Directory UMM :Data Elmu:jurnal:I:International Journal of Educational Management:Vol13.Issue6.1999:

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Mechanics, problems and contributions of tertiary

strategic alliances: the case of 22 Australian

universities

Kojo Saffu

Faculty of Business, Northern Territory University, Darwin, Australia

Aminu Mamman

Institute of Development Studies and Management, Manchester University,

Manchester, UK

Introduction

Co-operative strategy has become an essen-tial part of business strategies in today's global competition (Killing, 1988; Tallman and Shenkar, 1994) leading to co-operative arrangements between firms becoming in-creasingly popular in recent years (Sheth and Pravatiyar, 1992; Demerset al., 1997). Indeed, in the past five years, it is estimated that the number of domestic and cross-border alli-ances has grown by more than 25 percent (Bleeke and Ernst, 1995).

While co-operative ventures have received considerable attention in the literature, it seems little attention has been given to strategic co-operation between tertiary insti-tutions, in spite of its increasing importance. In Australia for instance, the Australian Vice Chancellor's Committee (AVCC) reports that in 1993 there were 1,232 formal links between Australian universities and overseas coun-terparts (Australian Vice Chancellor's Com-mittee, 1996). Similarly, there is a reported boom in university twinning across Asia involving educational institutions from Western countries (Asian Business Review, September 1996). Given the increasing im-portance of collaborative relationships be-tween Australian universities and overseas counterparts, the study poses the following questions:

. How do Australian universities go about alliance formation? More precisely, what are the mechanics of alliance formation in Australian universities?

. What problems do Australian universities involved in strategic alliances face? . What contributions do Australian

uni-versities make to the partnership and vice versa?

Arguably, answers to the above questions would make tertiary strategic alliances more

effective. The paper is structured as follows: first, international tertiary strategic alliance is defined, followed by a brief review of the strategic alliance literature. Next, methodol-ogy employed in the study is presented, followed by discussion of the findings of the study. The paper ends with conclusion and implications for future research.

Definition

At the outset, it is important to define tertiary strategic alliance because a wide range of types and terminologies are attrib-uted to strategic alliances (Porter, 1990). Sankaret al., (1995, p. 20), for instance, define strategic alliances as ``the joining of compe-titive capabilities between firms'' whereby each partner seeks to add to its competencies by combining some resources with those of its partners. For the purposes of this paper, we define an international tertiary strategic alliance as any collaborative relationship between a local university and an overseas counterpart, which may be public or private, encompassing agreements to co-op-erate in joint activities such as the develop-ment of on-shore or off-shore offerings, teaching, research and consultancy, technol-ogy, marketing new or existing courses to a new market, that has led to financial con-sequences and/or some kind of actual ex-change of staff/students between the partners. In this paper, terms such as national joint ventures, cross border inter-organisational partnerships, interfirm partnerships, collaborative relationships and co-operative arrangements are included in the foregoing definition and are therefore used interchangeably.

Prior research

This section reviews the strategic alliance literature focusing on the rationale for and problems associated with strategic alliance.

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Keywords

Joint ventures, Alliances, Australia, Higher education

Abstract

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There are numerous reasons why business enterprises enter into collaborative relation-ships. Some of the more common reasons include risk sharing and market dominance (Buckley and Casson, 1988; Harrigan, 1988; Sheth and Pravatiyar, 1992; Tallman and Shenkar, 1994); expansion of business opera-tions in today's fast changing environment (Sankaret al., 1995); access complimentary marketing skills, quick entry into foreign markets, cost reduction of doing business in foreign markets and circumvention of tariff and non-tariff barriers (Contractor and Lor-ange, 1988; Kotabe and Swan, 1995); strong synergistic opportunity extension of existing scope of operations (Bleeke and Ernst, 1995); competitive strengths, additional sources of capital, access to new technology, opportu-nities for rapid expansion into new markets (Cateora, 1996).

