ap- pliance maker in Germany, moved exclusively to LPG technology, which now domi- nates the industry.⁶⁹ As a result, both generated a win-win-situation. The company was taught the environmental friendly technology, saved cost of research and development and survived the verge of bankruptcy. The non-profit organization established effec- tively a non-damaging technology, achieved a visible outcome of their efforts and saved costs of a fierce public campaign.⁷⁰

Despite of overlapping motivations and the high potential of success of cross-sector alliances, non-profit-organizations and multinationals still face hostility and mistrust among each other because of fundamentally different structures and values.⁷¹ It will be assumed, that cross-sector alliance partners have to share to a certain extent common believes, values and part of their mission in order to overcome significant differences. A trade-off between fruitful outcome and hostility in order to make the alliance perform may be indispensable.⁷²

3. Developing Performance Criteria from a bilateral Theoretical Perspective

3.1 Literature Review on Alliance Performance

If both alliance partners overcome their hostility, alliance performance has still been perceived as one of the most difficult questions among research topics.⁷³ Its importance, as well as its complexity have been recognized in various issues of strategic management literature.⁷⁴ Yet, there have been various theoretical and empirical attempts to examine alliance outcome, performance and performance measurement.⁷⁵ It remains, however, difficult to conduct research on alliance performance and its measurement. Collecting rich data and doubts how to actually measure performance in a consistent and appropriate way still obstruct current research.⁷⁶

The termination of alliances has been one of the first empirically tested approaches of alliance performance.⁷⁷ Although these studies have provided valuable insights, under- standing performance remains limited. Suggesting that an alliance ends before or after a fixed date neglects at least two aspects. The alliance may have achieved its objectives earlier as estimated, or continues due to other more important reasons after environ mental changes. It also fails to differentiate between timely and unusual deaths.⁷⁸ Similar objective investigations of alliance performances have concentrated on alliance survival⁷⁹, duration⁸⁰, instability⁸¹, renegotiation and longevity⁸².

Instead of objective approaches, there have been various attempts to develop alliance performance criteria by means of financial indicators, such as profitability,⁸³ growth or cost position⁸⁴. These approaches are advantageous in terms of evaluating results, which can be compared quantitatively. However, they neglect the variety of objects such as gaining access to foreign markets⁸⁵ or “keep a window on an opportunity”⁸⁶ that may rank among core drivers of forming alliances and are hardly be measured in financial terms.⁸⁷ The few attempts to measure a non-profit’s performance focus surprisingly on financial measures, too. Although financial considerations do not play an insignificant role, the primary objective of performance measurement of non-profit organizations and their activities should concentrate on how effectively and efficiently NPOs meet the demands of their beneficiaries.⁸⁸

Zollo/Reuer/Singh (2002) use three indicators of alliance performance: satisfaction with accumulation of knowledge, creation of new opportunities, and fulfillment of initial goals.⁸⁹ Another approach that focuses on different performance dimensions has been developed by Venkatraman/Ramanujam (1986). Their approach of organizational effec- tiveness as overall performance criterion includes both the fulfillment of financial and operational goals and takes into account that the purpose of creating an alliance may not only be derived from the management team, but from multiple constituents, as well.⁹⁰ Latter aspect is of basic interest regarding cross-sector alliances. Organizational effec- tiveness can be measured in different ways. The method most frequently used is to evaluate the alliance partner’s satisfaction of the overall performance.⁹¹ Although this approach does not untangle financial and operational performance, its main advantage is to examine to which extent the alliance has satisfied the parents’ objectives.⁹² However, this subjective approach, too, has its limitations and is exposed to biases.⁹³ Measuring alliance partner’s fulfillment of objectives bears the problem that each partner may evaluate the performance differently.⁹⁴ Moreover, alliance performance can be asymmetric which has been observed in several cases already. In this case, one partner achieved its objective while the other one failed to do so.⁹⁵

Instead of measuring goal accomplishment from the organization’s perspective, which underlies most interpretations,⁹⁶ alliances can be evaluated intrinsically, i.e., separated from their parent organizations.⁹⁷ In this case, alliance performance reflects “the degree to which agreed objectives of an alliance are achieved”⁹⁸. This approach focuses on ob- jectives that have been mutually developed (by individual organization units concentrat- ing on a pressing issue) and may avoid conflicting individual overall intentions, such as maximizing profits on the company side against helping the poor on the non-profit’s side. As a result, there is no common understanding on alliance performance. Instead, the research field is characterized by heterogeneity and inconsistency. Only goal ful- fillment has been recognized as almost generally accepted performance criterion. If goals or initial objectives have not been fulfilled, there is doubt that this alliance will be declared as successful. In accordance to this, goal fulfillment will be used as perform- ance criterion in cross-sector alliances.⁹⁹

Goals, however, will hardly be achieved immediately after the partnership has been forged. Another aspect is, that albeit mutually agreed goals, (cross-sector) alliances re- main incomplete contracts.¹⁰⁰ Consequently, there has to be a course of action in order to achieve the targets of an alliance.

