Alliance Motives among Manufacturing SMES: Evidence from an Emerging Economy

  • Richard K. Muthoka School of Business, Kenyatta University, Nairobi, Kenya
  • James M. Kilika School of Business, Kenyatta University, Nairobi, Kenya
  • Stephen M. A. Muathe School of Business, Kenyatta University, Nairobi, Kenya
Keywords: Strategic Alliances, Firm Performance, Manufacturing Sector, Small and Medium Enterprises, Emerging Economy

Abstract

This study was designed to investigate the effect of environmental-based motives on firm performance. The study targeted manufacturing Small and Medium Enterprises based in Kenya whose performance has been negatively affected by high industry competition, low technology uptake, and industry regulation. The study was geared towards establishing the environmental-based motives pushing and pulling manufacturing Small and Medium Enterprises toward strategic alliance formation. To this end, the study was set to investigate whether compliance with government regulation, the need to grow market share, and the need to increase customer base motivates manufacturing Small and Medium Enterprises in Kenya to form strategic alliances. The target population for the study consisted of 74 SMEs and the study adopted descriptive and explanatory research designs and collected data from company CEOs or senior managers. Descriptive and inferential statistics were used to analyze the survey data. The study findings indicated that environmental-based motives have a positive and significant effect on the performance of manufacturing Small and Medium Enterprises in Kenya (Adj R2 = 0.484). Based on these findings, the study concluded that environmental-based motives of compliance with the government regulation, market share, and customer base motivate manufacturing Small and Medium Enterprises to form strategic alliances and that these motives have a positive and significant effect on firm performance. The study contributed to the general body of knowledge by bridging the contextual and empirical gaps identified after the literature review. The study recommends that top management teams in the manufacturing industry should map environmental-based motives and align such motives to specific aspects of their value chain activities.

Downloads

Download data is not yet available.

References

1. Arend, R. J. (2014). Entrepreneurship and Dynamic Capabilities: How Firm Age and Size Affect the Capability Enhancement-SME Performance Relationship. Small Business Economics, 42(1), 33-57.
2. Alexander, E. A. (2012). The effects of legal, normative, and cultural-cognitive institutions on innovation in technology alliances. Management International Review. 52(6), 791-815.
3. Aun, I. I. (2014). Effects of Strategic Alliance on the Performance of Manufacturing Companies in Nigeria. JORIND, 12 (2), 99-111.
4. Barney, J. B. (2001). Resource-Based Theories of Competitive Advantage: A Ten-Year Retrospective on the Resource-Based view. Journal of Management, 27(6), 643-650.
5. Blind, K. & Mangelsdorf, A. (2016). Motives to Standardize: Empirical Evidence from Germany. Technovation, 48, 13-24.
6. Chenge, J., Ngui, D. & Kimuyu, P. (2014). Scoping Paper on Kenyan Manufacturing. WIDER Working Paper, Volume 2014/136, UNU-WIDER. Retrieved from: http://www.wider.unu.edu/publications/working-papers/2014/en_GB/wp2014-136/
7. Climate Innovation Centre (2020). Kenya Industrial SME Cluster Mapping Report, Nairobi, Kenya. Retrieved from https://www.ctc-n.org/sites/www.ctcn.org/files/documents/KenyanIndustrialSMEsClusterMappingReport_Ja2020.doc
8. Dickson, P. H. & Weaver, K. M. (2011). Institutional Readiness and Small to Medium-Sized Enterprise Alliance Formation. Journal of Small Business Management, 49(1), 126-148.
9. Dress, J. M. & Heugens, P. M. A. R. (2013). Synthesizing and Extending Resource Dependency Theory: A Meta-Analysis. Journal of Management, 39(6), 1666-1698.
10. Eckenhofer, E. M. (2011). Outlining the Benefits of Strategic Networking. Journal of Systems Integration, 2(4), 70-86.
11. Fasanya, D. O. Ingham, H. & Read, R. (2022). Determinants of Internationalization by Firms in Sub-Saharan Africa. Journal of Business Research, 144(10), 951-965.
12. Field, A. (Ed.) (2009). Discovering Statistics using SPSS. Sage Publications ltd.
13. Franco, M. & Pereira, C. (2013). Exploring the reasons and factors influencing the formation and development of alliances in the hospitality industry. Baltic Journal of Management, 8(4), 438-462.
14. Ferreira, A. & Franco, M. (2017). The Mediating Effect of Intellectual Capital in the Relationship between Strategic Alliances and Organizational Performance in Portuguese Technology-Based SMEs. European Management Review, 14(3), 303-318.
15. Gaur, A. S., Mukherjee, D., Gaur, S. S. & Schmid, F. (2011). Environmental and Firm Level Influence on Inter-Organizational Trust and SME Performance. Journal of Management Studies, 48(8), 1752-1781.
16. Gils, A. V. & Zwart, P. S. (2009). Alliance Motives in SMES. An Explorative Conjoint Analysis Study. International Small Business Journal, 27(1).
17. Ghauri, P., Lutz, C. & Tesfom, G. (2001). Using Networks to Solve Export-Marketing Problems of Small and Medium Sized Firms from Developing Countries. European Journal of Marketing, 37(5/6), 728-752.
18. Gronum, S., Verreynne, M. L. & Kastelle, T. (2012). The Role of Networks in Small and Medium-Sized Enterprise Innovation and Firm Performance. Journal of Small Business Management, 50(2), 257-282.
19. Gulati, R. (1998). Alliances and Networks. Strategic Management Journal. (19), 293–317.
20. Gulati, R. & Gargiulo, M. (1999). Where Do Interorganizational Networks Come From? American Journal of Sociology, 104(5), 1439-1493.
21. Gulati, R., Nohria, N. & Zaheer, A. (2000). Strategic Networks. Strategic Management Journal, 21 (3).

