Knowledge Sharing Networks and Strategic Alliances Essay

Knowledge Sharing Networks and Strategic Alliances - Essay Example The fruits of this research are going to be reaped by many firms in the future when they decide to form a Strategic Alliance and Networks with another firm. Strategic Alliances can be defined as voluntary agreements between firms for exchanging, sharing, and codevelopment of products. A strategic network may also be formed for the purpose of information sharing and using the knowledge learned from one part of the world by one firm, and then applying this learned knowledge to another part of the world through a different company. In the past research was also done to determine the behavior and performance of firms as a consequence of these alliances and partnerships. However, the major focus of the past research was the proclivity of firms or motivation behind entering into the partnerships and what variables were used by these firms for choosing their strategic partners. One important factor that was unearthed by this paper that gives firms motive to form strategic partnership is the use of information. As the paradigm of knowledge has shifted and firms rely on quick and fast information transfer and usage to increase their profitability, information has a premium attached to it. Many firms form strategic alliance and networks to get hold of this information and use it in their businesses for better profitability and performance of the organization. Hence, strategic networks and alliances have become increasingly important in the sphere of businesses today. (Gulati, Alliances and Networks, 1998) There are various factors that have to be considered before a firm makes a decision about the type of strategy that it is going to implement. Historically, businesses or focal firms can either take hold of other firms through investment, joint ventures or acquisition. However, as the time has elapsed it has become increasingly difficult to predict what kind of strategy, the focal or a firm in need of partnership is going to follow. In a study done on 87 firms and 9276 d eal announcements, it found that a lot of factors play an important role in strategic partnership decisions. These factors range from economics to other important fields in a business context. They include transaction costs, R & D benefits internalization view and the level of technological stage of the targeted firm. It was also worth noting that other conventional theories also hold importance in the decision made by the firms to form Strategic Alliances and Networks. Agency Theory, for example, provides grounds for Strategic Alliances and Networks to materialize. Agency theory states that agents act on the behalf of the principle. The finding in the paper says that one firm agrees to act on the behalf of the other and chooses to forego its own business and resources. it becomes fairly easy to form Strategic Alliances and Network. (Belen & McGahan, 2005) Many other important factors play a very important role in the formation of Strategic Alliances and Networks. A study done on Ne twork and Alliances show that profitability of a firm is likely to increases if there is some sort of connection between the industry participants. This is one major reason why firms operating in an Oligopoly collude and form cartels. Hence, forming strategic alliances and networks increase the