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Some of the author s of this public ation are also w orking on these r elated pr ojects: Crack ed It : How to Solv e Big Pr oblems and Sell Solutions Lik e Top Str ateg y Consult ants - A Palgrave MacMillan book Vie w pr oject Allianc e manag ement Vie w pr oject Bernar d Garrett e HEC P aris 95 PUBLICA TIONS    1,791 CITATIONS     SEE PROFILE Pierr e Dussaug e HEC Paris 114 PUBLICA TIONS    2,694 CITATIONS     SEE PROFILE All c ontent f ollowing this p age w as uplo aded by Pierre Dussaug e on 30 November 2015. The user has r equested enhanc ement of the do wnloaded file. European Management JournalVol. 18, No. 1, pp. 63±69, 2000 Ó2000 Elsevier Science Ltd. All rights reserved Pergamon Printed in Great Britain 0263-2373/00 $20.00 PII: S0263-2373(99)00069-9 Alliances Versus Acquisitions:Choosing the Right Option BERNARD GARETTE,Groupe HEC, Paris PIERRE DUSSAUGE,Groupe HEC, Paris Recently, a wave of corporate acquisitions has swept across Europe, prompted by liberalisation and uni®cation in the European Union. The authors ask the question: Has this made the traditional pref- erence by European ®rms for alliances and co-oper- ative strategies obsolete? Bearing in mind that, in global terms, alliances are popular, another ques- tion is: Should European ®rms use their experiences in alliances to develop new alliance strategies as an alternative to joining the trend to acquisitions?

After a review of the European model of alliances, the authors discuss the pros and cons and rationale for horizontal acquisitions and scale alliances, and argue in favour of more aggressive complementary alliances combined with mergers and acquisitions to expand in Europe as well as globally.ã2000 Elsevier Science Ltd. All rights reserved While strategic alliances have long been a tradition in European business, it is only recently that a wave of pan-European acquisitions has swept across the old Continent. As early as 1962, British Aircraft Cor- poration and Sud Aviation from France collaborated to jointly develop the Concorde supersonic commer- cial aircraft. This was soon followed, in 1967, by the creation of the Airbus consortium which brought together British, French, German and Spanish partner ®rms. At about the same time, Volvo agreed to col- laborate with Peugeot and Renault in order to pro- duce a common V6 engine that they would each ®t on their top of the range sedans. The mid to late nineties, in contrast, have seen a dramatic increase in the number of pan-European acquisitions: Rhoà ne- Poulenc is being integrated into Hoechst to form Aventis, the number one pharmaceutical company in the World; BMW has acquired Rover; Total has taken over Petro®na and launched a takeover bid on Elf; PPR has, almost simultaneously, acquired Christie's in the UK and Gucci in Italy. In a matter of years, European Management Journal Vol 18 No 1 February 2000 63 such companies as EMAP or Bertelsmann in the press and publishing business have expanded their activi- ties throughout Europe by acquiring local competi- tors. Even in such traditionally `closed' industries as airlines, telecommunications or even defense, acqui- sitions have started taking place. Swissair has acquired Sabena in Belgium and AOM in France, while British Airways is now the second carrier in France following its acquisition of Air Liberte . After having collaborated with them for decades in Airbus, Daimler Benz Aerospace (DASA) acquired CASA of Spain in 1999. This trend raises an important question for academics and managers alike: Has the liberaliz- ation of markets in Europe made alliances obsolete and paved the way for true pan-European consoli- dation?

Indeed, alliances between competing ®rms on the one hand and horizontal acquisitions on the other are alternative moves. In order to join forces, pool assets, combine resources, and exploit synergies, ®rms can either choose to collaborate on well de®ned and lim- ited areas of business while retaining their strategic autonomy, or they can completely and permanently merge their operations within a new and expanded legal entity. When compared with their Japanese and American counterparts, European ®rms have long had a high propensity to favor alliances over acqui- sitions, at least at the international level. Partnerships and consortia like Airbus, Arianespace, Eureà ka or Euro®ghter appear to be a typically European phenomenon. While such collaborative ventures were being implemented in Europe, most businesses in the US were undergoing a dramatic concentration process. As, in many industries in Europe, the domi- nant trend seems to be moving away from alliances and favoring acquisitions, should European ®rms give up their preference for co-operative strategies and turn predominantly to acquisitions? However, if acquisitions are on the rise within Europe, it also ALLIANCES VERSUS ACQUISITIONS: CHOOSING THE RIGHT OPTION appears that, during the last 10±15 years, alliances have spread on a global basis (Dussauge and Gar- rette, 1999). Should European ®rms then, on the con- trary, build on their extensive experience in manag- ing co-operation and develop new alliance strategies?

