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2. Strategic Alliances between Hospitals are Decorous
Progressively Influential
Most of the academic research on strategic alliances has focused on structural characteristics of international
alliances in global manufacturing-based industries; many executives are struggling to make strategic alliances work
within other contexts.
Using insights from the strategic-alliance literature and anecdotes from the healthcare business management, we
refocus attention away from the traditional, solitary model of leadership to a shared model of leadership among the
top executives of the partner organizations. In so doing, we advance three lessons for leaders to predict and explain
strategic alliance success in the healthcare industry. Specifically, these lessons direct attention to top executives'
joint abilities to collaborate from a distance, to focus on creating customer value above all else, and to experiment
and implement innovative ways to compete in the industry with a partner.
A key market determinant of alliance formation is the ability of aligning organizations to be viable players in a
competitive market. Strategy researchers argue that a highly competitive product market increases the vulnerability
of the firm's strategic position by reducing margins and making product differentiation more problematic. Firms
increasingly engage in cooperative activity to reduce costs, share risks, or develop differentiable products and
services as product market competition increases Alliances can also increase the legitimacy of firms in the eyes of
potential buyers and suppliers by augmenting firms' visibility and touting the perceived advantages of cooperation.
Vertical dependencies among firms can also influence alliance formation. Firms may enter alliances to reduce the
threat of opportunism and small-numbers bargaining between buyers and sellers in a market and when needed
resources are scarce and concentrated in the hands of a few organizations. Finally, alliances can serve to increase a
firm's market power by combining the distribution channels and bargaining power of the alliance partners, as well
as by exchanging knowledge-based resources concerning partners' production processes that give them competitive
advantage over rivals.
Hospitals are confronted with competition in their supply and distribution markets. Healthcare constitutes major
purchasers of hospital services by virtue of their brokering of the flows of premium dollars from employers and
governmental payers to providers, and their contracting decisions (i.e., which physicians and hospitals to include in
their panels).
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R&L HEALTHCARE ADVISORS: 1605 Main Street, Suite 905, Sarasota, Florida 34236, Telephone: 941.316.1101