Esther Y Mangar, Justus Munyoki


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 sought to establish the
relationship between strategic alliance portfolio diversity on firm performance of
commercial banks in Kenya. 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 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. It was found that 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.

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