Environmental Shocks and SME Alliance Formation Intentions in an Emerging Economy: Evidence from the Asian Financial Crisis in Indonesia

Abstract

Environmental shocks can occur when emerging country governments open their markets to outside influences. We extend research conducted primarily in mature economies on how managers react to environmental shocks by evaluating how environmental shock type, a firm's strategic orientation, and its slack resources affected strategic alliance formation intentions during and immediately following the Asian Financial Crisis. Results from two Indonesian small-and medium-sized enterprises (SME) samples show that these factors influenced alliance intentions, although not always in ways that were consistent with previous research findings in more mature markets. Overall, our results provide critical insights into emerging market firms' strategic actions, particularly related to key managerial motivations for SME alliance formation.

External and internal influences on R&D alliance formation: Evidence from German SMEs

“…This discussion requires consideration of the finding of the negative relationship between environmental uncertainty and alliance formation likelihood in SMEs, which contradicts the theoretical tenets of resource dependence theory (Pfeffer and Salancick, 1978) and results of some other related studies (e.g., Marino et al, 2008). Resource dependence theory specifies that firms rely on alliances to obtain complementary resources and power when faced with greater environmental uncertainty.…”

“…The TCE-based explanations also are contingent on the level of interpartner trust. Accordingly, this research adds to literature on antecedents of alliance formation (e.g., Lohrke, Kreiser, and Weaver, 2006;Marino et al, 2008) by using actual alliance formation likelihood as a dependent variable in a longitudinal setting. Furthermore, uncertainty related to misappropriation of firm-specific resources is more salient when environmental uncertainty is high and the alliances are knowledge intensive.…”

“…A perceived inability to evaluate and predict future changes in external environmental conditions indicates environmental uncertainty (Dess and Beard, 1984;Dickson and Weaver, 1997;Milliken, 1987), which exerts significant influences on organizational processes and strategy (Dollinger and Golden, 1992;Marino et al, 2008;Walker and Weber, 1987) and plays a pivotal role in alliance formation. However, empirical research offers mixed findings regarding the strength and direction of the influence of environmental uncertainty on alliance formation, perhaps due to the multidimensional nature of the construct.…”

“…Firms engage increasingly in collaborative, interfirm alliances to complement and supplement internal activities and to create a bridge with the external environment (Doz and Hamel, 1998;Faems, Janssens, Madhok, and VanLooy, 2008;Marino, Lohrke, Hill, Weaver, and Tambunan, 2008). Extant literature identifies several benefits of alliances, including a stronger competitive position through greater market power (Kogut, 1991), increased efficiencies (Ahuja, 2000), access to new or critical resources or capabilities (Lee, 2007;Rothermael and Boeker, 2008), new market entry, and new products (Lai and Chang, 2010).…”

Employment and SMEs during crises

“…Mulhern 1996 for the crisis of 1989-1994 in Venezuela; Domaç and Ferri 1999 for the 1997 Asian financial crisis; and Özar et al 2008 for the 2001 Turkish financial crisis). Adding to the financial aspect, their relative shortcomings in terms of technological, managerial and human capabilities may reduce their capacity to overcome the economic crisis (Gertler and Gilchrist 1994;Forbes 2002;Beck et al 2005;Butler and Sullivan 2005;Régnier 2005;Marino et al 2008;Das and Pradhan 2009). On the other hand, their greater dependence on (fewer) customers and suppliers (Nugent and Yhee 2002) and markets (Butler and Sullivan 2005;Narjoko and Hill 2007;OECD 2009) may lead to increased difficulties in maintaining their activity level in the face of the crisis.…”