PARTNERSHIPS AND VALUE CHAINS FOR LIGNIN-BASED BIOREFINERIES
- A CASE-STUDY APPROACH

by

Zishan A. Shah
Master of International Business, Jamia Millia Islamia Central University, 2006
Bachelor of Business Administration, Guru Gobind Singh Indraprastha University, 2004

THESIS SUBMITTED IN PARTIAL FULFILLMENT OF
THE REQUIREMENTS FOR THE DEGREE OF
MASTER OF ARTS
IN
INTERNATIONAL STUDIES

UNIVERSITY OF NORTHERN BRITISH COLUMBIA
April 2014

© Zishan A. Shah, 2014

UMI Number: 1525675

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ABSTRACT
The Canadian forest products industry is exploring new opportunities to diversify their
revenue sources and product portfolio, and accessing new markets by implementing a forest
biorefinery.

This research considered the overall approach for the implementation of a

biorefinery at a Kraft pulp mill by creating partnerships within the value chains of the mill to
mitigate risks and enhance the likelihood for success of a biorefinery. The key challenges
with forming successful partnerships for a biorefinery revolve around finding and evaluating
potential partners. This research attempted to mitigate the impact of these challenges by
creating a systematic partner selection process and evaluation criteria.

This was

accomplished by creating partnership strategies which included a customized partner
selection process, identification of types of partners needed, finding potential partners, and
development of evaluation criteria using the analytical hierarchical method. These methods
were applied to a case-study Kraft pulp mill in western Canada to demonstrate their
applicability.

TABLE OF CONTENTS

ABSTRACT............................................................................................................................... II
LIST OF TABLES...................................................................................................................VI
LIST OF FIGURES...............................................................................................................VII
LIST OF ACRONYMS AND TERMS............................................................................. VIII
ACKNOWLEDGEMENTS.....................................................................................................X
CHAPTER 1: INTRODUCTION.............................................................................................1
1.1 O v e r v ie w .............................................................................................................................................................1
1.2 R e s e a r c h G o a l s .............................................................................................................................................3
1.3 M e t h o d s ............................................................................................................................................................. 4
1.4 O u t l in e o f t h e t h e s i s .................................................................................................................................5

CHAPTER 2: LITERATURE REVIEW............................................................................... 6
2.1 F o r e s t b i o r e f i n e r y ...................................................................................................................................... 6

Benefits o f forest biorefinery................................................................................................8
Risks associated with forest biorefineries........................................................................... 9
Types o f biorefinery............................................................................................................ 10
Lignin-basedforest biorefinery..........................................................................................11
2 .2 P a r t n e r s h ip s .................................................................................................................................................. 13

Benefits and drawbacks ofpartnerships fo r lignin biorefinery.........................................14
Partner selection process and evaluation criteria............................................................ 17
Partnership fo r forest biorefinery...................................................................................... 20
Partnership within the value chain - Empirical evidences from globalforest products
industry............................................................................................................................... 22
The Aditya Birla Domsjo example..................................................................................... 23
The Catchlight Energy example........................................................................................ 24
The UPM, VTT, and Volkswagen (VW) - Wood based diesel example............................ 25
2.3 C o n c l u s io n a n d A n a l y s i s ....................................................................................................................2 6

CHAPTER 3: METHODOLOGY........................................................................................ 29
3.1 S t e p s t o f in d p a r t n e r s f o r in t e g r a t in g a l ig n in - b a s e d b io r e f in e r y a t t h e C a s e
M i l l ........................................................................................................................................................................... 2 9
3 .2 S W O T (S t r e n g t h , w e a k n e s s e s , o p p o r t u n it ie s , a n d t h r e a t s ) a n a l y s i s ....................32
3.3 V a l u e c h a in a n a l y s is ( V C A ) ...............................................................................................................3 4
3 .4 M u l t i - c r it e r ia d e c is io n m a k in g (M C D M ) a n a l y t ic a l h ie r a r c h ic a l p r o c e s s
( A H P ) ......................................................................................................................................................................... 3 5
iii

3 .5 D a t a a n d in f o r m a t io n c o l l e c t i o n ............................................................................................... 37

CHAPTER 4: SWOT ANALYSIS OF THE CASE MILL............................................... 39
4.1 I n t r o d u c t i o n ............................................................................................................................................... 39
4 .2 T h e p u r p o s e o f S W O T A n a l y s is o f t h e m i l l ........................................................................... 39
4 .3 A b o u t t h e C a s e M i l l .............................................................................................................................. 39
4 .4 R e s u l t s o f S W O T a n a l y s is o f t h e C a s e M i l l ......................................................................... 40

4.4.1 Research and Development (R&D)......................................................................... 40
4.4.2 Raw material and sourcing...................................................................................... 41
4.4.3 Operations and Processes....................................................................................... 43
4.4.4 Distribution Network............................................................................................... 44
4.4.5 Marketing and sales................................................................................................. 46
4 .5 C o n c l u s i o n ................................................................................................................................................... 47
CHAPTER 5: VALUE CHAINS FOR LIGNIN-BASED PRODUCTS AND LIST OF
POTENTIAL PARTNERS OR CUSTOMERS.................................................................. 49
5.1 I n t r o d u c t i o n ............................................................................................................................................... 49
5 .2 V a l u e c h a in id e n t if ic a t io n ................................................................................................................ 50

5.2.1 Value chain o f Kraft lignin-based carbon fiber...................................................... 52
5.2.2 Value chain o f Kraft lignin-based PF resins.......................................................... 55
5.3 P r o s p e c t iv e p a r t n e r s o r c u s t o m e r s ............................................................................................ 57
5 .4 C o n c l u s i o n ................................................................................................................................................... 60
CHAPTER 6: PARTNER EVALUATION CRITERIA AND MCDM-AHP TO
EVALUATE POTENTIAL PARTNERS............................................................................ 61
6.1 Technical Criteria....................................................................................................... 62
6.2. Strategic Criteria....................................................................................................... 64
6 .3 R e s u l t s a n d a n a l y s is o f t h e A H P s u r v e y ................................................................................ 65
6.3.1 Data analysis and result.......................................................................................... 67
6 .4 A n e x a m p l e o f M C D M A H P - r a n k in g p o t e n t ia l p a r t n e r s ........................................... 72
6.4.1 Company backgrounds............................................................................................ 74
BASF Chemicals................................................................................................................ 74
Weyerhaeuser.................................................................................................................... 75
Lignol................................................................................................................................. 75
6.4.2 Results....................................................................................................................... 77
6.4.3 Scenario analysis..................................................................................................... 79
6 .4 C o n c l u s i o n .................................................................................................................................................. 83
CHAPTER 7: CONCLUSIONS........................................................................................... 84
BIBLIOGRAPHY................................................................................................................... 89
APPENDIX I - QUESTIONNAIRE

97

F o r e s t B i o r e f in e r y 1 - P a r t n e r S e l e c t io n C r it e r ia R a n k in g S u r v e y ............................. 9 7

APPENDIX II - AN EXAMPLE OF AHP METHODOLOGY........................................102
S t e p 1: S t a t e d t h e g o a l : T o s e l e c t a p a r t n e r f o r f o r e s t b i o r e f i n e r y f r o m s e v e r a l

POTENTIAL PARTNERS........................................................................................................................................ 102
S t e p 2: E s t a b l is h e d c r it e r ia : T h r e e c r it e r i a a r e c h o s e n r a n d o m ly f o r t h i s p u r p o s e

102
1)

F in a n c ia l r e s o u r c e s (FR) ................................................................................................................. 102

2)

T e c h n o l o g y c o m p a t ib il it y (TC) .................................................................................................... 102

3)

M a r k e t i n g a n d d is t r ib u t io n in f r a s t r u c t u r e (MDI).............................................................102