22. Gulati, R. & Sytch, M. Dependence Asymmetry and Joint Dependence in Interorganizational Relationships: Effects of Embeddedness on a manufacturer’s Performance in Procurement Relationships. Administrative Science Quarterly, 52(1), 32-69.
23. Government of Kenya (2007). Kenya Vision 2030. Nairobi, Kenya: Government Printers.
24. Helfat, C. E., Finkelstein, S., Mitchell, W., Peteraf, M., Singh, H., Teece, D. & Winter, S. G. (2007). Dynamic Capabilities: Understanding Strategic Change in Organizations: John Wiley & Sons.
25. Ireland, R. D., Hoskisson, R. & Hitt, M. (2006). Understanding Business Strategy: Concepts and Cases. Thomson South-Western.
26. Jin, J., Zestwitz, M. & Chong, L. C. (2015). Formation of R&D Alliances in the Chinese mobile Telephony Industry. Journal of Chinese Economic and Foreign Trade Studies, 8(2), 70-81.
27. Kenya Association of Manufacturers (2018). Kenya Association of Manufacturers Directory.
28. Nairobi, Kenya Kenya
29. Kenya National Bureau of Statistics (2020). Economic Survey Report 2020.
30. Government Printers.
31. Kenya National Bureau of Statistics (2017). Economic Survey Report. Government Printers.
32. Khattab, S., A. (2012). Marketing Strategic Alliances: The Hotel Sector in Jordan. International Journal of Business and Management, 7(9), 222-232.
33. Kinderis, R. & Jucevicius, G. (2013). Strategic Alliances – Their Definition and Formation. Latgale National Economy Research, 1(5), 106.
34. Klein, L. L. & Pereira, B. A. D. (2016). The Survival of International Network: A Proposal Based on Resource Dependence Theory. RAM, REV.Adm.Mackenzie, 17(4), 153-175.
35. Kyengo, J. M., Muathe, S. M. A. & Kinyua, G. M. (2019). Empirical Analysis of the Effect of Operational Capability on Performance of Food Processing Firms in Nairobi City County, Kenya. International Journal of Economics and Management Studies, 6(5), 113-124.
36. Lavie, D. (2006). The Competitive Advantage of Interconnected Firms: An Extension of the Resource-Based View. Academy of Management, 31(3), 638-658.
37. Li, H., de Zubielqui, G. C. & O’Connor, A. (2015). Entrepreneurial Networking Capacity of Cluster Firms: A Social Network Perspective on How Shared Resources Enhance Firm Performance. Small Business Economics. 45(3); 523-541.
38. Lin, H. & Darnall, N. (2015). Strategic Alliance Formation and Structural Configuration. Journal of Business Ethics, 127(3), 549-564.
39. Lu, J. & Steinhardt, C. (2022). Alliance Building Among Environmental Non-Governmental Organizations in China: The Emergence and Evolution of the Zero Waste Alliance. Modern China. 48(1), 105-133.
40. Maduekwe, C. C. & Kamala, P. (2016). Performance measurement by small and medium enterprises in Cape Metropolis, South Africa. Problems and Perspectives in Management, 14(2), 46-55.
41. Marino, L. D., Lohrke, F. T., Hill, J. S., Weaver, K. M. & Tambunan, T. (2008). Environmental Shocks and SME Alliance Formation Intentions in an Emerging Economy: Evidence from the Asian Financial Crisis in Indonesia. Entrepreneurship Theory and Practice, 32(205), 157-183.
42. Mahoney, J. T. & Kor, Y. Y. (2003). Edith Penrose’s (1959) Contribution to the Resource-Based View of Strategic Management. Journal of Management Studies, 41(1), 183-191.
43. Maqsoom, A., Charoenngam, C., Masood, R. & Awais, M. (2013). Foreign Market Entry Considerations of Emerging Economy Firms: An Example of Pakistan Contractors. Proceedings of the Fourth International Symposium on Infrastructure Engineering in Developing Countries, IEDC, 77, 222-228.
44. McCutchen, W. & Swamidass, P. (2004). Motivations for Strategic Alliances in the Pharmaceutical/Biotech Industry: Some New Findings. Journal of High Technology Management Research, 15(2), 197-214.