Other motives include access to a partner's resources, economies of scale or response to local government policies (Makino and Beamish, 1995); leverage critical capabilities and improve flexibility in responding to market and technological changes (Modic, 1986). Firms may enter into a co-operative venture to deter competitors from entering the market (Harrigan, 1988), take compli-mentary competitive advantage (Beamish and Banks, 1987) or acquire skills necessary to achieve their objectives more effectively at a lower cost or with less risk than if they acted alone (Ohmae, 1995; 1990). Another reason is the structural flexibility of the strategic alliance which allows firms to concentrate on performing tasks at which they are most efficient (Beamishet al., 1994). International joint ventures have commonly been used by firms in order to expand abroad (Franko, 1971; Harrigan, 1985; Beamish and Banks, 1987; Hennart, 1989).

Alliances also provide a platform for orga-nisational learning as well as access to the embedded knowledge of other organisations (Inkpen and Beamish, 1997). Indeed, the strategic management and international joint ventures (IJV) literature asserts that learning, knowledge, acquisition and adap-tation are important rationales for the crea-tion of internacrea-tional joint ventures,

contributing significantly to IJV perfor-mance (Hamel, 1991; Hamelet al., 1989; Inkpen and Beamish, 1997); and to organisa-tional performance more generally (Kogut and Zander, 1992; Nonaka, 1994). The in-creasing role of IJVs in terms of the accel-erating pace of technological innovation and the globalisation of markets has also been established (Buckley and Casson, 1996).

Such alliances are by no means confined to large multinational firms. Globally, tertiary

institutions are also taking advantage of the opportunities offered by globalisation and borderless markets and entering into inter-national collaborative relationships or joint ventures (Asian Business Review, September, 1996; AVCC Report, 1996). While partnerships are formed to bring value to the organisa-tions entering into them, they are not with-out problems.

International collaborative ventures are configured in many different ways and different configurations are associated with different kinds of behaviour (Tallman, 1992). Buckley and Casson (1996) argue that no matter how an international joint venture is configured, it does not perform perfectly. Some researchers (Geringer and Herbert, 1989) have listed a wide range of factors such as technological, legal,

cultural and psychological that have an impact on international joint ventures. The potential for failure of strategic alliances has also been noted. Stern (1994) lists some of the reasons for failure as: partners with different agendas as well as imbalance between partners in terms of their respective contri-bution to the alliance, conflict of interest, lack of communication, disagreement over how profits are to be shared, lack of per-ceived benefits to one or more of the part-ners, different management styles, different strategic issues and unwillingness to sacri-fice some control by each partner (Robert, 1993).

Not all alliances succeed (Stern, 1994). Ajami and Khambata (1991) demonstrate that collaborative agreements for the most part have limited lifespans. For instance, studies by some researchers (Kanter, 1994; Bleeke and Ernst, 1995) found that the median life-span of alliances was about seven years, failure rate was high, with seven out of ten joint ventures found to have fallen short of expectations and disbanded.

Culture is another problem that confounds strategic alliances. Some writers (Buckley and Casson, 1996; Fedor and Werther, 1995) take the view that partnerships are more dependent on culture for their success while others have highlighted the deleterious im-pact of cultural conflicts on alliances. Lane and Beamish (1990) stress that cultural con-flicts can lead to instability and poor perfor-mance, while others argue cultural

misunderstandings can reduce flows of in-formation and learning. Partner cultural sensitivity is an important contributor to trust building on both sides of the dydad (Johnsonet al., 1997). We define culture as shared values and beliefs and argue that cultural homogeneity, exemplified by shared beliefs, leads to a reduction of transaction

Kojo Saffu and Aminu Mamman

Mechanics, problems and contributions of tertiary strategic alliances: the case of 22 Australian universities

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costs by avoiding misunderstandings, and underpins the willingness to share knowledge which is crucial to a joint ven-ture. It is reasonable to argue that knowledge may be shared only with those who can be trusted to reciprocate, and thus favours partnership with the same cultural group. Cultural distance may therefore become an obstacle to international partnership forma-tion and operaforma-tion (Buckley and Casson 1996).