S t e p 3: C r e a t e d q u e s t io n n a ir e : A q u e s t io n n a ir e w a s c r e a t e d t o a s s ig n w e ig h t s t o
EACH CRITERION................................................................................................................................................. 102
S t e p 5: P a ir w is e C o m p a r is o n o f c r i t e r i a : ........................................................................................102
S t e p 6: A s s ig n r a n k in g t o e a c h c r i t e r i o n ........................................................................................ 103
Id e n t if y p o t e n t ia l p a r t n e r s : F o u r p o t e n t i a l p a r t n e r s a r e c h o s e n r a n d o m l y t o

EXPLAIN AHP METHOD...................................................................................................................................... 105
1)

W e y e r h a e u s e r (W H ), 2 ) BASF, 3 ) L ig n o l (LI), a n d 4 ) F P I n n o v a t io n s (FPI)

105

S t e p 8 - R a n k i n g ...............................................................................................................................................105

APPENDIX III - AHP POTENTIAL PARTNERS PAIRWISE COMPARISON

107

LIST OF TABLES

1. Expected market for four major products from lignin............................................................3
2. Primary activities in the value chain..................................................................................... 21
3. Support activities in the value chain..................................................................................... 22
4. Limitations of SWOT analysis..............................................................................................33
5. Analytical Hierarchical Process (AHP) scale....................................................................... 36
6. List of industries for carbon fiber and PF resins...................................................................52
7. List of prospective partners or customers in British Columbia........................................... 59
8. Indicators of financial status..................................................................................................62
9. Partner evaluation criteria and sub-criteria.......................................................................... 66
10. Weights assigned by participants........................................................................................ 69
11. Top five partner evaluation criteria according toAHP survey............................................72
12. Type of data and information neededto evaluate potential partners.................................. 74
13. Financial information for indicators................................................................................... 76
14. Indicators data and information.......................................................................................... 76

LIST OF FIGURES
Figure 1 - Forest biorefmery.......................................................................................................7
Figure 2 - Wood composition....................................................................................................12
Figure 3 - Process of partner selection......................................................................................19
Figure 4 - Porter Value chain................................................................................................... 21
Figure 5 - Aditya Birla Domsjo partnerships within the Value chains................................... 24
Figure 6 - A stylized step-by-step partner selection process for a Kraft pulp mill............... 31
Figure 7 - A simple value chain of the Case Mill...................................................................51
Figure 8 - A simple value chain of a Kraft lignin-based carbon fiber...................................53
Figure 9 - A simple value chain of Kraft lignin-based PF resins...........................................58
Figure 10 - Overall weights assigned by participants............................................................ 70
Figure 11 - Comparison of weights: Industry........................................................................70
Figure 12 - Comparison of weights: Academia......................................................................71
Figure 13 - AHP hierarchy.......................................................................................................73
Figure 14 - Overall ranking of potential partners...................................................................78
Figure 15 - Performance of each organization against each criterion................................... 78
Figure 16 - Scenario analysis.1..............................................................................................80
Figure 17 - Scenario analysis.s 2 ........................................................................................... 81
Figure 18 - Scenario analysis.3..............................................................................................82
Figure 19- Scenario analysis 4 .................................................................................................83

LIST OF ACRONYMS AND TERMS
Adhesive: A chemical substance used to stick material together.
AHP: Analytical Hierarchical Process
BC: British Columbia, Canada
Biomass: Forest residues such as dead trees, branches and tree stumps, yard clippings, wood
chips and even municipal solid waste.
Bioproducts: Are materials, fuels, chemicals, and energy derived from renewable organic
resources.
BTX: Benzene Toluene Xylene
C$: Canadian Dollar, unless otherwise specified
CF: Carbon Fiber- Is a material consisting of fibers and composed mostly of carbon atoms
Dispersant: Any substance used to promote the formation and stabilization of dispersion
Eigenvector: A square matrix is successively squared to obtain eigenvalue
Ethanol fuel: A gasoline alternative that can be manufactured by converting feed stocks
such as sugar cane, sugar beets, switch grass, com, barley, wood, algae, municipal waste, and
many other sources.
FPAC: Forest Products Association of Canada
GDP: Gross Domestic Product - A market value of all the final goods and services produced
within a country in a given period of time.
K raft process: A chemical process that uses sodium hydroxide and sodium sulfide to
convert wood into wood pulp
Lignin: A complex chemical compound that binds wood fibre together.
LVL: Laminated Veneer Lumber

MDF: Medium Density Fiberboard
MTon: Metric Tonne
NBSK: Northern Bleach Softwood Kraft
NGO: Non-Govemmental Organizations
NNFCC: National Non-Food Crops Centre - A United Kingdom based consultancy
company specializing in bioenergy, biofuels and bio-based products.
OSB: Oriented Strand Board
OEMs: Original Equipment Manufacturers
Pair wise comparison: Refers to a statistical process of comparing entities in pairs to judge
which of each entity is preferred over the other or which one is more important than the
other.
R&D: Research and Development
$: United States Dollar, unless otherwise specified
Value added: The amount by which the value of a product is increased at each stage of its
production.
VCA: Value Chain Analysis
Value chain: A chain of activities that are performed by a firm to design, produce, market,
and deliver its products or services

ACKNOWLEDGEMENTS
I owe special thanks to so many people who believed in me and motivated me all throughout
this research. I would like to start with a big thanks to my supervisors; Dr. Karima Fredj and
Dr. Bryan Bogdanski whose patience and support seems limitless. I would like to thank my
committee member, Dr. Elizabeth Croft for her meticulous inputs and advice that enriched
this thesis. I felt privileged to have Dr. Paul Stuart, Principal Investigator, NSERC CRD
project, who provided constant support and advice.
I am deeply indebted to my NSERC research team, Dr. Adriano Mariano, Cedric DifFo,
Sahar Mohammadi, and Pierre-Olivier Bontems for their immense support to this research.
I would like to acknowledge the support from UNBC’s administration especially
Debbie Price, Selina Ross, Kara Taylor, and Kealin McCabe for navigating me during my
graduate studies. I would also like to thank Mrs. Sharon Tower, Executive Director, Omineca
Beetle Action Coalition and Dr. Ajit Dayanandan, Associate Professor at UNBC, for their
time and advice on some important aspects of this research.
I am grateful to all the participants for their inputs and time. My appreciation also goes to
NSERC and industry partners for their support.
At the end I would like to thank my family, friends especially Matthew Graveline,
Charelle Gribling, and Emily-Anne Therrien, and fellow graduate students for their support,
without which I could not have accomplished this research study.
Thank you everyone!

Chapter 1: Introduction
1.1 Overview

In recent years the Canadian forest products industry has been facing several
challenges including rising energy and fibre costs, cyclical demand for traditional wood and
paper product commodities such as newsprint, and increased competition from low-cost
overseas producers. In response to these challenges the forest products industry has adopted
strategies such as collaborations with other companies, new products development, and
exploration of new markets (Douglas & Simula, 2010; FPAC, 2011; FPAC, 2010).
The focus of this research is on developing a business strategy to integrate a ligninbased forest biorefinery at an existing Kraft pulp mill. The strategy of combining ligninbased forest biorefinery within the existing Kraft pulp mill is less explored due to past
economic and technological constraints. Lately, the concept of a lignin-based forest
biorefinery has emerged as a frontrunner in the forest products industry in an effort to be
more economically and environmentally sustainable, and to retain competitive advantage.
The reasons for forest biorefineries recent popularity are, firstly, the high volatility in price of
crude oil and the diminishing global oil resources (International Energy Agency, 2010;
World Economic Forum, 2011). With numerous industries relying on petroleum-based
products as inputs for production of final products, there is a growing interest in alternative
inputs. Some of the petroleum-based products can be replaced with products from a forest
biorefinery (International Institute for Environment and Development, 2011; Holladay et al.,
2007). Secondly, there is a growing concern about energy security and geopolitical issues in

