Managing dynamics through robust alliance governance structures: The case of KLM and Northwest Airlines

Abstract

As alliances are mainly used in dynamic industries, extant theory assumes that alliance governance structures undergo frequent changes. This article aims to show, however, that some governance structures are more robust in dealing with internal and external dynamics than others. We develop propositions about the characteristics that need to be built into an alliance for it to be robust. These propositions are grounded in a case study of the KLM–Northwest alliance. After frequent changes in the governance structure of their alliance, KLM and Northwest found a model that has withstood turbulence in the airline industry for over a decade. This model, the virtual joint venture, has among others as a key characteristic a fifty–fifty profit sharing arrangement.