The dark side of alliances:: Lessons from Volvo-Renault

This article explores sources of failure in strategic alliances drawing on field research into one of the most prominent alliance collapses in recent years. The alliance of Volvo and Renault married the two largest enterprises in their respective countries for economic objectives that virtually all industry experts applauded. Three years after its founding, the allies split apart in a bruising argument that left observers reassessing the future of alliances and of European integration. We believe that an explanation of the paradox of `good motive-unhappy outcome' here is to be found in the `dark side' of alliances that invites managers to make fatal errors. We identify six factors that undermined the Volvo-Renault alliance: misalignment of senior and operating managers, path dependence, alliance recontracting, leadership style, cultural differences, and time. Alliances are vulnerable to these and other errors. Lessons about them are relevant to all alliance managers and senior executives of corporate allies.