1

many of the oil producing regions, compelling oil trading countries to resort to local
alternatives and renewable resources (Benoit, 2008). Finally, increasing general awareness
about environment degradation is propelling organizations to be more environmentally
friendly (Food and Agriculture Organization, 2010), and products manufactured at a forest
biorefinery are renewable and sustainable (Holladay et al., 2007). However, the uncertainty
around fossil fuel resources is the most significant reason for strong interest in forest
biorefinery (Fernando et al., 2006; World Economic Forum, 2010).
These developments have led to an exploration of renewable alternative sources of
energy and chemicals, that can be used as a substitute for petroleum-based products. One
type of forest biorefinery that is gaining significant attention is the lignin biorefinery due to
the variety of energy and other bioproducts that can be manufactured with it and the
availability of abundant renewable sources of lignin (Holladay et al., 2007). A lignin
biorefinery is a facility that converts forest biomass through process and equipment into
biofuels, bioenergy, and biochemicals (Pye, 2006). Lignin is the glue that binds wood fibre
together and has to be separated through chemical or mechanical processes before making
pulp at a Kraft pulp mill.
Traditionally, lignin has been burned and used as a source of energy at Kraft pulp
mills. The growing demand for alternatives to petroleum-based inputs has motivated private
and government organizations to devote more resources towards research and development
of new value-added products that can be produced using lignin (Holladay et al., 2007; World
Economic Forum, 2011). As a result, lignin has been used to produce several products such
as dispersants, energy, fuels, binders, paints, pharmaceuticals, adhesives, ethanol, and other
chemicals. The global market for such bioproducts is expected to reach an estimated $208
2

billion by 2020 (Smolarski, 2012). Table 1 presents estimated major markets for products
that can be produced from lignin. Currently 80 percent of these products are produced from
petroleum-based inputs. The current demand and expected growth in global market for the
products that can be derived from lignin provides an opportunity for Canadian forest
products industry to establish lignin-based biorefinery.
Table 1. Market for four major products that can be derived from lignin, 2010
Estimated
commercial
date
BTX
2020-2025
2015
Phenol
Commercial
Vanillin
since 1933
2020-2025
Carbon fiber
Source: (Smolarski, 2012)
Product

Market
volume in
(Million Ton)
102
8
0.016

Market
price (USD
per tonne)
1,200
1,500
600,000

Market
value
(BillonS)
122
9.6
0.1

CAGR
2010-2020
(volume)
+4.4%
+3.9%
+4%

0.046

34,800

1.6

+13%

1.2 Research Goals
The purpose of this research is to identify key challenges a Kraft pulp mill faces when
transforming into a lignin-based forest biorefinery and to develop effective partnership
strategies to overcome these challenges. This research focuses on partnerships within the
value chain of a Kraft pulp mill. The goal of the research is to address the following
questions:
1) What is the process of partner selection?
2) What types of partners are needed to transform a Kraft pulp mill into a ligninbased forest biorefinery?
3) Where to find potential partners to implement a lignin biorefinery at a Kraft pulp
mill?
3

4) How to select and evaluate potential partners for lignin-based biorefinery?

1.3 Methods
A case study approach had been followed in this research. An existing Kraft pulp mill
is used to help illustrate the partner selection process developed in this research. The mill is
a large, competitive softwood Kraft pulp mill owned by a large Canadian integrated forest
products company. The case-study mill possesses several strengths and weaknesses similar
to other Canadian Kraft mills that make it a good representative case of the challenges and
opportunities faced when implementing a lignin-based biorefinery at a Kraft pulp mill in
Canada. Due to confidentiality reasons the mill’s specific location and name are protected.
Throughout this thesis the case study mill will be referred to as the ‘Case Mill’.
We collected information through primary and secondary sources. The primary
sources included interviews and a questionnaire survey. The secondary data was collected
from previous literature on the subject, annual reports, industry reports, government reports,
and press releases.
Several tools were used to analyze the data and information collected.

The

customized partner selection process is based on case study analysis, and a review of relevant
literature. This was followed by a SWOT (strengths, weaknesses, opportunities, and threats)
analysis to assess what types of partners the Case Mill needs in order to implement a ligninbased forest biorefinery. We then used value chain analysis to find potential markets and
industries for lignin-based products and partners for the Case Mill. Furthermore, we created
partner evaluation criteria which are based on SWOT analysis of the Case Mill, case studies,
and literature review.

Finally, we surveyed experts using Analytical Hierarchy Process

(AHP) to determine the relative importance of each evaluation criterion that is used to
4

evaluate and rank competing potential partners as identified through the value chain analysis.
The analysis of the AHP survey results and ranking of the potential partners was done
through 1Expert Choice’ software specially designed for AHP methods. We provide details
of the methods and tools used in Chapter 3. The partner evaluation criteria developed in this
research are applied to select partners for the Case Mill.

1.4 Outline of the thesis
The thesis is arranged into seven chapters. The following chapter is a review of the
literature around biorefineries, lignin biorefineries, partnerships, partner selection process,
and partner evaluation criteria, value chains, and examples of partnerships for bioproducts
manufacturing in the global forest products industry.

This is followed by an overview of the methods used in this research. Chapter 4
presents a SWOT analysis used to determine the types of partners needed to implement a
lignin-based forest biorefinery at the Case Mill. Chapter 5 presents a value chain analysis of
lignin-based products and identified prospective partners or customer for the Case Mill.
Chapter 6 focuses on partner evaluation criteria for the Case Mill, MCDM AHP survey
results, and includes an example to demonstrate applicability of the evaluation criteria
established in this research. Finally, Chapter 7 presents conclusions, recommendations,
limitations, and venues for future research.

5

Chapter 2: Literature review
2.1 Forest biorefinery
Governments and organizations around the world seek to achieve a balance between
preservation and management of natural resources and economic development. This balance
involves economic growth alongside conservation of natural resources so as to reduce the
impact of industrial activity on the environment (Kamm et al., 2006). One of the ways to
preserve environmental and economic growth is to reduce dependence on conventional
natural resources such as fossil fuel that are not considered as sustainable and environment
friendly (IPCC, 2012). This makes it imperative to reduce reliance on non-renewable fossil
fuels such as petroleum, natural gas, and coal, which will propel a shift towards renewable
resources such as forests and other biological resources.
One of the alternatives that have emerged as a strategy to shift from fossil fuels
resources to more renewable resources is forest biorefineries. The key reason for the recent
increase in interest of the forest biorefinery concept among industry leaders, academics, and
industry researchers is the increased demand for alternative energy from renewable sources
(Fernando et al., 2006; World Economic Forum, 2010; International Energy Agency, 2010).
It is expected that biorefineries will eventually become more economically and
environmentally viable than fossil fuel energy resources in the future (Holladay et al., 2007;
World Economic Forum, 2011).
The concept of biorefinery can be understood from the definition given by the
American National Renewable Energy Laboratory (NREL, 2012) “a facility that integrates
biomass conversion process and equipment to produce fuels, power, and chemicals from

biomass”. A biorefinery can use different types of biomass including wood and agricultural
crops, forest residues, organic residues, aquatic biomass (algae and sea weeds), and industrial
wastes (International Energy Agency, 2010; Taylor, 2008; Demirbas, 2009).
In contrast to a conventional biorefinery, a forest biorefinery is a type of facility that
uses wood based feedstock (such as residues, bark, and tree branches) to produce fuels,
energy, and chemicals (Kamm & Kamm, 2004). The products that can be produced at a
biorefinery could include bioenergy, biofuels, and bio-chemicals (Figure 1). The demand for
such products from renewable resources is growing and expected to reach $200 billion by
2015 (FPAC, 2011).

