June 2008

Feature of the Month - June
Price Competition in the Alliance Selection Process

9 Reasons in favour of the single DCT approach - CJ Ross

Modern-day "project alliancing" as practiced in Australia had its origins in the innovative procurement model used to deliver several oil and gas projects in the North Sea in the early 1990's'. In the late 1990's Sydney Water pioneered the use of project alliancing for public sector infrastructure with the Northside Storage Tunnel project including an innovative selection process where design and construction partners were selected on the basis of capability and attitude with out any direct competition on price. </p><p>In the 10 years since Northside Storage Tunnel the use of project alliancing to deliver public sector projects in Australia has grown exponentially with Australia (and New Zealand) leading the world in the widespread application of this innovative form of contracting

Click here to read the full article: 9 Reasons in favour of DCT

The Impact of Information Technology Capability on Alliance Design and Performance

By Constantinos Lioukas, Maurizio Zollo

The development of information technology (IT) has permitted ever-increasing amounts of information to be processed at low cost. This in turn has led to a decrease in the costs of coordination both between and within firms, with empirical evidence suggesting that the cost reduction is greatest for between-firm, or external, coordination. As a result, inter-organizational collaboration, in the form of strategic alliances and joint ventures, should benefit greatly from advances in IT. Anecdotal evidence and case studies indicate that IT enhances the management and execution of joint programmes. But empirical research on the relationship between IT capability and strategic alliances is scanty, and our understanding of this important field is weak.

In this working paper, doctoral student Constantinos Lioukas and Maurizio Zollo, Associate Professor of Strategy at INSEAD, examine the impact of firms' IT capabilities on the design of strategic alliances and alliance performance through a novel theoretical examination of hierarchy within governance structure, and alliance scope, tested with a survey of 206 alliances formed over a period of six years.

The authors draw on the resource-based view of the firm to claim that only managerial IT skills can be a source of sustainable competitive advantage because, unlike other IT resources, they are not subject to low-cost imitation. By conceptualizing IT capability as managerial IT skills, the authors rule out the possibility that IT capability is the outcome rather than the determinant of alliance design. How IT actually influences alliance design is explored from both the contractual perspective, which examines how monitoring is used to protect a firm from the opportunistic behaviour of the partner firm, and from a competence perspective, which explores coordination costs related to implementation. Empirical evidence suggests that IT can reduce both monitoring and coordination costs.

Copyright: INSEAD 2006

To access full paper: http://knowledge.insead.edu/abstract.cfm?ct=16537