The aim of this article is to help disentangle the pros and cons of alliances, when compared to acquisitions, in the European context.

The European Model of Alliances In a globalizing economy, alliances are a means to expand internationally more rapidly (Yoshino and Rangan, 1995). Alliances make it possible to enter new markets using the distribution networks and the speci®c knowledge of local partners. Thanks to the contributions of these partners, less effort and time has to be put into learning how to succeed in very different local environments, thus allowing for simul- taneous and fast entry into multiple countries. In addition, alliances also make it possible for compa- nies to focus their resources on enhancing their core competencies while leveraging the complementary capabilities of their partners in areas that are not seen as being critical. For instance, General Mills formed the Cereal Partners World-wide alliance with Nestle in order to market its breakfast foods outside the USA. General Mills, unlike its chief competitor Kel- logg's, was primarily focused on the US market, and was therefore playing a catch-up game in the inter- national arena. By leveraging Nestle 's extensive dis- tribution networks in all major regions of the world, General Mills was able, in a matter of months, to make its products available globally, even in coun- tries that Kellogg's had not yet entered. In addition, Cereal Partners World-wide also pro®ted from Nestle 's expertise in food processing and was able to improve the production technology contributed by General Mills. Nestle , on the other hand, had failed each time they had tried to introduce cereal products on their own; they appeared to be unable to develop a range of breakfast products that adequately met customer expectations. Cereal Partners World-wide has been a highly successful venture that has fully satis®ed the objectives of both partners.

Global alliances are based fundamentally on a comp- lementarity of capabilities and resources between the partner ®rms and create value by leveraging this complementarity. They make it possible to seize busi- ness opportunities that neither partner could pur- sue alone.

Most alliances formed within Europe, however, do not match this pattern. When Ford and Volkswagen teamed up to produce a people carrier for the Euro- pean market, they did not seek to take advantage of any complementarity in the skills and capabilities they could contribute to the venture. Both companies had extensive distribution networks throughout Eur- European Management Journal Vol 18 No 1 February 2000 64 ope, and each possessed the capabilities needed to design and produce a vehicle of this kind. Volk- swagen pioneered the people carrier concept back in the sixties with its VW-Combi, while Ford produced minivans of its own (the Villager and Windstar models) for the US market. In fact, the market for minivans in Europe is too small for any manufacturer to recoup the investment needed to produce such a vehicle. This is why, in order to achieve minimum ef®cient output levels, Ford and Volkswagen decided to share the investment and produce a common vehicle in a jointly-owned plant. By marketing the same product under several brand names (Ford Gal- axy, VW Sharan and Seat Alhambra) and through parallel dealer networks, they expected to sell twice as many cars as either Ford or VW could have on its own. The objective of the alliance was clearly to achi- eve greater economies of scale, rather than to enter new markets or leverage complementary resources.

In a very similar way, and for exactly the same rea- son, Peugeot and Fiat also chose to co-operate on the production of a common people carrier (Peugeot 806, Citroen Synergy, Fiat Ulyssee and Lancia Zeta).

Other well-known European alliances, such as Airbus, were based on the same logic: in the aeros- pace industry where the development of each new product requires billions of dollars in investment, sharing such a cost and optimizing economies of scale is a priority. On the contrary, bringing together British, French, German and Spanish partner ®rms only to sell to the local airlines would make little sense in a global industry (and in fact, British Air- ways never bought Airbus aircraft despite British Aerospace's participation in the consortium). The data we collected for our research on global strategic alliances support this view. Table 1 shows that a vast majority (84 per cent) of intra-European alliances are formed primarily to bene®t from increased econom- ies of scale with only 16 per cent of them being aimed at leveraging complementary capabilities and achiev- ing rapid international expansion. Inter-continental alliances (i.e. alliances uniting US and Japanese ®rms, European and US ®rms or Japanese and European ®rms), on the contrary, are predominantly comp- lementary.

