Navigating AI partnerships between big and small tech firms

Partnerships have long been an essential part of business, and some of the most famous technology collaborations stem from such linkups. These include the Wintel alliance between Microsoft’s software and Intel’s chips in personal computers and Google’s linkup with Samsung in mobile phones to help make Android the most-used mobile operating system. Disney and Pixar struck such an alliance in the film animation industry in the 1990s, creating such iconic movies as Toy Story, Finding Nemo and Monsters, Inc., before Disney acquired Pixar in 2006.

With the emergence in recent years of artificial intelligence (AI) as a cornerstone of business for the future, the nature of partnerships in this area are of great interest to practitioners and scholars alike. What do firms both large and small gain from such alliances? What are the potential issues arising from these partnerships? What are the lessons for managers?

It is perhaps therefore fitting that a partnership between Cambridge Judge Business School and the Institute for Manufacturing at the University of Cambridge has examined these AI partnership issues through a comprehensive review of studies in this area, filtered through the eyes of both practitioners and academics. The research seeks to strike a balance between allowing growth and innovation through partnerships and preventing too much power by tech giants that harms smaller firms.

How AI partnerships risk dominance by larger firms

“What the big tech firms are looking for is cost savings, talent and skills,” says Shahzad (Shaz) Ansari, Professor of Strategy and Innovation at Cambridge Judge, a co-author of the research. “The issue is that when these small firms join forces with the tech giants they often don’t know what their data is worth, so this has implications for smaller firms doing partnerships with much larger companies, including what they need to consider so they don’t get exploited.

“There is a risk of too much dominance by the big tech firms, some of which have market caps (capitalisations) of a country like the UK or France. The smaller AI firms need these partnerships, as they can help them grow or expand into new markets, so they need big tech like it or not. So the question is how much power is too much power. The point of our paper is not to break these giant firms up, but to show that we don’t want complete dependency by the smaller firms on the much bigger firms. So the paper highlights the implications for managers in negotiating AI partnerships.”

Collaborative research between Cambridge Judge and the Institute for Manufacturing

The article showcases the collaboration between Cambridge Judge and other departments at the University of Cambridge whose expertise complements that of the Business School.

Shaz was co-supervisor of doctoral student Neeti Gupta at the Institute for Manufacturing (IfM), part of the Department of Engineering at the University of Cambridge. Neeti is the article’s lead author, bringing practical expertise through 2 decades of business development work at big tech firms such as Microsoft and Amazon. The research on big-tech partnerships, published in the International Journal of Business and Management, was co-authored by Neeti Gupta, Florian Urmetzer, Associate Teaching Professor at the IfM, and Shaz Ansari.

“Collaboration between Cambridge Judge Business School and experts from throughout the University of Cambridge is a cornerstone of Cambridge Judge,” says Professor Gishan Dissanaike, Dean of the Business School. “There are many areas of the University where the expertise dovetails perfectly with our areas of research and teaching at Cambridge Judge, and this includes healthcare, economics, politics and international relations, and, in this case, technology and the pivotal area of AI. This timely study by Neeti and Florian at the IfM, and by Shaz Ansari at the Business School, shows the benefit of such joint research.”

Neeti says the tensions faced by partner managers when building strategic partnerships had not previously been well documented. “Our research points out that partner managers must navigate complex power dynamics and strategic tensions in AI partnerships, highlighting the need for more informed decision-making and transparency,” she says. “The most difficult aspect of partnering from both sides in AI strategic partnerships, as outlined in the article, largely revolves around the power imbalance between big-tech firms and their smaller partners, leading to complex challenges related to dominance, dependency, and data control.”

Research by Shaz Ansari also looks at other types of partnerships and the issues arising

Research by Shaz on TiVo, a pioneer in digital video recording, focused on how disruptive companies may need to partner with threatened incumbents in order to advance their own interests. “The paper highlights the challenges that come with disruption, including challenges faced by the disruptor,” says Shaz. “The traditional TV industry felt threatened by TiVo’s advert-skipping technology, and this competitive tension led to an accommodation that worked for both sides.” The study also looked at the rise of autonomous vehicles, noting in effect that partnerships in this area involve creating complex ecosystems that include automakers, public transport providers, regulators, insurance companies and city planners.

Another study by Shaz examined managing partnerships in the cloud computing sphere. When Cisco fell far behind Amazon Web Services and other giants in this area, Cisco went into ‘fog computing’ which focused on addressing certain specific areas such as capacity and security.

