Chapter Listing | Return to 1997 Topical Index


Three major themes surfaced in this study. First, trust is associated with alliance success. Based on our interview it also appears that trust in the early stages of the alliance formation is often based on reputation, intuition about a partner, and early negotiation meetings. This initial trust is often tentative and is built on limited information. Second, entrepreneurial companies often have specific technology, people, and product ideas as their bundle of resources. These often smaller firms have the flexibility, culture and innovative ability to create knowledge which is inimitable for larger firms.

The authors believe that this is the first article to suggest that trust and partner integrity are interwoven. When each firm represents its resources accurately, deeper levels of trust may develop in the alliance. As the alliance continue, trust can deepen further as the result of each partner's integrity and continued knowledge sharing. However, longevity alone does not deepen trust; it must be accompanied by the demonstrated trustworthiness and integrity of each firm. Trust by itself is not a competitive advantage. However if trust deepens as a result of demonstrated capabilities on the part of each alliance partner the deeper level of trust will facilitate more knowledge transfer which may lead to a competitive advantage. The authors posit that trust is not stagnate, but fluid, and can either deepen with an alliance relationship or lessen. The primary determinant of whether trust deepens or lessens is the integrity displayed by each partner with regard to their managerial and technical skills. If each partner accurately represents their skills and is willing to share this knowledge, trust will deepen.The second finding is that entrepreneurial firms often lack sufficient managerial expertise, financial resources, and distribution/marketing abilities is, not a remarkable finding. It has been typically known that entrepreneurial firms may lack the resources to complete the product development process and/or to take the product to market. What is different about this research is that the authors have identified these voids and demonstrated that they can be filled by forming an alliance with a larger firm. Larger firms typically do have the financial resources, and firm structure that can assist entrepreneurial firms in the commercialization of their knowledge. By forming an alliance with one another, entrepreneurial and large firms are apparently able to complement each other's tacit and tangible resource sets, as demonstrated by the significant effects on performance which were found for the entrepreneurial firm.

Third and also not probed before, is the possibility that the tacit knowledge which exists in each company can be shared in the alliance structure. Smaller firms are able to acquire the knowledge of, or learn from, their alliance partner in a cost effective and accelerated manner. In the present era of discontinuous change, knowledge may well be a scarce commodity since privately-held knowledge is a basic source of advantage in competition (Conner & Prahalad, 1996). Governance processes that allow for new combinations of knowledge and knowledge value creation, may ultimately be responsible for competitive performance differences. Entrepreneurial small firms often have high levels of technology specific knowledge, and are attracted to new opportunities and the creation of new markets (Rumelt, 1987). However because of a lack of financial, administrative, and marketing ability, these smaller firms may not be able to commercialize their product. Knowledge based resources are particularly important to the entrepreneurial firm as often this the asset that the larger organization is unable to replicate. Forming alliances with a larger organization allows the entrepreneurial firm to maintain its independence and knowledge producing abilities while incorporating the tacit administrative and marketing knowledge of the larger firms.

Relationship Between Trust, Resources, and Alliance Success.

In summary, forming alliances with a larger organization allows the entrepreneurial firm to maintain its independence and knowledge producing abilities, while incorporating the tacit administrative and marketing knowledge of the larger firm. Successful alliances are important to entrepreneurial firms because they enable the commercialization of the firm's unique resources. Entrepreneurial firms with technology specific knowledge can improve their competitive position by associating themselves with larger organizations which are unable to replicate the smaller firm's knowledge.

Top of page | Chapter Listing | Return to 1997 Topical Index

1997 Babson College All Rights Reserved
Last Updated 03/23/98