The impact of cultural factors on alliance performance
Intangible factors such as cultural compatibility, an openness to knowledge sharing and to new ideas and a determination to make the partnership work are the most important factors in predicting the outcome of a partnership. These conclusions are drawn from the analysis of data collected in a survey run by Silico Research and IBM in 2006 among 148 executives in biotechnology and pharmaceutical companies.
Data from the survey indicated that a respondent's assessment of the partner's openness to knowledge sharing (correlation = 0.6210, p =< 1.13e-13, n = 83), and the cultural compatibility between the two partners had a particularly strong correlation with the success of the partnership (correlation = 0.69912, p =< 2e-16, n = 87) as did the respondent's assessment of their partner's openness to new ideas (correlation = 0.70578, p = 1.16e-12, n = 82).
Our research has discovered that tangibles, principally the deal on offer, drive the deal before signing and intangibles, such as knowledge sharing and communication, drive the deal after is has been signed by the parties.
A number of things seem to be happening here. First, the respondents place a particularly high premium on knowledge sharing because this sends signals to the respondent that the partner values the partnership and the relationship over and beyond the strict terms of the contract. Second, a flow of ideas back and forth between the parties leads the respondent to believe that further value may arise out of the partnership through new opportunities or new partnerships. Third, knowledge sharing between the parties and an openness to new ideas means that the respondent is led to believe that the partner is more likely to take an open approach to any potential problems that arise.
These findings are in line with game theory that now accepts that in a situation of co-operation, including commercial partnerships, the stability of the relationship is enhanced by sharing information and by treating information as a communal asset. Conflicts are more likely to occur where there is asymmetrical information, for example where one party treats information as an asset to be hoarded. Trust is of fundamental importance in this process.
The Prisoner's dilemma, as originally framed by Merrill Flood and Melvin Dresher, shows that co-operation and information sharing is a rational strategy only in situations where the party sharing information believes that the other party will also co-operate and share information to the same extent. Otherwise the most rational strategy would be to withhold information and gamble that the other party will put himself at a disadvantage by sharing information.
As important in predicting the success or otherwise of an alliance is the role played by a partner's senior executives and staff. The survey showed a high correlation with outcome in the degree to which key decision makers were determined to make the negotiations or the alliance work and overcome problems (correlation = 0.68) and how accessible they were (correlation = 0.63). The degree to which senior staff of the partner remained involved in the alliance after the initial contact between the parties also showed a high correlation with outcome (correlation = 0.64). The ease of working with the partner's staff also had an impact (correlation = 0.67), as did the quality of the expertise among the staff (correlation = 0.63).
Factors that had a weaker correlation with the partner's expectations being met included the extent to which the staff managing the negotiations or alliance for the partner changed during the life of the negotiations or alliance (0.38) as did the perceived consistency of the partner's staff (0.43). Structural factors such as the degree to which planning and decision-making for the partnership was a joint effort also showed a weak correlation with the outcome of the alliance (correlation = 0.2714, p = 0.00943, n = 76).
One of the lessons from this evidence is that very simple measures can be undertaken to ensure a successful partnership. In terms of communication and cultural compatibility this could be ensuring that the lines of communication are open and keeping the dialogue going even when there is little or nothing to report.
Keeping key executives involved in signing the alliance involved in the information loop after signing the deal, providing the partner with the mobile telephone number of senior team members and making the effort to visit partners can also improve the chances of those alliances achieving positive outcomes.
Meeting up at relevant conferences, jointly presenting papers at conferences and holding seminars for scientists from the two companies to come together may prove a relatively cheap way of improving the ability to share knowledge, demonstrate commitment to the alliance and resolve potential problems at the early stage.
BioPartnering 2006 Location of Respondents
The chart shows the location of respondents to the BioPartnering 2006 survey by country.
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