European ®rms have engaged in so many scale alliances because of their speci®c features, relative to their global competitors, and because of the peculiari- ties of the European economic context. Indeed, many leading European ®rms are often dominant players Table 1 European vs Global Alliances Intra-Europe Inter-continental alliances (%) alliances (%) Scale alliances 84 25 Complementary alliances 16 75 100 100 Data calculated on a sample of 256 international alliances ALLIANCES VERSUS ACQUISITIONS: CHOOSING THE RIGHT OPTION in their home country but are in fact only medium- sized competitors in the global arena. British Airways for example, is by far the largest European airline but is only about half the size of American Airlines or United Airlines. In semi-conductors, the leading Eur- opean manufacturers (Siemens, Philips or SGS) are dwarfs when compared to Intel, Motorola, Samsung or Hitachi. In the mid-nineties, Volkswagen, the Eur- opean leader, produced annually only 3.5 million vehicles when General Motors produced 7 million, Ford 6 million and Toyota 5 million. Forming scale alliances was a way to overcome this handicap. To provide increased economies of scale, most of these intra-European alliances were based on joint invest- ments, sharing ®xed costs, rationalising manufactur- ing assets. Therefore, the partner ®rms contributed similar resources and assets to the joint endeavour.

Combining similar assets in scale alliances led to a fundamentally different logic than leveraging comp- lementary skills and capabilities in complementary alliances.

Scale alliances are in fact an alternative to industry concentration (Hennart, 1988). They are formed to produce some of the effects that could also be obtained from merging the partner ®rms. This is where the peculiarities of the European context in¯uence strategy. In a really uni®ed market, such as the United States, ®rms would have merged or taken over weaker competitors rather than engage in dif®- cult to manage partnerships. Until recently, the polit- ical environment of Europe made it dif®cult, for a foreign, albeit European, company to acquire a mar- ket leader, or `national champion' in another country.

It would have been unthinkable, for example, for Fiat to take over Volkswagen or Peugeot. In industries like aerospace and defense, it actually would have been legally impossible. As a result, Europe has been left with multiple medium-sized local ®rms that had few other options than forming scale alliances to compensate for their disadvantagevis-aÁ -vistheir glo- bal competitors.

The liberalization and uni®cation process that the European market has been undergoing since the early nineties has paved the way for the wave of acquisitions that have taken place in recent months.

Now that European ®rms can grow and achieve economies of scale through acquisitions, are alliances a relic of the past? Should we expect to see the num- ber of alliances formed in Europe decrease dramati- cally over the next few years?

Horizontal Acquisitions Will Always Outperform Scale Alliances If ®rms are seeking to achieve economies of scale, a full-¯edged acquisition will allow for a greater rationalization than alliances. Indeed, any rationaliz- European Management Journal Vol 18 No 1 February 2000 65 ation undertaken within the context of collaboration will be limited in scope and effectiveness because of two features that distinguish alliances from mergers and acquisitions: (i) all decisions must be made by consensus among the partner ®rms, (ii) alliances are transient in nature and must remain reversible.

The Consensual Decision-making Process in Alliances Increases the Cost of Rationalizing First, because they are placed under the simultaneous authority of several partner ®rms, alliances tend to lead to virtually unending rounds of negotiations (Killing, 1983; Weiss, 1987). Within the framework of a newly merged company, differences of opinion about decisions to be made can be arbitrated by the senior management of the acquiring ®rm. In an alliance, however, one of the parties cannot force the other to accept any particular solution. And even if one of the partners dominates the alliance, it would be unwise for it to impose too many of its own decisions against the wishes of the other ally. Such a behavior would very likely lead to the collapse of the alliance.

By bringing together several companies which, despite the agreement between them, remain inde- pendent entities, alliances imply that multiple decision-making centers will be involved in the choices to be made about the joint project or activity.

This multiplication of decision-making centers makes it considerably longer and more complex to decide on controversial issues, notably such tough decisions as eliminating redundant assets, rationalizing pro- duct lines, or specializing facilities. Indeed, to become effective, every such decision requires the agreement of all the partner companies involved. The example of Airbus is eloquent in this respect. Following the outstanding success of the A320, a 150-seat short-to- medium range aircraft, the consortium partners decided to develop a larger 200-seat version Ð the A321 Ð which ®rst ¯ew in 1992. Some of the partners then wanted to follow up with a smaller 120/130-seat version of the same aircraft to spread development costs and manufacturing investments over a broader product line. Despite the interest expressed by a great many airlines for this A319 project and signi®cant economies of scale potentially created by this new addition to the product line, it took several years to decide to actually launch production owing to the opposition of certain partners; this procrastination allowed the competition Ð notably Boeing with its 737-500 model Ð to enter this particular market niche earlier. A company acting alone would have been able to make the decision to launch the program much more rapidly.