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¹ Cf. Anand/Khanna (2000) p. 296.

² Cf. Glaister/Buckley (1998) p. 89.

³ Cf. Bartlett/Ghoshal (1992) p. 403.

⁴ Cf. Anand/Khanna (2000) p. 295; Barringer/Harrison (2000) p. 367; Gulati (1998) p. 293.

⁵ Cf. Rondinelli/London (2003) pp. 61-62.

⁶ Cf. London/Rondinelli/O’Neill (2004) p. B1; Millar/Choi/Chen (2004) p. 408-410.

⁷ Cf. Gulati (1998) p. 309; Zollo/Reuer/Singh (2002) p. 701.

⁸ Cf. Hawkins/Allen (1991) p. 1079. Performance can either be understood as “the act of carrying out” or “the fulfillment of a duty”.

⁹ A constituent is somebody and/or a group out of the social context of the organization that define organ- izational behavior without having a necessary stake in the organization.

¹⁰ Cf. McGann/Johnstone (2005) p. 167.

¹¹ Cf. Graves/Waddock (1994) p. 1034. Institutional owners, for example, boosted their investments in the computer industry from 16 percent to 50 percent. They more than tripled stock holdings in the chemi- cal industry (growth of stock from 15 to 52 percent).

¹² Cf. Graves/Waddock (1994) pp. 1035-1043.

¹³ Cf. Bansal (2005) p. 202; Hitt et al. (2000) p. 449; Meyer/Rowan (1977) p. 353.

¹⁴ Cf. Zukin/DiMaggio (1990) pp. 14-23.

¹⁵ Cf. Gulati (1998) p. 296.

¹⁶ Zukin/DiMaggio (1990) p. 20.

¹⁷ The stakeholder concept, as well, uses a broader context focusing on all who affect the survival of the company. This approach classifies protest groups, trade associations and competitors into the same group and neglects to differentiate each one’s motive of behavior, cf. Freeman/Reed (1983) p. 91. The stakeholder framework has not been used, because it treats the firm as core element and does not de- fine the NPO as equal partner. Furthermore, applying the economic term stakeholder to NPOs may cause misunderstandings.

¹⁸ Cf. Etzioni (1973) p. 315.

¹⁹ Cf. Anheier/Seibel (1990) p. 7.

²⁰ Cf. Teegen/Doh/Vachani (2004) p. 464.

²¹ Brown et al. (2000) p. 275.

²² Cf. Teegen/Doh/Vachani (2004) p.465.

²³ Cf. Teegen/Doh/Vachani (2004) p. 466.

²⁴ Cf. Granovetter (1985) p. 490

²⁵ See e.g. Barringer/Harrison (2000); Das/Teng (1998); Das/Teng (2002); Dussauge/Garrette/Mitchell (2000); Hitt et al. (2000); Reuer/Ariño (2003).

²⁶ Cf. Richards/Indro (2005) p. 15.

²⁷ Cf. London/Rondinelli/O’Neill (2004) p. B1.

²⁸ The term Public-Private-Partnership (PPP), which has been used frequently and interchangeably with cross-sector alliances, will not be used. In most cases PPP stands for partnerships between a state’s agency and a private company, e.g. the collaboration between GTZ and Kraft Foods in Peru and Viet- nam. Building a framework on the PPP model would have caused misunderstandings, because the term public is mostly used with the state, not with non-profits.

²⁹ For an overview of cooperative arrangements see Contractor/Lorange (2004) p. 22.

³⁰ See Figure 2.

³¹ Lewis (1998) p. 509.

³² Anheier/Seibel (1990) p. 21.

³³ Cf. Vakil (1997) p. 2068.

³⁴ Cf. Teegen/Doh/Vachani (2004) p. 466.

³⁵ Cf. Vakil (1997) p. 2059.

³⁶ Cf. Anheier/Seibel (1990) p. 21.

³⁷ Cf. Anheier/Seibel (1990) p. 21.

³⁸ Cf. Lewis (2003) p. 330-342.

³⁹ Cf. Vakil (1997) p. 2059.

⁴⁰ Trade Unions, business associations, church groups and are NPOs which produce or supply public goods or services on a not-for-profit basis are excluded due to less focus on public concerns, cf. Put- nam (2002) p. 412. The reasons are that unions and business associations operate in the private sector and not-for-profit supplier underlie market constrains. Finally, including church groups and their reli- gious motives would exceed the scope of this paper.

⁴¹ For empirical indicators of poverty see e.g. Durth/Körner/Michaelowa (2002) pp. 13-16.

⁴² For a detailed classification of NPOs see e.g. Vakil (1997); Parker (2003).

⁴³ Cf. Parker (2003) pp. 84-89.

⁴⁴ Cf. Parker (2003) p. 81.

⁴⁵ Cf. Teegen/Doh/Vachani (2004) p. 463.

⁴⁶ Cf. Caterbow/Holzer (2001) p. 37.

⁴⁷ Cf. Kaplan (2001) p. 353.

⁴⁸ Cf. McGann/Johnstone (2005) p. 159.

⁴⁹ Cf. Ariño (2003) p. 67.

