Alliance

國

立 政 治 大 學

‧

N a tio na

l C h engchi U ni ve rs it y

15

Concluding this section, we state two problems of current researches in previous paragraphs, which are: (1) service innovation tools needs to be based on interaction because the nature of service, (2) based on the importance of SME sector in economic and their difficulties, an easier and guidance free service innovation tool is necessary to fulfill this existing gap. This section supports the environment part as the current technology of the IS research framework by indicating the current available service innovation techniques for SMEs and its insufficiency, and the following two subsections - alliance and interaction patterns - will illustrate the fundamental theory of this research’s knowledge base.

2.2 Alliance

Alliance was always considered as a solution for SMEs to compete and survive (Miles et al, 1999). Through alliance, SME are supposed to be able to develop new competence, obtain crucial resources, improve access to market, achieve scale economies and strengthen firm reputation (Varadarajan & Cunningham, 1995).

Innovation is also benefiting from alliance, the importance of inter-firm alliances in innovative activates were also widely recognized by the industry (Hagedoorn, 2002), for the reason that alliance with firms in unfamiliar domain can lower the risk and cost for the innovation (Linnarsson & Werr, 2004), or can obtain key resources and knowledge the newly innovated service requires (Dickson et al, 2006). To conclude, alliance enables the implementation and enhances the performance of the innovation;

for companies building alliance to do innovation, it was called “joint innovation”

(Cowan & Jonard, 2008).

Innovation could be done in two different ways: one is to decide the expected outcome of the innovation first and then gather the resource it needs to accomplish the goal; the other one is to start from gathering resource and then consider what

‧

立 政 治 大 學

‧

N a tio na

l C h engchi U ni ve rs it y

16

innovation can be done by these resources. So a company can start innovation from deciding the final result, or can figure out the resource it owned first and then decide what to do next. As for alliance, it means a company can start an innovation campaign first and then find partners for support, or make sure who is partner and what resource it can obtain before starting the innovating activities. The two directions form two different views to the innovation-alliance relationship. The first is a top-down approach; ideas are generated first and then try to use alliance to meet the bottom line of the resources needed. The second one is a bottom-up approach; SMEs make sure the alliance partners first and thus understand what resource can obtain before brainstorming for an innovative idea.

Innovation is inherently a risk taking thing (Rothwell, 1992); one of the major possible failure factors is resource and capability constraints of the innovation (Hadjimanolis, 1999). While this is similar for both large companies and SMEs, SMEs still face a more significant influence of the resource constraint in innovation (Hewitt-Dundas, 2006). Relating this argument with the top-down and bottom-up approach of innovation, for SMEs the bottom-up approach defines the accessible resource first, which means it moves the pain point of SME’s innovation to the front stage of innovation process because it makes unfeasible innovation ideas closed at early stage and it decreases the time cost of the innovation failure. So the bottom-up approach of innovation-alliance is better for SMEs innovation, since it lowers the entire risk of innovation.

Another issue in the innovation-alliance relationship is the performance of the alliance. The management of the alliance is a main topic within that field (Ireland et al, 2002; Rothaermel & Deeds, 2006; Duysters et al., 1999); for all the benefit it could be achieved by an alliance, poor managing will make the positive result of alliance goes to negative results (Hamel, 1991), and other research already proposed contrary,

‧

立 政 治 大 學

‧

N a tio na

l C h engchi U ni ve rs it y

17

opposite opinion of the innovation-alliance relationship due to the risk and uncertainty of alliance (Miles et al., 1999; Chi, 1994).

However, despite the negative result of alliance, SMEs are not given choices to choose in innovation, with respect to the poor resource it usually has (Hewitt-Dundas, 2006). This means the selection and managing of the partners will count greatly on the SMEs innovation process. Research argues that there are five factors to consider in the partnership building (Whipple & Frankel, 2000): trust, management, ability of partners, clear goals, compatibility.

Nevertheless, from the point of view of system thinking, the value created from an alliance is from the interactions between entities (Spohrer et al, 2011), we argued that good interaction is the true key of a successful alliance. Also, as a service innovation, Tatikonda and Zeithaml argued that it requires intensively interaction between the innovation creator and the result deliver (Tatikonda & Zeithaml, 2001). Accordingly, to create a successful alliance that can boost innovation, we could choose interaction between the partners as the focal issue as a replacement of the aforementioned five factors.

Extends the notion of using interaction to manage alliance to service innovation creating, since we argued that interaction is a more service oriented perspective, we probably could anticipate this perspective will provide an alliance structure that is more likely to be service-innovation-targeted. Furthermore, the interaction based alliance managing could inherent the benefit of innovating through system thinking:

consider things in a broader view.

Concluding, alliance could provide the important resource SMEs required in service innovation building, also it lowers the risk of failure or the destructive force of unsuccessful innovation project. To guarantee the alliance to provide proper service innovation insights, or to assure the alliance is service innovation dedicated, chances

‧

立 政 治 大 學

‧

N a tio na

l C h engchi U ni ve rs it y

18

are we could use interaction as a method of alliance managing. The discovery of this notion not only enhanced our foundations in the knowledge section of the IS research framework, but also enables us to forward our research to discover how to use interaction to manage the alliances between SMEs.