In certain cases, the lack of agreement between the partners can even paralyze the alliance for consider- able lengths of time and delay the implementation of badly-needed rationalization measures. For example, ALLIANCES VERSUS ACQUISITIONS: CHOOSING THE RIGHT OPTION Chausson, a Peugeot±Renault joint venture, which was once the largest assembler of delivery vans in France and also produced a range of automotive parts, eventually went bankrupt because its parents never managed to agree on a consistent rationaliz- ation plan. At the height of its glory, the company employed 17,000 people, operated six plants and ten foreign subsidiaries. By 1993, Chausson employed a mere 2900 people, operated two obsolete factories, had sold all its subsidiaries abroad as well as its auto- motive parts business; in September of that same year, the company ®led for bankruptcy. In the wake of this, massive lay-offs took place, the social climate deteriorated, strike followed strike and disagreement between the allies over the management of Chaus- son, which had been brewing for years, degenerated into open con¯ict when Peugeot refused to shoulder its share of the ®nancial burden of the 1991 and 1993 redundancy schemes. Renault ended up suing Peug- eot on this issue. After having disagreed for many years on how to manage and turn around the com- pany, it still took the partner ®rms several years to terminate their joint venture.

Alliance Reversibility Limits the Extent of Rationalization A second major characteristic of alliances is their transient nature. By de®nition, it has to be possible to terminate alliances without putting the partner ®rms at risk. One of the basic justi®cations for choos- ing alliances over more permanent forms of organiza- tion is precisely that they can be undone relatively easily. This precludes rationalizing in a way that would make it dif®cult for either of the partners to withdraw from the alliance and resume its operations autonomously. In other words, it is dif®cult in an alliance to shut down facilities belonging to one of the partners and concentrate production in the other partner's plants, which is one of the primary means to achieve economies of scale, because it makes sub- sequently terminating the alliance virtually imposs- ible. This is why the Airbus consortium is based on a system with four different manufacturing facilities located in four different European countries. This organization requires ¯ying major aircraft segments from one end of Europe to the other and generates high costs. Boeing, in contrast, carries out most of its manufacturing activities in a single location. Airbus's very existence is justi®ed by the economies of scale it creates in the European commercial aircraft indus- try; yet because it is an alliance rather than the result of actual consolidation, it cannot leverage all poten- tial scale economies. Worse still, all partners attempt to utilize the joint venture to strengthen their own position which often implies duplicating existing assets (Dussauge and Garrette, 1995). In the case of Airbus, a second assembly line, duplicating the main facility in Toulouse (France) was created in Hamburg (Germany) in order to satisfy DASA, the German consortium member. European Management Journal Vol 18 No 1 February 2000 66 Even in the case of Eurocopter, a more integrated joint venture formed by Aerospatiale and DASA, rationalization is far from complete, almost ten years after the formation of the alliance. Marketing and sales have been reorganized: all the helicopter mod- els, irrespective of their origin are now marketed under the Eurocopter name, and the salesforces have been merged. The manufacturing side has proved more dif®cult to integrate. Eurocopter had inherited facilities in France (in La Courneuve near Paris and in Marignane on the French Riviera) as well as in Germany (in Ottobrunn, Bavaria) and it was never even contemplated to close any of these facilities down in order to group production together at a sin- gle site. It was decided, instead, to emphasize the pre-existing specialization of each factory: the Marig- nane plant would manufacture large helicopters, Ottobrunn would produce small helicopters and La Courneuve would concentrate on the manufacture of certain components, such as rotor blades. Neither were the engineering departments brought together in the same location; they are gradually specializing in technology, components or particular sub- assemblies so as to limit redundancy between them.

Eurocopter's range of helicopters still includes all the old models sold by both DASA and Aerospatiale, and therefore lacks consistency. For example, the BO 105, originally from DASA, competes with the Gazelle and Ecureuil inherited from Aerospatiale; the same is true for the BK 117 (DASA) and the Dolphin (Aerospatiale). It is expected that as Eurocopter gradually renews its range of models, the line of pro- ducts offered will eventually become more consist- ent.