Methodology

To bridge the gap in our knowledge of strategic alliances involving tertiary institutions, the entire 38 universities in Australia were surveyed between April and August 1997. The list of the universities was obtained from the Australian Vice Chancel-lors' Committee (AVCC) publications. Be-cause of the small number of Australian universities, a census rather than a sample was undertaken. A structured questionnaire was developed after review of the strategic alliance literature and comprised 17 struc-tured questions and seven Likert-type ques-tions. The questionnaire had a brief preamble which sought the respondent's permission and co-operation to complete and mail the instrument back. The questionnaire was pilot tested for ambiguity and clarity at the Northern Territory University. Changes were made to three questions while one question was deleted from the questionnaire. The final draft of the questionnaire was sent to all the universities in Australia in April 1997 and reminders were sent after eight weeks.

An initial problem encountered at the data collection stage was who to send the ques-tionnaire to, given that terminologies per-taining to those with responsibilities for internationalisation activities varied from university to university. While in some universities the Deputy Vice-Chancellor was in charge of the international activities, in others, it was the Director or the

Deputy Registrar. The questionnaire was addressed to the person with the designation and responsibility for the university's inter-national activities, with addresses obtained from AVCC publications and cross-checked with details from the latest edition of the particular university's handbook, as well as from the university's Web site. A total of 22 usable questionnaires were returned, representing 58 per cent response rate. The data was analysed using descriptive statistics.

Findings

Mechanics of internationalisation

As bureaucratic entities, universities usually operate guided by policies. Unlike business organizations funded by private funds, uni-versities are funded by public money and have to be sensitive to political and commu-nity concerns. Therefore, adventures that will take them across their normal boundary of operation will require some guidelines in the form of policy. Our study shows that 84 percent of the universities in the survey had a policy framework that was conducive to internationalisation initiatives, while the remaining 16 percent did not have any internationalisation policy.

Multi-country and multiple alliances were the norm for the universities surveyed. Most of the universities (95 percent) surveyed had entered into at least five different alliances. Contrary to the view that the recent cuts in university operating grants had precipitated a rush into strategic alliances, our study does not appear to support this view. Rather, the study shows a long experience of strategic alliance activity by some Australian univer-sities. A total of 55 per cent of the responding universities had had an international strate-gic alliance for more than a decade.

Strategic alliance in the business sector is usually initiated by senior management. Our study shows that initiating strategic alli-ances in Australian universities has been the responsibility of senior management (67 percent) complemented by Faculties or Schools (57 percent), and individual staff members (38 percent).

Problems of strategic alliances

Tables I, II and III summarise our findings regarding the problems faced by Australian universities during the initiation, negotia-tion and implementanegotia-tion stages of the alli-ance.

Table I lists the problems faced at the alliance initiation stage. The problems which were prominent at the negotiating stage are shown in Table II and Table III presents major implementation problems faced by the responding universities in their alliance formation.

Table I

Problems faced at the alliance initiation stage

Lack of resources 29 percent

Red tapism 14 percent

Cultural differences 14 percent

Poor communications 10 percent

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Contribution to strategic alliance

Alliances work well when both partners are strong in functions they bring to the venture. One of the conditions that the strategic alliance literature stresses for a ``trouble free marriage'' is an awareness of what each partner brings to the marriage venture (Lorange and Roos, 1991; Lei and Slocum, 1991).

Table IV summarises the contributions made by the Australian universities sur-veyed to the strategic alliances in which they are involved.

We also asked the respondents to indicate the contribution that they believed their overseas partners had made to the alliance. Table V presents their responses.

Financial resources constitute the most important contribution that overseas part-ners bring to the alliance (69 percent), followed by market access (62 percent) and opportunity for student exchanges (52 per-cent). Australian universities and their in-ternational partners contributed equally to their alliances in terms of cultural diversity, management styles and opportunity for staff development.