Forest
i Biorefinery

^

__

Biom ass

Dedicated
Trees

Processing

Bioenergy

Figure 1. Forest biorefinery

7

Benefits of forest biorefinery
The potential benefits of a forest biorefinery can support the development of a more
economically and environmentally sustainable Canadian forest products industry and
consequently support many resource-based communities across Canada. The Canadian forest
products industry can benefit from forest biorefineries in many ways, which include financial
gains in the form of new revenue sources, environmental benefits by reducing dependence on
non-renewable resources and increasing self-sufficiency for energy need, and societal gains
by creating new jobs and sustainable environment for the community (Holladay et al., 2007;
International Energy Agency, 2009; International Energy Agency, 2010; Mabee et al., 2010;
World Economic Forum, 2011; Kamm et al., 2006; Benoit, 2008).
Other benefits that are not covered in the literature include creating new opportunities
for partnerships, technology innovation and international trade. Forest biorefineries create
opportunities for new partnerships within and outside the forest products industry. As an
example Chevron, a petroleum company, partnered with Weyerhaeuser, a forestry company
to produce biofuels (CatchLight Energy, 2012). Another example is British Petroleum (BP)
created a joint venture with DuPont, one of the leading chemical companies to produce
biofuels (Butamax, 2013). Forest biorefmeries also contribute to innovate and create new
technologies e.g. FPInnovations collaborated with forestry companies, universities, and
institutions to research biorefining technologies (FPInnovations, 2013). Finally, Forest
biorefineries help increase international trade in non-traditional forest based products as the
global demand for renewable energy sources keeps growing exponentially (International
Energy Agency, 2010). These non-traditional benefits accrue to industries, institutions, and

8

communities, and also provide economic benefits to countries, encouraging more
partnerships to be created.
Risks associated with forest biorefineries
While there are substantial benefits involved in pursuing forest biorefinery there are
also risks associated with its implementation at a Kraft pulp mill. Firstly, investment risk as
in any other project forest biorefinery also creates uncertainty about the capital invested in
the project (Olsen, 1997). Companies have apprehension of losing capital due to the
uncertainty around bioproducts demand (World Economic Forum, 2011), which depend on
demand and pricing of petroleum-based products (International Energy Agency, 2010). This
risk can be mitigated through partnerships by sharing the capital cost among partners.
Secondly, the technological risk relates to availability and integration of technologies
into the existing Kraft pulping process for bioproducts manufacturing. There is a substantial
technological risk due to the availability of a limited number of technologies for bioproducts
manufacturing. Also the available technologies are not fully developed and need further
R&D (World Economic Forum, 2011).

Technology is one of the key components for

successful implementation of lignin biorefinery at a Kraft pulp mill and requires substantial
investment (Chambost et al., 2008; World Economic Forum, 2010; Demirbas, 2009). The
selection of appropriate technology is important since different technologies produce
different products or the same products but with different quality. Also the choice of
technology depends on the impact on the operations of a mill, since the mill has to balance
pulp and bioproducts production. The technological risk creates avenues for companies to
work together to enhance available technologies and create new technologies that will
minimize the impact on mill’s operation.

Finally, commercialization risk which is associated with marketing and distribution of
bioproducts and creating markets for bioproducts (Janssen et al., 2008; World Economic
Forum, 2010). Most of the companies interested in bioproducts do not possess sufficient
infrastructure to support commercialization of bioproducts (International Energy Agency,
2010). Also most of the bioproducts are competing with petroleum-based products. The latter
have strong supply chain networks that make it difficult for bioproducts companies to create
a new supply chain strategy. The supply chain strategy to promote bioproducts can
effectively be established through collaborations with other companies as highlighted
previously in Chevron and Weyerhaeuser, and BP and DuPont joint ventures.
The gravity of these risks depends on the type of biorefinery that an organization is
considering to implement. For instance, these risks depend on the type of feedstock, products
manufactured, and process and technology adopted for the production of bioproducts. Due to
such risks, forest biorefineries have failed to fully develop in the last decade (Kamm et al.,
2006; Chambost et al., 2008; Mabee et al., 2010; World Economic Forum, 2010). However,
such risks can be mitigated by sharing them with other companies, and choosing the right
type of biorefinery with the appropriate technology.
Types of biorefinery
Biorefineries are classified as first, second, or third generation based on the
technology and raw materials they use (Fernando et al., 2006). A first generation biorefinery
has a fixed processing capability and uses grain as raw material. An example of a first
generation biorefinery is a dry-milling ethanol plant, which uses grain to produce a fixed
amount of ethanol, other by-products, and carbon dioxide (Kamm et al., 2006). A second
generation biorefinery also uses grain as feedstock and has flexibility in producing various
10

end-products based on the product demand. An example of such a biorefinery would be a
plant producing plastic, sugar, and ethanol using grain feedstock. In contrast to first and
second generation biorefineries, a third generation biorefinery is capable of using a variety of
feedstock and processing methods to produce variety of products (Kamm & Kamm, 2004;
Kamm et al., 2006; World Economic Forum, 2010). Lignin-based biorefineries classify as
third generation as they use different types of wood-based feedstock to produce a variety of
bioproducts. The third generation biorefinery is still under research and development stages
and several companies and institutions are developing technologies around such processes.
Lignin-based forest biorefinery
Lignin is a complex chemical compound that is found in every woody substance.
Wood is composed of cellulose, hemicellulose, lignin, and extractives as shown in Figure 2.
Lignin is conventionally burned to generate power for a Kraft pulp mill. Lignin is used to
produce several products which include dispersant, binder, adhesive, ethanol, and other
chemicals. This provides an opportunity for Kraft pulp mills to enhance their operation and
to generate new revenue source and products, and to be more environmentally sustainable by
integrating lignin-based forest biorefinery (International Energy Agency, 2009). There are
numerous companies such as Domtar, Tembec, Borregaard, Domsjo, MeadWestvaco, Virent,
Gevo, Metso, and Lignol producing lignin based products and many other companies are
venturing into lignin biorefinery.
The key markets for lignin-based products are in the construction, mining, and
agriculture industries. There are some other small and medium markets such as resins, oil
well mud additive, rubber additive, water treatment, pesticides, and carbon black markets.
The main uses of lignin-based bioproducts are as dispersants in concrete admixtures,
11

admixtures, oil drilling additives, road dust control, animal feed additive, additive to
automotive lubricant, and dyestuff for textiles (Holladay et al., 2007; Pye, 2006). The other
significant uses include wood adhesive and binder which accounts for 32.5 per cent of 1.1
million tonnes global capacity (NNFCC, 2011). Recently, new promising uses of lignin are
carbon fibers, energy and fuels, pharmaceuticals, and value added chemicals (Holladay et al.,
2007; World Economic Forum, 2011).

Figure 2 - Wood composition
Adapted: (Created from International Lignin Institute, 2012)

The Canadian pulp and paper industry is facing challenges such as the decrease in
demand for traditional products, high energy cost, and competition from overseas producers.
The impact of these challenges can be mitigated by implementing a lignin-based forest
biorefinery at existing Kraft pulp mills (Chambost et al., 2008). Currently, Canadian
companies like Tembec and Domtar are producing and selling lignin in domestic and
international markets. Some companies like Lignol, Ensyn, and Iogen Corporation, are
researching and experimenting, new products and technologies to create new value added
products from lignin. Other non-governmental organizations such as FPInnovations are also
supporting and participating in research and development of new technologies to use lignin
for high value-added products. In fact, FPInnovations in partnership with Centre for Research
12

and Innovation in the Bio-Economy (CRIBE), Natural Resources Canada (NRCAN), and
Resolute Forest Products have established a pilot-plant for production of lignin for
experimentation and further research (FPinnovations, 2011). These organizations are
collaborating to research and test lignin products that can be produced at a Kraft pulp mill.
Several global companies, including MeadWestvaco, Domtar, Domsjo, and
Borregaard, have constructed commercial facilities with large capacity to manufacture
products from lignin. The products manufactured at these facilities range from raw lignin,
dispersants, concrete admixtures, industrial binder, fertilizers, micronutrient, and many other
niche uses. Recently companies are exploring new value-added products such as PF resins,
carbon fibers, and carbon black. To create new value-added products these companies relied
heavily on partnerships with technology, energy, and chemical companies to pursue ligninbased forest biorefinery. Therefore, some scholars believe that partnerships are essential for
the successful implementation of forest biorefinery at a Kraft pulp mill and to create valueadded lignin-based products (Holladay et al., 2007; Chambost et al., 2008; World Economic
Forum, 2011; Demirbas, 2009; International Energy Agency, 2009).
2.2 Partnerships
Partnerships are effectively used by the organizations interested in pursuing forest
biorefmeries. Therefore, it is essential to understand the concept of partnerships. Partnerships
have been described in several other terms in the literature such as alliances, cooperative
arrangements, collaborations, strategic alliances, and coalitions (Roberts, 2004; Austin, 2000;
Contractor & Lorange, 2004; Brouthers et al., 1995; Doz & Hamel, 1998; Ohmae, 1989;
Roberts, 2004). The usage of different terms for the concept of partnership is due to partners

13

having different perceptions about its purpose, operation, and governance structures; hence,
partnership is considered a varied and ambiguous concept (McQuaid & Christy, 1999).
Roberts (2004, p.27) defines a partnership simply as “a relationship in which we are
jointly committed to the success of whatever process we are in.” In contrast, Mohr and
Spekman (1994) followed a holistic approach to define partnership.

