Many MNEs in response to globalization are becoming increasingly engaged in international business beyond their countries boundaries to achieve and maintain competitive advantages over competitors. This entry into international market is facilitated by foreign firms working together in joint venture relationships referred to as Global Strategic Alliances (GSAs). GSAs are formed by firms to gain new technology, gain access to specific markets, reduce financial risks, reduce political risks, to ensure or achieve competitive advantages (Wheelen and Hungar, 2000 as cited by Elmuti and Kathawala, 2001). Shenkar and Luo, (2008, pp.332) stated that “Global strategic alliances are cross-border partnerships between two or more firms from different countries with an attempt to pursue mutual interests through sharing their resources and capabilities”.
Global strategic alliances have not always lived up to the expectations of the initiators. 60% of strategic alliances fail (Kalmbach and Roussel, 1999 as cited by Elmuti and Kathawala, 2001). Certain factors have been implicated in making global strategic alliances prone to failure. Parkhe (2001) listed these factors as societal cultures, national context, corporate culture, strategic directions and management practices and organisation.
The GSAs are formed by two or more firms from different nationalities, diverse backgrounds and cultures. These multiple inter organizational relationships create difficulties which affects the longevity of the alliances. Cultural differences such as languages, attitudinal behaviours, societal norms and corporate business ethics might be so divergent and incongruous leading to the failure of the GSAs. Parkhe (2001) however argued that these negative tendencies can be mitigated by formal training to enhance intercultural understanding, structural mechanism to improve behaviour, moderation by the technological and economic imperatives facing the global firms, development of intermediate culture to the guide the global alliances, structural flexibility that permits adaptability to the shifting environment and establishment of unitary management processes and structures.
The key challenges to...