Determinants of international telecommunications alliance form in emerging markets

Purpose – The purpose of this study is to attempt to explore how host governmental restriction and interfirm trust influence telecommunications operators (telcos) to choose international telecommunications alliance forms among equity alliances, relational alliances and recurrent alliances in three emerging markets: China, Hong Kong and Taiwan. Design/methodology/approach – This study utilizes multiple discriminant analysis to analyze 111 international alliances established in China, Hong Kong and Taiwan during 1993-2004. Findings – This study finds that host governmental restriction exerts greater influence on the choice of alliance form than interfirm trust. Telcos tend to develop non-equity alliances when governmental restriction is strong. In addition, they tend to develop equity and relational alliances when interfirm trust in high. Research limitations/implications – Two limitations are: this study only explores the impacts of a number of factors (host governmental restriction and interfirm trust) on alliance form choice, and it only focuses on bilateral alliances in telecommunications services industry. This study suggests that future study should explore other strategic factors (e.g. firms' capability, competitors' strategy) and multi-lateral alliances. Practical implications – This study provides three managerial suggestions. First, when international telcos establish alliances in emerging markets, they should primarily evaluate host governmental restrictions, and second assess interfirm trust. In addition, if local telcos intend to build relational and equity alliances to acquire international telcos' technology and marketing know-how, they should enhance interfirm trust with them. Lastly, when host governments attempt to attract foreign equity investment, they should remove restrictions on foreign ownership and provide support and friendly regulatory institutions. Originality/value – Most literature about telecommunications service industry focuses on developed markets and uses descriptive or case analysis. To fill these research gaps, this study conducts an empirical research by analyzing the international alliances in three emerging markets: China, Hong Kong and Taiwan. The findings not only provide suggestions to international telcos, local telcos and host governments in these markets but also can be applied to other emerging markets.