They characterize

partnership as having at least two independent organizations that share compatible goals, are
looking for mutual benefits, and have a high level of mutual interdependence. Mutual
interdependence is necessary for creating a successful partnership strategy that will complete
a supply chain network needed for a lignin-based biorefinery, since many companies’ posses
a part of infrastructure needed
In the past few decades, there has been an unprecedented increase in the number of
partnerships through international joint ventures, licensing agreements, co-production
agreements, joint research initiatives, and other strategic relationships among two or more
firms (Contractor & Lorange, 2004; Hagedoom, 1993). This increase in partnerships can be
attributed to liberalization of global markets, change in demand, and faster diffusion of
technology that intensified competition from local and overseas producers. Due to such
development and growth, partnerships have emerged as a cornerstone for reinstating
competitive advantage, creating new products, and entering new markets (Contractor &
Lorange, 2004; Harrigan, 1988; Mohr & Spekman, 1994).
Benefits and drawbacks of partnerships for lignin biorefinery
In the literature there is no consensus over the basic reasons for partnerships.
However, the main reason for partnerships that is highlighted in the literature is to gain or

14

sustain competitive advantage in areas such as reduction in production and operation cost,
access to raw materials, research and development for new products or processes, and access
to marketing, and distribution resources (Austin, 2000; Contractor & Lorange, 2004; Davies,
2000; Doz & Hamel, 1998; Gibbs & Andrew, 2009; Hagedoom, 1993; Kogut, 2004; Roberts,
2004). More recently, the emerging reasons for partnerships have moved towards access to
new knowledge (Kogut, 1988), acquiring new expertise and skills (Inkpen, 2008; Hamel et
al., 1989), access to new markets and new products (Culpan, 1993; Roberts, 2004; Ohmae,
1989), creating new technologies (Doz & Hamel, 1998), financial gains (Contractor &
Lorange, 2004; Ohmae, 1989), and risk mitigation (Steward, 1999).
The benefits of partnerships to a Kraft pulp mill that is interested in integrating a
lignin-based biorefinery are multifold. Firstly, access to technology; some of the Kraft pulp
mills do not possess technology to produce lignin at the mill (Chambost et al., 2008), so a
partner with lignin technology will save initial investment in its development and further
innovation. Secondly, co-development of supply chain infrastructure; a Kraft pulp mill may
not possess sufficient infrastructure to develop markets for lignin-based bioproducts.
Therefore, a partner with an existing supply chain infrastructure with marketing and
distribution capabilities will benefit lignin-based biorefinery. Finally, capital investment; it
is estimated that the capital and operating cost of a lignin biorefinery with 50 tonne/d
capacity to be between $16-20 million (Paleologou et al., 2011). This will increase or
decrease depending on product manufactured and production capacity. Therefore, a partner
that can share this initial investment and operating cost will reduce the capital risk for a Kraft
pulp mill.

15

Despite several benefits partnerships can offer to a Kraft pulp mill interested in
integrating a lignin-based biorefinery at the mill, it can also have some potential drawbacks.
Firstly, partnerships are often considered as ‘complicated and risky’ since they involve two
or more organizations with different interests, goals, corporate structure, culture, and vision,
which often leads to delay in strategic decisions due to conflict of interest (Culpan, 1993;
McQuaid, 2000). The delay in decision making could have detrimental effect on long-term
sustainability of a lignin biorefinery as the bioproducts markets are very dynamic and
requirement swift decision making. The complex nature of partnerships and the fear of losing
autonomy make partnership an unfavorable strategy and it is often used as the last resort
(Austin, 2000).
Secondly, in a partnership there is always a possibility of ‘unequal financial and nonfinancial gains’ accrued to partners that may lead to uncertainty about the long-term
sustainability of the partnership (Culpan, 1993; Mohr & Spekman, 1994; Austin, 2000). This
is a crucial element for a Kraft pulp mill since different organizations have different financial
expectation from a project, and financial equity should therefore be addressed in the early
stages of establishing a biorefinery project.
Finally, every organization is unique in its culture and corporate structure and that
may serve as an impediment for any cooperative arrangement (Austin, 2000; Culpan, 1993;
Roberts, 2004; Geringer, 1991). This will pose some challenges for a Kraft pulp mill when
they want to partner with a particular company where there is a mismatch of corporate
structure and lack of collaborative culture (Chung et al., 2000).

16

These drawbacks of partnerships need to be addressed to successfully implement a
lignin biorefmery at a Kraft pulp mill. To mitigate the impact of these disadvantages several
scholars have proposed that a firm needs to: 1) structure its partner selection process and
clearly define its evaluation criteria, 2) to clearly understand the objectives of the partnership,
and 3) to clearly define the roles and responsibility of the firm and partner (Austin, 2000;
Deakin et al., 2001; Culpan, 1993). The next section provides an overview of the partner
selection process and evaluation criteria available in the literature.
Partner selection process and evaluation criteria
There has been an increase in the number of partnerships in the last two decades.
According to Dyer (2001) the top 500 global businesses have nearly 60 major collaborations
each. Despite the growth in collaborations, the success rate has remained fairly low. The
failure rate is estimated to be between 50 and 60 percent (Duisters et al., 2008). However,
the high rate of partnerships failure has encouraged scholars to study and identify some the
reasons behind it such as a mismatch of partners objectives and goals (Brouthers et al., 1995;
Varis et al., 2005); cultural incompatibility (Douma et al., 2000; Duisters-Twardy, 2008);
poor management, execution, and implementation (Duisters et al., 2008); incomplementary
resources (Brouthers et al., 1995; Gibbs & Andrew, 2009); and, poor partner selection
process and evaluation criteria (Doz, 1988; Mohr & Spekman, 1994; Holmberg &
Cummings, 2009; Wu et al., 2009; Brouthers et al., 1995). Among all the reasons, a study of
810 global alliances conducted by Duister et al. (2008) found that 80 percent of partnership
failure is mainly related to the partner selection process and evaluation criteria.

17

In the literature, partner selection has been considered as a fundamental element in
building a successful partnership (Dyer et al., 2001; Holmberg & Cummings, 2009; Doz &
Hamel, 1998; Wu et al., 2009). But only a few articles have studied the partner selection
process and evaluation criteria. Among those who tried to define the essential elements of a
partner selection process, Holmberg and Cummings (2009) concluded that a partner selection
process should start with the determination of partnership motivation and goals. Duisters, et
al. (2008), on the other hand, suggested that it should start with identification of types of
partners a company may need and that the organization should analyze its own culture,
financial capabilities, needs and goals, technology, and marketing and distribution
infrastructure.
Duister-Twardy (2008) offered the most comprehensive partner selection process
consisting of 16 steps, which we described in Figure 3. This research also highlighted that
not all companies need to follow all these steps but should customize the process according
to their needs.
Apart from the process of partner selection several studies also suggested that using
an analytical or systematic method to determine partner evaluation criteria will enhance the
success rate of partnerships (Holmberg & Cummings, 2009; Wu et al., 2009). However,
developing comprehensive evaluation criteria is a difficult task and represents an extremely
critical step (Doz & Hamel, 1998; Douma et al., 2000; Duisters-Twardy, 2008; Geringer,
1991; Mohr & Spekman, 1994; Holmberg & Cummings, 2009; Wu et al., 2009). The
literature only highlighted essential components of partner evaluation criteria and provided
general criteria for partner selection, such as: cultural compatibility, resource and skills