⁵⁰ Cf. Barringer/Harrison (2000) p. 368.

⁵¹ Das/Teng (1998) p. 21.

⁵² Cf. Das/Teng (1998) pp. 21-22.

⁵³ Gulati (1998) p. 293.

⁵⁴ Spekman et al. (1998) p. 748.

⁵⁵ Gulati (1998) p. 293; Zollo/Reuer/Singh (2002) p. 701.

⁵⁶ Das/Teng (1999) p. 50.

⁵⁷ Spekman et al. (1998) p. 748.

⁵⁸ Ariño (2003) p. 67.

⁵⁹ Cf. Hawkins/Allen (1991) p. 294. The word common can either be used as “shared by more than one” or “affecting the whole community or the public”.

⁶⁰ Cf. Ariño (2003) p. 68; see also chapter 2.1.

⁶¹ Cf. London/Rondinelli/O’Neill (2004) pp. B2-B3.

⁶² Cf. Ariño (2003) p.67; Spekman et al. (1998) p. 748; Das/Teng (1999) p. 50.

⁶³ Cf. Glaister/Buckley (1996) pp. 314-328.

⁶⁴ Cf. Carmeli/Tishler (2004) p. 1257.

⁶⁵ Corporate social responsibility (CSR) encompasses the economic, legal, ethical, and philanthropic expectations which constituents within society have of the firm or organization, cf. Carroll (2004) p. 116. See also Appendix 1.

⁶⁶ Cf. Kell (2004) pp. 61-64; McGann/Johnstone (2005) assume that NGOs are in many cases a more reliable expert than general policy makers due to the NPO’s focus on a narrow range of issues, cf. McGann/Johnstone (2005) p. 163.

⁶⁷ Cf. Christmann/Taylor (2002) p. 123.

⁶⁸ Among others, the recipient can either be the community, the environment, disabled people, people in poor living conditions and/or refugees. The recipient depends on the specific type of the non-profit or- ganization and their mission; see chapter 2.2.

⁶⁹ Cf. Yaziji (2004) pp. 113-114.

⁷⁰ For a detailed overview of objectives, motives and structure of cross-sector alliances see Rondi- nelli/London (2003), esp. Table 1 pp. 66-67 and Figure 1 p. 68; Yaziji (2004) pp. 113-114.

⁷¹ Cf. London/Rondinelli/O’Neill (2004) p. B1.

⁷² For an example of decision path of a cross-sector alliance with environmental purpose see Appendix 2.

⁷³ Cf. Gulati (1998) p. 309.

⁷⁴ Cf. Zollo/Reuer/Singh (2002) p. 701.

⁷⁵ Cf. Glaister/Buckley (1998) pp. 91-115; Zollo/Reuer/Singh (2002) p. 711.

⁷⁶ Cf. Gulati (1998) p. 307; Kale/Dyer/Singh (2002) pp. 752-753.

⁷⁷ Cf. Gulati (1998) p. 307.

⁷⁸ Cf. Gulati (1998) p. 307.

⁷⁹ See e.g. Killing (1983); Geringer (1990).

⁸⁰ See e.g. Harrigan (1986).

⁸¹ See e.g. Gomes-Casseres (1987).

⁸² See Das/Teng (2000) p. 48 and literature mentioned there.

⁸³ See e.g. Reuer/Miller (1997).

⁸⁴ See e.g. Dollinger/Golden (1992); Thomas/Trevino (1993).

⁸⁵ Cf. Barringer/Harrison (2000) p. 367.

⁸⁶ Anderson (1990) p. 19.

⁸⁷ For a detailed review on alliance performance see e.g. Geringer/Hebert (1991); Gulati (1998).

⁸⁸ Cf. Kaplan (2001) p. 353.

⁸⁹ Cf. Zoller/Reuer/Singh (2002) p . 706.

⁹⁰ Cf. Ariño (2003) pp. 68-69; Venkatraman/Ramanujam (1986) pp.803-804.

⁹¹ Cf. Ariño (2003) p. 69.

⁹² Cf. Geringer/Hebert (1991) p. 251.

⁹³ Cf. Geringer/Hebert (1991) p. 251.

⁹⁴ Cf. Das/Teng (2000) p. 48.

⁹⁵ Cf. Gulati (1998) p. 307.

⁹⁶ Cf. Ariño (2003) p. 67 and literature mentioned on goal accomplishment.

⁹⁷ Cf. Anderson (1990) p. 23.

⁹⁸ Das/Teng (2000) p. 48.

⁹⁹ Synonyms of goal fulfillment will be: goal accomplishment, fulfillment of targets and/or objectives.

¹⁰⁰ Cf. Anand/Khanna (2000) p. 295.

• College: University of Paderborn
• Grade: 1,0
• Author: Diplomkaufmann Björn-Alexander Gehrmann (Author)
• Publication Year: 2005
• Pages: 72
• Catalog Number: V64334
• ISBN (eBook): 9783638571807
• ISBN (Book): 9783638710527
• Language: English
• Tags: Performance, MNCs, NPOs