Risk Management in Strategic Alliances: Field Evidence

This paper provides field evidence on management control practices used to mitigate risk and to enhance cooperation in strategic alliances. The data are extensive field interviews with 38 managers in three large U.S. companies that have significant alliance risk exposure.

These interviews are used to probe the specific forms of risk that firms face as well as the use of alliance management controls. Consistent with transaction cost economics and with the agency-based framework of Jensen and Meckling, management controls play an important role in mitigating opportunistic behavior. However, this study provides evidence that management controls play an equally important role in facilitating coordination and communication between exchange partners, a role that fits more easily with the resource-based view of alliance formation and with the Simons and the Merchant and Van der Stede control frameworks.