18

complementarity, goals and objectives compatibility, and financial and marketing
capabilities.

evalu ate
shortlisted
p artn ers with
d efined criteria

2. id en tify
p a rtn erin g needs
o f you r com p an y

4. d efin e
com p an y's
o b jectiv es for
ailian ce

7. M eetin g w ith
p ro sp ectiv e
p artn ers

5. Id en tify
p a rtn er selectio n
c riteria

10. B eauty
con test

15. W ritin g legal
a g reem en ts

11. R anking
p otential
prospects

14. O rg a n izin g
social even t for
selected p a rtn er

12. F inal ch oice o f
p a rtn er

13. n egotiatin g
allian ce wi th
p rosp ected
p artn er

Figure 3. Process of partner selection
Source: (Duisters-Twardy, 2008, p.5)
The research on partner evaluation criteria revolves around Geringer’s typologies.
Geringer (1991) divided the evaluation criteria into two general types: task-related and
partner-related. The task-related criteria pertain to operational skills and resources required
to achieve competitive success of collaboration. This includes financial resources, technical
know-how, and marketing and distribution resources and infrastructure. The partner-related
issues address the efficiency and effectiveness of the partnership, which also include hard to
define attributes such as corporate culture, partnership history, and trustworthiness.
Geringer’s criteria have been used in several studies to further develop partner evaluation
criteria (Hoffmann & Schlosser, 2001; Cavusgil & Evirgen, 1997; Tatoglu, 2000).

19

Partnership for forest biorefinery
Companies within the global forest products industry have been building partnerships
within and outside the industry. These partnerships within value chains are considered as the
way forward to find potential partners for successfully pursuing forest biorefinery strategy
(Demirbas, 2009). A value chain partnership can be defined as “companies in different
industries with different but complementary skills which link their capabilities to create value
for ultimate users” (Chambost et al., 2008). This can further be understood from the value
chain concept.
The value chain concept was first introduced in the 1960s and 1970s to understand
markets and competition in the exporting countries (Kaplinsky & Morris, 2001). Later, it was
popularized by Michael Porter in 1980s and 1990s through his seminal book “Competitive
Advantage: Creating and Sustaining Superior Performance”. According to Porter (1985),
every firm is a collection of activities (Figure 4) that are performed to design, produce,
market, and deliver its products or services. In his framework Porter described two categories
of business activities that firms perform in order to produce goods or services. The first
category is primary activities and involves the transformation of inputs into outputs. These
activities are summarized as in Table 2. The second category is support activities which
provide support to primary activities. These activities are summarized in Table 3.

20

Procurem ent

Primary Activities

Figure 4. Porter Value chain
Source: (Porter, 1985, p.58)

Table 2. Prim ary activities in a value chain
Prim ary Activities
Inbound logistics

Sourcing of raw-materials and storage

Operations

Process, technology, equipment, and manufacturing facility

Outbound logistics

Distribution of outputs

Marketing and sales

Communication, pricing, promotion, and brand management

Technical assistance, repairs, installation, and maintenance
Customer service
Source: (Porter, 1985, p.62)
Although Porter’s value chain framework is widely accepted and used, Fabe et al.
(2009) argued that Porter’s value chain approach ignored the activities outside the firm and
focused on activities performed within the firm. Keeping in mind this criticism, some authors
have described the value chain concept in a broader fashion. Shank and Govindrajan (1993,
p.56) stated that “the value chain for any firm is the value creating activities all the way from
component supplier through to the ultimate end-use produced delivered into the final
21

consumer hands”.

They view a firm as an integral part of the overall value creating

processes, and other organizations as also part of this broader value chain.
Therefore, the role of outside organizations such as suppliers, retailers, dealers,
customers, and governments is important and should be included in the value chain of a firm.
To understand the role of outside organizations there is a need to study the structure of
partnerships created in the global forest products industry. The next section provides a few
examples from the global forest products industry of partnerships created with organizations
other than forest products industry. The examples illustrate the effective use of value chain
analysis to find partners.
Table 3. Support activities in the value chain
Support Activities
Procurement

Purchasing of raw material, consumables, and equipments
and machinery

Technology development

Technological inputs and research and development
activities

Human resource
management

Hiring, promotion,
development

Firm infrastructure

General management, accounting, finance, legal, and
government affairs

promotion,

and

training

and

Source: (Porter, 1985, p.64)
Partnership within the value chain - Empirical evidences from global forest products
industry
The examples in this section represent companies with complementary resources that
provide mutual benefits to the partners. These examples include organizations from forestry,
automobile, energy, textile, research institutions, and universities that have effectively used
partnerships to overcome their weaknesses and mitigate risks involved with a forest
22

biorefinery. They pooled needed resources such as technology, raw materials, capital, and
marketing and distribution to complete the value chain of bioproducts manufacturing.
The Aditya Birla Domsjo example
Aditya Birla Domsjo is an illustrative example of how a company can effectively use
partnerships to pursue a forest biorefinery. Initially Domsjo started as a bleaching company
and over time transformed into a full-fledge biorefinery by creating partnerships throughout
its value chain. The primary bioproducts it produces at the biorefinery are: specialty
cellulose, lignin, and bio-ethanol (Aditya Birla Domsjo, 2012). Aditya Birla Domsjo
transformation has been accomplished through successful partnerships. The partnerships
created by Domsjo within its value chain are illustrated in Figure 5.
Domsjo has research collaborations with MORE Research, an independent research
and development company in Sweden, UMEA University, a Swedish university with strength
in forestry research, and Processum a Sweden based biotechnology research company, for its
research and development activities. Similarly, the company has developed a partnership
with Ekmans, a marketing and sales service provider specializing in forest products.

23

A ditya Biria
DOMSJO

r~

Development

Rmv Matari*!
Partnership
with Domsjo

Products

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Speciality

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Figure 5. Aditya Birla Domsjo partnerships within the Value chains

The Catchlight Energy example

Catchlight Energy is a joint venture between Chevron and Weyerhaeuser. The focus
of the venture is to accelerate the commercialization and economic development of cellulosic
biofuels to meet the current and future energy need (CatchLight Energy, 2012).

On one

side, Weyerhaeuser is a forestry company and an expert in innovative practices in land
management, resource pooling and management, and capacity to provide cellulose-based
feedstock needed for the production of biofuel (Weyerhaeuser, 2013b). On the other side,
Chevron is a petroleum company and an expert in conversion technology, product
engineering, advanced fuel manufacturing and fuels distribution. The pooled resources are
complementary to each other and are required to successfully build a forest biorefinery.

24

Catchlight Energy highlights the parent companies’ common vision about the future
of transportation fuels, which will diversify the energy sources along with addressing the
issue of global climate change by providing low-carbon transportation fuel. This is an
example of how one company can utilize another company’s competitive advantage to
overcome weaknesses within their organization. This partnership combines feedstock
technology, capital, distribution and marketing, and employees to create a new product for
the existing and future markets.

The UPM, VTT, and Volkswagen (VW) - Wood based diesel example
UPM initiative to create wood-based diesel is an example of product portfolio
diversification and accessing new market to mitigate the impact of decrease in demand for
forestry products. UPM is one of the largest forestry companies in the world and has stated
that it intends to become a major player in Europe in the production of high quality
renewable biofuels (UPM Kymmene, 2013a). However, UPM does not possess technology
for production of wood based diesel, but rather has access to raw material, capital, and
distribution infrastructure. The company has adopted partnerships along the biofuels value
chain as one of the strategies to achieve its goals. UPM is promoting biodiesel produced
through technology developed with W T - Technical Research Centre which is a leading
applied technical research organization in Northern Europe. The UPM BioVemo Diesel is
produced from renewable materials and testing is done on cars provided by VW auto group.
The raw materials used in the production of biodiesel comprises logging residues, wood
chips, stumps, bark, and additional raw material derived from industrial residues such as tall
oil from sulphate pulp process (UPM Kymmene , 2013).

