Recent research reveals that the answer is “with non-competitors,” especially for small and medium size firms.   Alliances with competitors are more costly, directly and indirectly, and provide redundant knowledge and resources, leading researchers to conclude that small and medium size firms should strive to form alliances with non-competitors rather than competitors whenever possible when expanding geographically.  The authors report that the benefits of allying with competitors are offset by higher monitoring and control costs.  Also, competing firms oftentimes share less knowledge than they could or should.  Even though small and medium size firms typically have resource constraints as they expand globally and need alliances to grow, research shows that alliances with non-competitors are positively associated with international performance, whereas alliances with competitors are negatively related.  These findings are based on a recent study involving 162 British and U.S. private small and medium sized businesses.

Source:  Based on Keith Brouthers and Pavlos Dimitratos, “International Alliances with Competitors and Non-Competitors:  The Disparate Impact on SME International Performance,” Strategic Entrepreneurship Journal, 8, no. 2, June 2014, 167-182.