To put the contributions in a better per-spective, we asked our respondents to tell us

what they considered important in the alli-ance. On a five-point importance scale the universities surveyed, listed study abroad and student exchanges as very important, followed by collaboration in research and consultancy, twinning and staff exchange. Offshore programs were scored the lowest (see Table VI).

Conclusion and implications for

management

This paper has examined the mechanics, problems and contributions of international strategic alliances involving 22 Australian universities. Our findings show that the majority of Australian universities have internationalisation policy frameworks that guide senior university management who are instrumental in strategic alliance formation. The study also shows that strategic alliances are not a new phenomenon for Australian universities with the majority of the re-sponding universities having had several years experience of multi-country multiple alliances.

While the senior management of the uni-versities surveyed may be described as pro-alliance, the resources provided for strategic alliances particularly at the implementation and initiation stages were inadequate. Cul-tural differences posed the most significant problem at the initiation stage with bureau-cratic red tapism and differences in the goals of the partners being the second most im-portant bottlenecks. In spite of the above bottlenecks, Australian universities and their overseas partners made contributions to their partnerships. More specifically,

Table II

Problems faced at the alliance negotiation stage

Cultural differences 38 percent

Red tapism 24 percent

Differences in goals 24 percent

Poor communication 19 percent

Lack of resources and differences in goals 10 percent

Table III

Problems faced at the alliance implementation stage

Lack of resources 33 percent

Too much bureaucracy 19 percent

Lack of attention to detail 19 percent

Cultural differences between partners

and differences in goals 14 percent

Table IV

Contribution of Australian universities

Contribution Percent

Access to higher qualifications 72

Product quality 71

Reputation of credentials 70

Scholarship and expertise 65

International understanding 52

Cultural diversity (management styles,

opportunity for staff development) 50

Table V

Contribution of overseas partners to alliance

Contribution Percent

Financial resources 69

Access to overseas markets 62

Opportunity for student exchanges 52

Equal contribution by overseas and

host partners to cultural diversity, management styles; opportunity for staff development 50

Table VI

What Australian universities consider important

What is important Percent

Study abroad, student exchange 65

Collaborative research/consultancy 60

Twinning 50

Staff exchange 40

Offshore programs 30

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Australian universities' contribution which may be described as altruistic, comprised scholarship, access to reputable, quality credentials. On the other hand, the contri-butions by the overseas partners were mar-ket-based and included revenue and market access. Managerial and research implica-tions deriving from the foregoing are listed below.

Managerial implications

. Given the altruistic nature of the Austra-lian universities' contribution, perfor-mance may be difficult to evaluate. It may be worthwhile for Australian uni-versities to state their objectives in mar-ket-based measures in such a way as to enable performance to be measured. Market-based measures have been sug-gested as superior alternatives for perfor-mance measures and have been used frequently to measure post-acquisition performance in the literature. Perhaps, total revenue generated from tuition fees, research and consultancy and fran-chising arrangements may serve as an appropriate measure for such process-based operating phenomena as strategic alliances.

. The study shows that senior university management played an instrumental role in strategic alliance formation. However, inadequate resources hampered alliance activities particularly at the initiation and implementation phases. Strategic intent must be met by ample supply of resources if Australian universities are to succeed in an increasingly competitive interna-tional market for students.

. Our study found the non-importance of off-shore programs having scored the least on the importance table. With the rapid advances in technology leading increasingly to the virtual university, the offer of distance education and off-shore programs requires immediate at-tention from Australian university man-agement.

. Student exchanges must go hand in hand with staff exchanges for a more effective interaction between overseas students. Given the significance of cultural differ-ences at the negotiation stage, it is perti-nent to involve academicians and

administrative staff in such exchanges. In particular, there is the need for academic staff to experience the culture of the overseas partners in the overseas country and vice versa. This is tantamount to studying by immersion which hastens learning.

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