Further proof that full rationalization is almost impossible to achieve within the context of scale alliances is provided by the break-up of the Renault ± Volvo partnership. Despite several years of intense collaboration carried out with the explicit objective of merging the two companies, all co-operation ceased in a matter of months after Volvo's share- holders voted against the merger. Had Volvo and Renault rationalized their activities to any signi®cant extent, undoing the alliance, which encompassed both the automobile and truck divisions of the two companies, would have proved much more dif®cult.

Indeed, the partner ®rms had decided that, until the merger was complete and turning back no longer possible, they would not shift production from one facility to another or close down existing plants. The whole purpose of the planned merger was precisely to take the rationalization process further, concentrat- ing activities in fewer locations, closing down less ef®cient facilities, reorganizing the product lines in a consistent way, etc.

Overall, it appears that, while scale alliances have allowed many European ®rms to resist the competi- tive pressure from larger rivals and have made it possible to postpone industry concentration, they are inherently less ef®cient than actual acquisitions. We ALLIANCES VERSUS ACQUISITIONS: CHOOSING THE RIGHT OPTION should thus expect the number of scale alliances for- med in Europe to decrease signi®cantly and the wave of mergers and acquisitions to continue. However, we might see some scale alliances to be formed in the future, not so much as alternatives to acquisitions, but as a ®rst step toward a merger. Indeed, one of the major pitfalls in acquisitions is the post-merger integration process (Franck, 1990). Alliances make it possible to avoid the culture and organization shock coming in the wake of an acquisition by proceeding step-by-step, and by gradually adapting the content and structure of the agreement.

European Companies Should Turn to Offensive Alliances Alliances can be used to pursue radically different strategies: complementary alliances support offens- ive strategies while scale alliances ®t defensive stra- tegies. As we have just discussed, scale alliances are formed to help compensate for a size disadvantage; they are merely aimed at putting the allied ®rms on a par with global competition. Once the alliance is set up, the issue of competing successfully in a global setting, i.e. entering new markets, being at the lead- ing edge of technology and innovation, still has to be addressed. Complementary alliances, in contrast, are speci®cally formed to address this issue. They are formed by global players and contribute to enhanc- ing their competitive advantage by tapping the skills and resources of their partners.

In addition, complementary alliances, in which the partner ®rms bring different skills and resources to the party, create favorable conditions for learning and capability appropriation. Properly used, these alliances can provide a window on the partner's pro- prietary know-how and skills. Over time, collabor- ation can even be a learning mechanism through which a ®rm can expand its knowledge and capa- bility base. Japanese companies have been shown to be particularly ef®cient at using complementary alliances with Western partners in this way (Hamel, 1991).

At the onset of complementary alliances, the partners are mutually dependent on one another. For example, in the alliance formed by Chrysler and Mit- subishi to market Japanese-made cars in North America, Chrysler was dependent on its Japanese partner for the design and manufacture of cheap compact cars, while Mitsubishi was dependent on its American ally's distribution network and marketing skills to increase its market share in the USA. This dependence is usually not satisfying in the long-term.

To reduce it, one of the partners may use the relation- ship to progressively capture the know-how contrib- uted by the other. Mitsubishi has used the alliance to learn about the North American automobile market European Management Journal Vol 18 No 1 February 2000 67 and may eventually no longer need Chrysler to oper- ate there. When the initial complementarity in the capabilities possessed by the partners is eroded away by the learning taking place between them, the entire raison d'eà treof the alliance disappears. As learning is usually not simultaneous, one of the partners becomes able to operate on its own while the other continues depending heavily on the partnership. In such cases, it is not unusual for the joint endeavour, or even for the entire business, to be taken over by the partner that has succeeded in acquiring all the necessary skills.

Data collected on alliance outcomes (Dussaugeet al., 1998, 1999) show that complementary alliances result in capability transfers between the partners much more often than scale alliances. They also tend to end more frequently in the take-over of the joint venture by one of the partners (see Table 2).

Most scale alliances tend to continue over time with no transfer of capabilities occurring between the part- ner ®rms. This is due to the fact that their primary objective Ð achieving greater economies of scale Ð remains relevant on the long run. Even when scale alliances are terminated, they tend to end without any competencies having been transferred from one partner to the other. Overall, almost 80 per cent of all scale alliances do not lead to any skill transfer between the partners. This is due to the fact that, from the beginning, both partners possess very simi- lar skills and have little to learn from one another.