25

These three above described examples of partnerships highlight the value for
potential partnerships and show how companies are using collaborations within the forest
products industry to create new products, develop new technology, enhance environmental
performance, reduce operating cost, and access new markets. However, in order to
implement a partnership strategy, several challenges need to be addressed such as choosing
partner selection process, and identifying and evaluating potential partners. The next section
provides an overview of the literature on partner selection process and evaluation criteria.

2.3 Conclusion and Analysis
The forest products industry is facing numerous challenges such as a decrease in
demand for traditional wood and wood-based products, high fiber and energy cost, and
competition from low-cost overseas producers. Forest biorefinery has emerged as a key
strategy to mitigate the impact of these challenges by diversifying product portfolio,
generating new sources of revenues, and accessing new markets. This is also due to increase
in demand for renewable sources of energy, economics of fossil fuels, uncertainty about
availability of fossil fuels due to geopolitical crisis, and concerns about climate change and
environmental risks. The implementation of a lignin forest biorefinery at a Kraft pulp mill
can be helpful in overcoming some of the challenges that forest products industry is facing.
However, lignin forest biorefinery is a fairly new concept to forest products industry and
there are four major challenges. First, technology is important aspects of lignin biorefinery
implementation at a Kraft pulp mill. Kraft pulp mills do not possess technology to convert
lignin into value-added products. Hence, there is a need for investment in research and

26

development and procurement of technology. There are several technologies such as lignin
precipitation and solvent pulping available to produce lignin-based bioproducts, but each
technology creates a unique technological challenge for a Kraft pulp mill. The choice of the
right technology is critically important for the successful implementation of a lignin
biorefinery at a Kraft pulp mill.
Second, the introduction of new technology and process will affect a Kraft pulp mill’s
production operations. The lignin-based bioproducts need new processes and handling
techniques. There is also a need to train the existing workforce to handle new processes,
equipment, and machinery. The integration of the lignin biorefinery into the existing plant
needs to be done carefully to minimize any detrimental impacts on current operations.
Third, there is a substantial amount of investment needed for the implementation of
lignin-based forest biorefinery at a Kraft pulp mill. The investment pertains to procurement
of technology, machinery and equipment, training employees, and building supply chain
infrastructure.
Fourth, the market demand for lignin-based bioproducts is uncertain and all
bioproducts produced from lignin are competing with petroleum-based products (World
Economic Forum, 2010; Holladay et al., 2007). A Kraft pulp mill needs continuous R&D
activities to create new products, and establish marketing and distribution infrastructure such
as packaging, shipping and handling, and dealer and retailer networks to commercialize
lignin-based products.
These challenges need to be addressed in order to successfully implement a ligninbased biorefinery at a Kraft pulp mill. One strategy that has been highlighted in the literature
27

to mitigate risks involved in the implementation of a forest biorefinery is to create
partnerships with other organizations. However, there is no research that provides details
about the types of partners needed to implement a lignin-based forest biorefinery at a Kraft
pulp mill. Also forming partnerships can be challenging due to high rate of partnerships
failure.
The limitation of evaluation criteria in the literature is that each evaluation criterion
was assigned equal importance in the decision. However, they should be assigned relative
importance according to their significance in the decision because some criterion can make a
partnership a success or failure. The literature also provides some insight into partnerships
within the value chain of a company, but there is a need for a targeted approach catering to
the issues a Kraft pulp mill may face while pursuing forest biorefinery strategy. Henceforth,
a case study approach is followed to complete this research, where a Kraft pulp mill in
western Canada is used as a case-study.

28

Chapter 3: Methodology
3.1 Steps to find partners for integrating a lignin-based biorefinery at the Case
Mill

This chapter explains the methodology we use to investigate how a Kraft pulp mill
might pursue a partnerships strategy to implement a lignin-based forest biorefinery. The
geographic scope of the research is western Canada. Focusing on a case study of a western
Canadian Kraft pulp mill permitted face-to-face meetings with mill representatives to fully
understand the challenges in implementing a lignin-based forest biorefinery at an actual mill.
For the purpose of this research we collect information from primary and secondary
sources. The primary sources included interviews and a questionnaire survey. The secondary
data originated from previous research, annual reports, industry reports, government reports,
and press releases.

As highlighted in Chapter 2, a formalized and systematic method of identifying and
evaluating prospective partners may increase the chances of a successful partnership. The
overall process developed for the Case Mill is a partner selection process with eight steps
(Figure 6) customized based on insights from existing literature and relevant forestry case
studies. All these steps can be followed by any Kraft pulp mill setting up a biorefinery at the
mill to select new partners. We on the other hand accomplished our research by following
step 3 to step 7. That included identification of types of partners needed for the Case Mill
using SWOT analysis, identification of potential partners using value chain analysis, and
creation of partner evaluation criteria using literature on the subject and AHP methodology.
The complete process of partner selection is discussed in the next few paragraphs.
29

The first step involves forming an internal partner selection team (Duisters-Twardy,
2008). It is important for this team to include professionals from different areas with different
sets of knowledge, skills, and competences to ensure the success of this process (Roberts,
2004). Therefore, an ideal team for the Case Mill would include professionals from finance,
human resources, marketing, procurement, operations, and research and development
divisions, as well as a team leader with a background in management or administration.
The second step involves identification of partnership’s needs, motivation and
objectives. One of the causes of partnerships failure is the inability to mobilize internal
resources to support it (Dyer et al., 2001). Many studies have supported that this is due to
miscommunication of the partnership’s needs and objectives (Austin, 2000; Mohr &
Spekman, 1994).
The third step includes a SWOT analysis which will allow the Case Mill to analyze
all its activities starting from procurement to customer services. This is one of the key steps
in partner selection process as it helps the Case Mill to identify the types of partners needed
to implement a lignin-based forest biorefinery.
The fourth step involves creation of partner evaluation criteria for the Case Mill. The
criteria are based on previous literature and case studies. Chapter 6 provides details about the
evaluation criteria used in this research.

30

Sfcpl. Cfffttifiifl#
P U ^ II

Step*. gvihntiai
pf
pirtwrn
»s deftod iu Step 4

Figure 6. A stylized step-by-step partner selection process for the Case Mill
Adapted from: (Duisters-Twardy, 2008)

The fifth step in the partner selection process is to reflect on the results of the
company’s SWOT analysis in order to identify what types of partners are needed. Partners
within the value chain of the potential products were considered as the best possible options.
More details about identification of potential partners are discussed in Chapter 5.
In the sixth step potential partners are evaluated using the evaluation criteria
established in step four. The information for evaluation is collected through secondary
sources such as company reports, financial statements, and press releases. Chapter 6 provides
an example of partner evaluation for the Case Mill.

31

The seventh step involves ranking of the criteria and potential partners. Ranking is a
significant challenge due to the numerous qualitative and quantitative criteria used to
evaluate partners. One of the ways to overcome this challenge is to use a questionnaire
survey based on the AHP. AHP is a multiple criteria decision-making tool that is widely used
to choose among several alternatives (Saaty, 1990). Chapter 6 covers the application of AHP
method to rank evaluation criteria and potential partners for the Case Mill.
Though not done in this research, a final step in the partner selection process is to
enter into discussion with prospective partners to negotiate terms of a partnership. A team of
negotiators meets with the potential partners to discuss the terms, conditions, and benefits of
the proposed partnership.
The methods we applied at different stages of the partner selection process are casestudy approach, SWOT analysis, value chain analysis, and MCDM AHP.
3.2 SWOT (Strength, weaknesses, opportunities, and threats) analysis.
There are several tools such as PEST (Political, Economic, Social and Technological
analysis), PESTLE (Political, Economic, Social, Technological, Legal, and Environmental
analysis), and MOST (Mission, Objectives, Strategies, and Tactics analysis) to understand
and analyze business environment. But we use SWOT analysis since it serves the purpose of
this research which is to analyze the internal environment of the organizations to identify
what type of partners are needed at the Case Mill to implement a lignin biorefinery. SWOT
analysis helps focusing on the Case Mill and some of the external factors that will effect
implementation of a lignin-based forest biorefinery. Chapter 4 is dedicated to the application
of this analysis and results for the Case Mill.
32

