Success factors of strategic alliances in the construction industry

This article is part of an ongoing series looking at knowledge management (KM) in the building and construction industries.

Over the past two decades, companies have been increasingly using inter-organisational collaborative arrangements to help improve their competitive advantage. The focus is on forming strategic alliances with suppliers and customers to support the essential activities of providing good quality products and services.

However, research has found that the failure rate of these strategic alliances has increased by more than 50% globally. To overcome this high rate of failure, a better understanding of the factors necessary for successful strategic alliances is needed.

A recent paper¹ addresses this information gap through a review of the considerable body of literature discussing strategic alliances in the construction industry in the United Kingdom.

Strategic alliance success factors

Five fundamental success factor categories were identified in the review:

• Trust: A transaction view proposes that trust is a vital factor in a partnership, with trust seen as having the ability to lower transaction costs through preventing opportunistic behaviour. This helps partners to extend their view and have a long-term perspective on the relationship. Trust works as a trigger for various structuring, organising, and mobilising mechanisms that enable an alliance to fulfil an extreme performance outcome, so it is proposed that the main factor in firm success is trust. However, disrupting the flow of information between partners could lead to an absence of trust, resulting in conflicts and coordination problems.

• Commitment:. Commitment is key for continuing a relationship and fulfilling desired outcomes in strategic alliances, and has a positive impact on performance. Commitment and joint action are required to encourage recurring reciprocity in a partnership.

• Sharing knowledge: Trust and commitment are identified as important precursors to the effective sharing of knowledge in strategic alliances. The benefits of sharing knowledge include decreased failure rates, increased productivity, and avoiding the considerable challenge of generating new knowledge.

• Communication and IT capabilities: In virtual teams, a successful strategic alliance depends on effective communication and the sharing of knowledge between partners. The development of effective communication skills is important for facilitating links between allied partners, and information technology is a key factor in aggregating and exchanging essential information. This means that effective IT abilities are vital for achieving a high level of performance.

• Dependency: Dependence refers to the extent to which a firm relies on its alliance partners for economic, social, and financial resources. To deal with uncertainty, the amount of information and knowledge that firms need relies not only on the number of activities performed, but also on the extent to which actors depend on others to carry out these activities. There is a suggestion that dominance by one partner might be better for performance.

Header image source: Home Builder by Scott Lewis is licenced by CC BY 2.0.

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Also published on Medium.