In contrast, more than half of all complementary alliances lead to transfers of capabilities between the partner companies. In 25 per cent of the cases, the alliance continues despite the shifting complementar- ity between the partners; in 28 per cent of the cases, the capabilities captured by one partner are such that this partner can take over the joint venture and man- age it on its own. These outcomes stem from the initial complementarity of the resources possessed by the allied corporations. It thus appears that comp- lementary alliances, which are primarily aimed at globalizing a ®rm's business are also a weapon to acquire new strategic skills.

Table 2 The Outcomes of Scale and Complemen- tary Alliances Alliance fate Scale Complementary alliances alliances (%) (%) Continues with no skill transfer 57 31 Terminated with no skill transfer 22 16 Continues with skill transfer 10 25 Taken over by one partner 11 28 100 100 Data calculated on a sample of 256 international alliances ALLIANCES VERSUS ACQUISITIONS: CHOOSING THE RIGHT OPTION Research we conducted on the automotive industry (Garrette and Dussauge, 1998) shows that the skill appropriation process at work in complementary alliances results in signi®cant changes in the relative competitive positions of the partner ®rms. Indeed, in complementary alliances, the changes in relative market shares that tend to appear progressively over time are much more signi®cant than in scale alliances (see Table 3).

Acquisitions are also used by ®rms to get access to new capabilities (Capronet al., 1998). Daimler Benz is said to have acquired Chrysler in order to strengthen its presence in North America and to enter lower segments of the automobile market. In the same way, Ford has acquired Jaguar and Volvo to develop a presence in two differentiated segments of the industry. These moves were justi®ed by the fact that earlier attempts by the same companies to expand their product lines through internal growth had proved extremely dif®cult. However, in both cases, the price paid by the acquiring ®rm is such that it is unlikely that any of these acquisitions will ever become pro®table.

Research on mergers and acquisitions shows that the success rate of these operations has proved to be quite low. According to many analysts, 80 per cent of the acquisitions carried out throughout the eighties have not bene®ted the acquiring ®rms' shareholders and should in fact never have taken place (Lynch, 1993). More speci®cally, acquisitions aimed at captur- ing new capabilities and at entering new ®elds of business or new markets appear to be even more haz- ardous. M.E. Porter has reported that, on average, corporations ended up divesting more than 60 per cent of their acquisitions in new ®elds; even a highly respected corporation like General Electric divested a very high percentage of its acquisitions, particularly those in new ®elds (Porter, 1987).

In this context, complementary alliances are often an attractive strategic move through which to expand Table 3 Impact of Complementary and Scale Alliances on Partner Firms' Market Shares (evidence from the automobile industry) Scale Complementary alliances alliances (%) (%) Change in relative market share a After 3 years (dRMS 3)1933 After 5 years (dRMS 5)2957 After 7 years (dRMS 7)4772 aChanges in relative market share (dRMS) were calculated after 3, 5 and 7 years using the following formula: dRMS i5 (RMS i2RMS 0)/RMS 0, where RMS 0is the ratio of the market shares of the two partner ®rms at the time the alliance was formed and RMS iis the ratio of their market shares in year i after the formation of the alliance European Management Journal Vol 18 No 1 February 2000 68 and capture valuable capabilities without running the very high risk of failure and without having to pay the premium attached to any acquisition.

Conclusion Given the radical changes taking place in the Euro- pean economic context, the way in which European ®rms will use alliances in the future is likely to shift dramatically. Instead of forming alliances as part of a defensive strategy, in order to limit competition, compensate for their size disadvantage and avoid or, at least, postpone industry concentration, European ®rms must use alliances in a more offensive way, not as substitutes for mergers and acquisitions but com- bined with M and As. As the liberalization of Euro- pean markets favors pan-European consolidation, ®rms in Europe should turn to mergers and acqui- sitions in order to achieve an ef®cient size and limit their use of scale alliances to preliminary steps towards full integration. In contrast, European ®rms must use their experience of co-operation to design more offensive alliance strategies. They must turn to global alliances formed with partners outside of Eur- ope that possess complementary capabilities and pro- vide access to new markets. Indeed, using comp- lementary alliances to expand, rather than acquiring ®rms in new albeit related ®elds, is less risky, less costly and offers greater opportunities to learn valu- able skills.

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