45. Meiseberg, B. & Ehrmann, T. (2013). Tendency to Network of Small and Medium Sized Enterprises: Combining Organizational Economics and Resource-Based Perspectives. Managerial and Decision Economics, 34(3), 283-300.
46. Meyers, L. S., Gamst, G. C. & Guarino, A. J. (2013). Performing Data Analysis Using IBM SPSS. John Wiley & Sons.
47. Ministry of Industrialization and Enterprise Development (2014). Kenya Apparel and Textile Industry: Diagnosis, Strategy and Action Plan. Retrieved from: http://www.industrialization.go.ke/index.php/downloads/322-kenya-apparel-and-textile-industry-diagnosis-strategy-and-action-plan
48. Ministry of Industrialization and Enterprise Development (2015). Kenya Leather Industry: Diagnosis, Strategy and Action Plan. Retrieved from: http://www.industrialization.go.ke/index.php/downloads/324-kenya-leather-industry-diagnosis-strategy-and-action-plan
49. Mitchell, M L., & Jolley, J. M. (2012). Research Design Explained (8th ed.). Wadsworth Cengage Learning.
50. Muange, R. & Maru, L. C. (2015). Strategic alliances on performance of retail firms in Nairobi County, Kenya. The TQM Journal, 27(6),
51. Mukherjee. D., Gaur. A. S., Guar. S. S., & Schmid. F. (2013). External and Internal Influences on R&D alliance formation: Evidence from German SMEs. Journal of Business Research. 66(11), 2178-2185.
52. Muteshi, D. C. & Awino, A. (2018). Strategic Alliance and Performance of Food and Beverage Manufacturing Companies in Kenya. DBA-Africa Management Review, 8(1), 86-98.
53. Oehme, M. & Bort, S. (2015). SME Internationalization modes in the German Biotechnology Industry: The Influence of Imitation, Network Position and International Experience. Journal of International Business Studies, 46(6), 629-655.
54. Oliver. C. (1990). Determinants of Interorganizational Relationships: Integration and Future Directions. Academy of Management Review, 15(2), 241-265.
55. Olsen, J. R., Harmsen, H. & Friis, A. (2008). Product Development Alliances: Factors Influencing Formation and Success. British Food journal, 110(4/5), 430-443.
56. Panda, D. K. (2014). Managerial Network Impacts Firm Performance. Performance Improvement Quarterly, 27(1), 5-32.
57. Park, S., Chen, R. & Gallagher, S. (2002). Firm Resources as Moderators of the Relationship Between market Growth and Strategic Alliances in Semiconductor Start-ps. The Academy of Management Journal 45(3), 527-545.
58. Parmigian, A. E., & Rivera-Santos, M. (2011). Clearing a Path Through the Forest: A Meta-Review of Internationalization Relationships. Journal of Management, Forthcoming.
59. Pfeffer, J. & Salancik, G. R. (2003). The External Control of Organizations: A Resource Dependence Perspective. Stanford University Press.
60. Rambo, C. M. (2012). Strategic Alliances and the Performance of Small and Medium Enterprises in Kenya. DBA Africa Management Review, 2(1), 56-76.
61. Rajasekar, J. & Fouts, P. (2009). Strategic alliances as a competitive strategy. International Journal of Commerce and Management, 19(2), 96-114.
62. Remigijus, K. & Giedrius, J. (2013). Strategic Alliances-Their Definition and Formation. Latgale National Economy Research, 1(10), 106-128.
63. Samsunlu, A. & Akdemir, A. (2007). The Effect of Strategic Alliances on the Development of Automotive Industry: The Case of Turkey. Journal of Global Strategic Management, 1(1), 124-132.
64. Schoonjans, B., Cauwenberge, P. & Bauwhede, H. V. (2013). Formal Business Networking and SME Growth. Small Business Economics, 41(1), 169-181.
65. Siegel, A. F. (2002). Practical Business Statistics. Elsevier Inc.
66. Steiner, B., Lan, K., Unterschultz, J. & Boxall, P. (2017). Applying the resource based view to alliance formation in specialized supply chains. Journal of Strategy Management, 10(3), 262-292.
67. Street, C. T. & Cameron, A. (2007). External Relationships and the Small Business: A Review of Small Business Alliance and Network Research. Journal of Small Business Management, 45(2), 239-266.
