While FDI-based internationalization is still common, beginning in the 1980s firms have emphasized non-equity, flexible collaborative ventures to internationalize.  It is vital that firms are able to react quickly to changes in the marketplace and emerging trends in global business development. There is the possibility that firms with extensive fixed assets may find themselves at a disadvantage when it come to spontaneous reaction to changes in the marketplace due to the fact that it can limit the extent to which it can readjust and realign its assets in time. This highlights the fact that the need for cooperation is not only limited to relationship with the organization’s value chain. More and more organizations are combining resources to solve common strategic problems, be it in the area of product development and R&D, or production, business development or marketing. These types of relationships not only mean sharing knowledge and skills, but also the ability to switch allegiances and the nature of alliances when market conditions change.

Technological Collaboration

One of the catalysts towards the more recent trends of greater cooperation in international business may be partly attributed to the rapid changes in technological development. With shortening technology life cycle, and therefore the marketable ‘life’ of products, managers are increasingly looking to lower costs of R&D and to ensure fast returns on their investment in the marketplace. Another reason for technological collaboration includes the intention of setting industry standards (i.e. USB port). Through the sharing of risk and the pooling of global resources the technology gets global spread which hopefully will set an international standard.

Collaboration and market entry

Collaborative venture: a form of cooperation between two or more firms. Through collaboration, a firm can gain access to foreign partner’s know-how, capital, distribution channels, and marketing assets, and overcome government imposed obstacles. Venture partners share the risk of their joint efforts, and pool resources and capabilities to create synergy. Many mature and developed markets can be hard to enter. Strategic alliance between firms can serve as a way of securing market access as well as by-passing the cultural difficulties of being a foreign firm on alien soil. Joint venture is used to lower the risk of failure and acts as a pre-emptive strategy to developing wholly-owned manufacturing facilities in the Japanese market.

Collaboration and vertical integration

Alliances have also become popular between manufacturer and their suppliers. This is due to the well published success of Japanese firm and rapid technology change. To ensure that the manufacturer and suppliers are moving in the same direction, joint research program can facilitate component development and to ensure an automatic ‘match’ between demands of the producer and the products of the supplier. Once again the car industry is a good example of this, where component suppliers are considered part of the production process. They are involved throughout the research, development and commercialization process in order that the elements of the final vehicle fit standards and specifications outlined by the car designers and manufacturers.

Industry networks

As result of various forms of cooperation and alliances, a number of complex industry network where firms are linked together through both formal and informal contracts. This links reveals that there are very few firms in the industry which remain insular as with regards to the process of cooperation. The number of alliances between firms gives the notion that they are ‘project based’, entered into to develop a solution for a specific problem.

This contradicts the tradition view of joint ventures being a long-term commitment and cooperation, and highlights the changing nature of modern-day alliances, which tends to be fluid and flexible. The main implications is that firms that are not in the industry network will likely be left out of the technological changes, market developments, and vertical business agreements which are now characteristics of many industry. The failure to embrace the challenges of industry alliance can lead to the firm falling behind competitors and finding it hard to stay abreast of dynamic changes taking place.