“Cisco at first had to be very cautious in not upsetting clients, so it developed fog computing to focus on certain aspects in a way that complemented but didn’t threaten the dominant players,” he says. “Cisco teamed up with other organisations to develop a consortium based on fog computing, and then later managed these partnerships to connect cloud and fog in a way that benefitted many parties.”

Issues facing partnerships among multistakeholder groups addressing big global problems

The concerns about imbalance and co-ordination echo in Shaz Ansari’s broader work on partnerships addressing societal challenges, where similar tensions emerge – albeit outside the commercial tech sector. Partnerships develop not only between companies, but also among multistakeholder groups to address some of the world’s toughest challenges such as climate change and inequality. Research by Shaz published in 2022 examined issues that get in the way of these partnerships reaching their admirable goals, often due to disruptive power differences between partners.

“Collaborative initiatives allow a pooling of expertise and resources that is typically needed to ameliorate grand challenges, as they can mobilise diverse actors and generate novel solutions to address these complex problems,” the research says. “However, despite the well-meaning intentions of organisers and partners, collaborative partnerships often devolve into contentious negotiations and frequently fall short in addressing the problems they seek to ameliorate.”

The research outlines 4 trajectories that typically arise in such multistakeholder partnerships:

• collaboration to seek a common purpose, which can minimise power differentials
• consciousness-raising that allows low-power actors to embrace new identities and reframe their relationships with other actors
• contention that enables less-powerful actors to disturb the stranglehold of the powerful
• compliance by smaller actors with the wishes of more powerful counterparts

“Two of the pathways, consciousness raising and collaboration, occur when actors focus on examining the taken-for-granted meanings and norms in a field and utilise partnerships as a forum for expressing their distinct visions for the field,” says the research. “The other 2 trajectories, contention and compliance, emphasise the dynamics of power.”

Partnerships can bring efficiency to government

“Governments need partners too,” says Shaz. “I know from doing Executive Education programmes at Cambridge Judge with government officials from different countries that these government agencies want to be more efficient and they know that as a public sector organisation they can benefit by partnering with the private sector. The same holds true in academia, where universities partner with commercial firms and other intermediaries to commercialise important innovation.”

In his 2021 book, How should a government be, Cambridge Judge Professor of Marketing Jaideep Prabhu examined public-private partnerships in countries including Brazil, India and South Africa, such as NGO Agenda Pública (Public Agenda) in Sao Paulo, Brazil, which was formed to improve public management through cooperation between local government and private companies in sanitation and housing.

“The key to such partnerships is that all parties need to be flexible and pragmatic,” says Jaideep, who is Vice-Dean for Faculty at Cambridge Judge. “Such public-private partnerships can help government learn from successful start-up firms which approaches are most successful rather than slavishly following a certain blueprint.”

Focusing on the Big 7 of the tech world

The examination by the IfM and Cambridge Judge of big-tech partnerships focused on the Big 7 of Alphabet (Google), Amazon, Apple, Meta (Facebook), Microsoft, NVIDIA, and Tesla, as these companies are among the leaders in development and commercialisation of AI. In particular, Amazon, Google and Microsoft are ‘hyper scalers’ in that they control large cloud networks essential for AI development and deployment, so this provides them great leverage in ecosystem negotiations, the authors say.

“This research is motivated by the need to address knowledge gaps in strategic partnerships within the unique big-tech AI ecosystems” of the Big 7, says the study, which identifies 5 key reasons why big-tech companies pursue AI strategic partnerships:

• acquiring data
• securing talent
• pooling resources to reduce costs
• gaining access to new markets
• managing reputations, often through partnerships with government agencies and industry groups to help build trust in AI

For example, partnering with other firms in certain sectors like healthcare, finance and manufacturing allow big tech firms to train and refine their algorithms in these areas, thus developing more tailored AI solutions that allow market expansion into these spheres. Such partnering also helps address what the authors say is a significant talent gap in AI with a relatively limited pool of skilled professionals.

Tensions include dependency, data control and ethical issues

Previous research, the authors say, had focused on AI ecosystems as a meta concept, while ignoring the unique histories, products and roadmaps for the future of the big technology companies. So the authors launched a systematic literature review of 74 papers, which found that big tech firms usually tend to seek complementary strengths within existing networks rather than partner with players in other domains.

This often translates to partnerships between small tech firms and very big tech firms, so the smaller firms “face tensions related to dependency, data control, and ethical considerations, requiring careful negotiation and governance mechanisms”.