THE 3 Rs OF STRATEGIC ALLIANCE FORMATION: RESOURCES, RENTS, AND (PROPERTY) RIGHTS

This paper examines the formation and governance of strategic alliances. In particular, the problem is defined for the development of alliances in agriculture, where new organizational forms are arising rapidly for horizontal and vertical coordination of the production-marketing chain. As the title of this research conference implies, these organizational forms offer opportunities within the portfolio of strategies facing agricultural producers for reconfiguring their marketing and managing risks by joint/collective action. The basis for the paper is the resource-based theory (RBT) of firm strategy, which has developed over the past ten years as a way to build positive and normative models of strategic decisions. The RBT draws from industrial organization economics and organizational economics (often called neoinstitutional economics) as a way to model the sources and robustness of sustainable competitive advantage. This paper extends to RBT to the joint strategies of firms engaged in strategic alliances. Additionally, the analysis turns on the manner by which economic rents are earned in a strategic alliance and how they are shared by alliance partners. What rights do alliance partners have to jointly earned returns in the alliance, given its organizational form (statutory structure and governance structure), the sources of economic rents, risks associated with the rent streams, and the often intangible resources (assets) that drive the performance of the joint assets in the alliance? This discussion paper presents a brief review of the RBT model, followed by a discussion of the sources of, and durability of, economic rents that accrue to firm resources. These sections are essentially résumés of the current literature on RBT. The third section departs from the literature in explicitly considering a model of strategic alliance formation as the development of a portfolio of jointly held alliance resources that are linked to the resource portfolios of the individual alliance partners. The fourth section presents further extensions of RBT to examine the problems of ex ante and ex post division of alliance rents. One extension is the exploitation of the property rights theory of economic behavior (cf. Barzel, 1989) to explain how the economic rent streams from the resource portfolio should be shared among alliance partners, including participating financial institutions.