Strategic alliance portfolio diversity and performance of Commercial Banks in Kenya

Abstract

Establishment of an appropriate level of diversity in an alliance portfolio has emerged as an important issue for managers if they have to steer business units in the unpredictable operating environment. This implies that firms that wish to leverage their competitive advantages through cooperation with other firms pursue strategic alliances as one of the viable options since it has been argued that a firm competitiveness level is influenced by the alliance that it forms. However, alliance formation among firms should generate the necessary synergy and towards this end, the diversity of the portfolio partners comes out prominently. The research aimed at establishing the relationship between strategic alliance portfolio diversity on firm performance of commercial banks in Kenya. Specifically, the portfolio diversity practices investigated include embeddedness, reciprocity and status similarity. The study adopted a cross-sectional descriptive survey design with the population of the study being the 42 commercial banks operating in Kenya. Primary data was collected using semi-structured questionnaire. The findings were that the bank embeddedness reduced the level of information asymmetry among the partners and consequently enabling the alliance bank partners to create a common problem solving approaches. The findings had that reciprocity among the banks is manifested by their willingness to share proprietary knowledge among the alliance partners to limit their tendencies to pursue opportunistic behaviour. The findings also show that alliance portfolio characteristics are significant moderators of the alliance portfolio diversity-performance relationship. Reciprocity positively moderates the relationship while status similarity is expectedly found to positively moderate this focal relationship. The study concludes that strategic alliance portfolio diversity practice is much necessary in any organization for better functioning of all of its categories and makes effective management of commercial banks.