68. Skokic, V. (2015). Motivations and Benefits of Entrepreneurial Network Formation. International Journal of Business and Management, 10(9), 109-120.
69. Swaminathan, V. & Moorman, C. (2009). Marketing Alliances, Firm Networks and Firm Value Creation. Journal of Marketing, 73(5), 52-69.
70. Talebi, K., farsi, J. Y. & Miriasi, H. (2017). Identifying the Impact of strategic Alliance on the performance of SMES. Case study: The Industry of Automotive Parts manufacturers in Iran). International Business Research, 10(6), 227-235.
71. Teece, D. J., Pisano, G. & Shuen, A. (1977). Dynamic Capabilities and Strategic management, Strategic Management Journal, 18(7), 509-533.
72. Tjemkes, B., Vos, P. & Burgers, K. (2012). Strategic Alliance Management (2nd ed.). Routledge.
73. Trochim, W., Donnelly, J. P. & Arora, K. (2015). Research Methods: The Essentials Knowledge Base. Unites States: Cengage Learning.
74. United Nations Industrial Development Organization UNIDO (2008). Creating an enabling environment for private sector development in sub-Saharan Africa. Technical Paper. Retrieved from:https://www.unido.org/fileadmin/user_media/Publications/documents/creating_an_enabling_environment_for_private_sector_development_in_subSaharan_Africa_01.pdf
75. United Nations Industrial Development Organization (UNIDO). (2011). Building Linkages for Competitive and Responsible Entrepreneurship: Innovative partnerships to foster small enterprises promote economic growth and reduce poverty in developing countries. Published Report, Retrieved from: https://www.hks.harvard.edu/content/download/67691/1243574/version/1/file/report_8EXEC_UNIDO+executive+summary.pdf
76. Viljoen, J., & Dann, S. J. (2003). Strategic Management (4th ed.). Prentice Hall.
77. ViffaConsult (2018). SME Performance Index 2018. Retrieved from: http://viffaconsult.co.ke/wp-content/uploads/2019/01/SME-PERFORMANCE-INDEX-2018.pdf
78. Vestrum, I. & Rasmussen, E. (2013). How Community Ventures Mobilise Resources: Developing Resource Dependence and Embeddedness. International Journal of Entrepreneurial & Research, 19(3), 283-302.
79. Warner, R. M. (2013). Applied Statistics: From Bivariant through Multivariate Techniques (2nd ed.). Thousand Oaks. Sage Publications Inc.
80. Wagner, M. & Zidorn, W. (2017). Effects of Extent and Diversity of Alliancing on Innovation; The Moderating Role of Firm Newness. Small Business Economics. 49(3), 1-18.
81. Walker, J. T. & Maddan, S. (Eds.). (2013). Statistics in Criminology and Criminal Justice. Jones & Bartlett Learning, LLC.
82. Wilden, R., Gudergan, S. P., Nielsen, B. & Lings, I. (2013). Dynamic Capabilities and Performance: Strategy, Structure and Environment. Long Range Planning, 46(1-2), 72-96.
83. Wu, C. & Hsu, Z. (2013). International Strategy Alliance: Macro-Institutional Environment Perspective. The Journal of Global Business Management, 9(1), 35-43.
84. Yasud, T. (2005). Firm Growth, Size, Age, and Behaviour in Japanese Manufacturing. Small Business Economics, 24(1), 1-15.
85. Zhang & Yin (2012). The Relationship between Function and Motivation of R&D Alliances. An Empirical Analysis of Chinese Software Firms. Proceedings of the 2012 International Conference on Solid State Devices and Materials Science, 25, 1162-1167.
86. Zikri, R. (2020). Effects of Strategic Alliances on the Growth of Market Share of Commercial Banks Malaysia. Journal of strategic Management, 4(4), 55-70.
Published
2022-07-31
How to Cite
Muthoka, R. K., Kilika, J. M., & Muathe, S. M. A. (2022). Alliance Motives among Manufacturing SMES: Evidence from an Emerging Economy . European Scientific Journal, ESJ, 18(22), 180. https://doi.org/10.19044/esj.2022.v18n22p180
Section
ESJ Social Sciences