Explain how to evaluate strategic alliances using the transaction cost and resource-based views.

Explain how to evaluate strategic alliances using the transaction cost and resource-based views.

• A. RBV alone is sufficient to decide about alliances.
• B. Use only market size to decide alliances.
• C. Transaction costs are irrelevant to alliances.
• D. The transaction cost view focuses on reducing costs/risks of exchange; RBV emphasizes leveraging unique resources/capabilities through alliance; use both to decide.

Answer: (C)

Evaluating strategic alliances with two lenses helps you capture both the costs of collaboration and the value you can gain from unique capabilities. The transaction cost view asks what it costs to exchange resources with another firm and how a governance form—contract, licensing, or a joint venture—minimizes those costs and limits opportunism. It considers factors like asset specificity (are the resources specialized to this partner?), frequency of transactions, and uncertainty about the collaboration. This helps you judge whether an alliance reduces total costs and risks compared with other arrangements or doing things alone. The resource-based view focuses on leveraging the other firm’s and your own unique resources and capabilities—things that are valuable, rare, hard to imitate, and supported by the organization. An alliance can give access to complementary assets, accelerate learning, or build capacities you cannot efficiently develop in-house. To decide, you integrate both lenses: determine whether the alliance lowers transaction costs and governance risks while enabling access to or combination of critical, hard-to-imitate resources. If so, the alliance can create value that neither firm could capture alone. Relying only on internal resources or only on cost considerations misses important aspects of why and when alliances succeed.

Evaluating strategic alliances with two lenses helps you capture both the costs of collaboration and the value you can gain from unique capabilities. The transaction cost view asks what it costs to exchange resources with another firm and how a governance form—contract, licensing, or a joint venture—minimizes those costs and limits opportunism. It considers factors like asset specificity (are the resources specialized to this partner?), frequency of transactions, and uncertainty about the collaboration. This helps you judge whether an alliance reduces total costs and risks compared with other arrangements or doing things alone.

The resource-based view focuses on leveraging the other firm’s and your own unique resources and capabilities—things that are valuable, rare, hard to imitate, and supported by the organization. An alliance can give access to complementary assets, accelerate learning, or build capacities you cannot efficiently develop in-house.

To decide, you integrate both lenses: determine whether the alliance lowers transaction costs and governance risks while enabling access to or combination of critical, hard-to-imitate resources. If so, the alliance can create value that neither firm could capture alone. Relying only on internal resources or only on cost considerations misses important aspects of why and when alliances succeed.