Dr Jose Alberto Brache is a lecturer in the Department of Management and International Business at the Business School. His research interests include inter-firm cooperation in innovation and internationalisation, the subject of the story below.
Cooperation: the key to international success for New Zealand companies
The vast majority of New Zealand businesses are SMEs, and many of them are struggling to gain traction in international markets. One of the biggest barriers to success, Jose says, is that these companies fail to recognise the value of cooperation with other companies also looking to break into these markets. Take, for example, the case of two New Zealand wine producers looking to enter the Chinese market. Perhaps they are so focussed on competition with each other that they ignore the benefits to be gained from pooling resources. Or perhaps they acknowledge the potential benefits but don’t have a system in place to first create a strong strategic alliance with each other, and then manage the process of collaboration, just as they would manage any other business process.
Proper management is crucial, according to Jose. Around 50% of strategic alliances between companies fail because they lack the knowledge to manage the process successfully. Important factors include:
- Creating opportunities
- Selecting a partner company
- Designing contracts and agreements to minimise risk
- Setting KPIs
- Building inter-firm cooperation capabilities
It is especially important to deploy people who understand cross-cultural behavioural components that will open doors in other markets. For example, an agent with intimate knowledge of the foreign market could represent a partnership of New Zealand companies operating in the same industry.
Trade associations (themselves the product of inter-firm cooperation) also have a key role to play, as they promote and sustain collaboration at a local level, and provide a bridge to other trade associations abroad.
Jose and his research partner James Tremewan from the Department of Economics are engaged in some interesting simulations and experiments to foster inter-firm cooperation. Example: An international trade operation is formulated mathematically and simulated on a computer like a game to be played by business firms in two distinct countries. Exporters and importers are given sets of rules for cooperation and defection that mimic realistic business scenarios. The simulation allows for multiple iterations, and just like in the real world, the firms that use strategies that best fit the environment are the ones that survive. After multiple runs, the results of the simulation provide insights into which set of rules allow for the best outcome of cooperation between company personnel. From the results of this computer simulation, the researchers can design appropriate inter-firm cooperation environments for organisations, and delineate efficient contract rules for individual partners engaging in a cooperation setting.
Jose and James are also using experimental methodology, in which business managers play a set of cooperation games. As a game progresses, the teams are offered several incentives to cooperate and to abandon cooperation. Which teams will maintain cooperation and why? This particular methodology has the advantage of providing reliable answers to the previous question, while highlighting behavioural elements in decision-making in the context of international business. From these experiments, the researchers develop a behavioural stream component of an inter-firm cooperation management system.