We use SWOT analysis to identify the types of partners the Case Mill will likely need
to implement a lignin biorefinery at the mill. The origins of SWOT analysis can be traced
back to the 1960s and its development is often credited to Harvard Business School and other
American business schools (Hill & Westbrook, 1997). Strength for an organization is a
resource or capacity that can be used effectively to achieve defined objectives. A weakness is
a limitation or defect that will restrict an organization to achieve its objectives. An
opportunity is a favorable situation in the organization’s environment. A threat is an
unfavorable situation that is potentially damaging to an organization’s strategy (Harvard
Business School, 2005).
SWOT analysis has been commended for its simple and targeted approach on key
issues that may affect a company’s development and growth (Pickton & Wright, 1998). It has
also been widely used by organizations for its simplicity, but at the same time an adoption of
SWOT analysis that is too simplistic may lead to serious consequences, such as neglecting
important strengths or weaknesses, and perceiving threats or opportunities without
supporting information (Pickton & Wright, 1998). Some of the limitations of SWOT analysis
can be found in Table 4.
Table 4. Limitations of SWOT analysis
Inadequate definition of
factors

Lack of prioritization of Over-subjectivity in the
generation of factors:
factors
compiler bias

•

•

•
•
•

Factors w hich appear to fit into
more than one category
Factors w hich do not appear to fit
w ell into any category
Factors described broadly: lack o f
specificity
Lack o f information to specify
factors accurately

•
•

Factors w hich are given
too m uch em phasis
Factors w hich are given
too little em phasis
Factors w hich are given
equal importance

•
•
•
•

Adapted from: (Pickton & Wright, 1998, p. 104)

33

Factors m issed out: lack o f
com prehensiveness
Serendipity in the generation o f
factors
Disagreem ent over factors and
to which category they belong
Factors represent opinions not
fact

For this research SWOT analysis is used to ascertain the Case Mill’s needs and
requirements to implement a lignin-based forest biorefinery.
The result of the analysis provides insight into the mill’s specific strengths and
weaknesses while also provide information about opportunities and threats prevalent in
western Canada to setup a forest biorefinery. Furthermore, the analysis provides a basis to
determine the types of partners needed to implement a lignin-based forest biorefinery at the
Case Mill.
3.3 Value chain analysis (VCA)
VCA is useful to understand the relationship within each activity as explained in
Chapter 2, sub-section 2.2. In this research we used VCA to understand the markets for
lignin-based products and to find partners to implement a lignin-based forest biorefinery at
the Case Mill. There are several products that can be produced from lignin and in order to
focus this research to a few products we have identified only two products: PF resins and
carbon fibers based on their current and future market projections and technology
availability. Table 1 in Chapter 1 provides an overview of commercial market for these
products.
In order to identify value chains for these two products, we analyzed the markets for
carbon fibers and PF resins in Alberta and British Columbia. We used industry reports,
government reports, and reports from other organizations in the region. We identified
prospective partners within the value chains of PF-resins and carbon fibers. More details
about the value chains can be found in Chapter 5 on VCA.

34

3.4 Multi-criteria decision making (MCDM) analytical hierarchical process
(AHP)
MCDM AHP is a tool used to assign relative weights to each partner evaluation
criterion and rank potential partners.
There are generic evaluation criteria available in the literature as discussed in Chapter
2, but each criterion is weighted equally. For example, culture compatibility is equally
important as financial compatibility. However, each criterion should be weighted based on its
relative importance in decision making. Consider a scenario where a company is looking for
a location for a new lumber production plant. The price of the land will be less important
than the geographic location since the company wants the plant closer to the markets and
raw-material sources. Therefore, the location of the land is more important than any other
criteria, in such a situation company will trade-off between two or more criteria. Hence there
is a need to assign relative importance to each criterion as to their importance in achieving
the goal. In order to assign weight to each criterion we conduct a survey with a select group
of experts in various fields. A survey design was adopted from Saaty (1990) methodology to
conform to the requirements of the AHP, a MCDM tool. Under AHP methodology, there is a
need to develop a set of criteria that will be used to judge the potential partners in this
research. Where eight fundamental steps were followed to implement the AHP method to the
partner selection problem.
The first step in an AHP process is to set a goal for the research. Our goal in this
research is to select partners using defined evaluation criteria. In step two, we defined the
criteria used in this research. We expanded more on the partner evaluation criteria in Chapter
6. Based on the criteria, we design in step three an electronic questionnaire for the survey. A
copy of the questionnaire can be found in Appendix 1.

35

Further in step four we selected participants for the survey. We included 17 experts
from different fields within the biorefinery industry. The experts are from engineering,
finance, marketing, distribution, resources, environment, human resource, academia, and
government. More details about the sampling can be found in the next section on data
collection. In step five we use pairwise comparison to ascertain the relative importance of
each criterion (Triantaphyllou & Mann, 1995) by comparing them in pairs to judge which
criterion is preferred over the other. For the pairwise comparison AHP uses a 1 to 9 scale to
rank the different criteria. An overview of the scale used in the survey is presented in Table
5.
Step six involves assigning weights based on the responses from the participants, we
use AHP software ’E xpert Choice‘, which is specially developed to help decision makers for
computation. This software permits straightforward analysis of the pairwise survey results
and computation of weights for each criterion and alternatives. A more detailed explanation
of AHP calculations is provided in an example in appendix 2.
Table 5. AHP Scale
Intensity of
Importance
1
3

Explanation

Definition

Two activities contribute equally to the objective
Experience and judgment slightly favor one activity
over other
Experience and judgment strongly favor one activity
5
over another
An activity is strongly favored and its dominance
7
demonstrated in practice
The
evidence
favoring one activity over other is of
Absolute
importance
9
the highest possible order of affirmation
When compromise is needed
Intermediate values
2,4,6,8
Adapted from: (Triantaphyllou & Mann, 1995, p.3)
Equal Importance
Weak importance of one
over other
Essential or strong
importance
Demonstrated importance

For step seven, the potential partners are identified with the help of value chain
analysis and pairwise comparison is done based on supporting information such as financial
36

statements, distribution channels, type of products manufactured, and R&D activities about
each potential partner. This information is collected through secondary sources which include
company reports, press releases, and other documents. More details about collected
information is provided in Chapter 6. Finally, based on the information collected through
previous steps, potential partners were ranked in step 8 according to the criteria using
’E xpert Choice ’ software.
3.5 Data and information collection
Data and information collection is crucial in a research, as the data will be used to
answers research questions. In this study, data was collected by direct observation, personal
interviews, participation at the meetings, forums and field school, questionnaire survey,
publically available reports and documents, and available literature on the subject.
This research relies on knowledge and expertise of people involved in forest
biorefinery industry. For this purpose we used purposive sampling to select participants in
the survey. A purposive sampling is a type of non-probability technique that is used when
one needs to study certain aspects of a domain with the help of knowledgeable experts from
the field of study (Bernard et al., 1986). In this type of sampling researcher decides what type
of information is needed and finds experts who are willing to provide that information
(Bernard, 2002).
However, there are possible limitations of purposive sampling that the researcher
must rely on his or her judgment about the reliability and competency of the participants
(Campbell, 1955). The responses of the participants are also subject to the personal biases.

37

To avoid these pitfalls, we included experts with knowledge in at least one aspect of
biorefinery industry.
Personal interviews of the Case Mill’s officials were carried out to understand the
operations of the mill. The unstructured interview approach was adopted for conducting
interviews. Interviewees were chosen because of their expertise and position at the Kraft pulp
mill. All of the interviews took place at the Case Mill. The information collected from these
interviews was used to complete SWOT analysis of the Case Mill and to understand what
types of partners the mill could need.
The key documents referenced in the study include the Case Mill annual reports,
news releases, and other reports pertaining to the mill. The information from these
documents feeds into the SWOT analysis of the mill. Other documents consulted include
industry and government reports, news releases, and previous research on the subject matter.

38

Chapter 4: SWOT Analysis of the Case Mill
4.1 Introduction
One of the key tasks in the partner selection process is to determine the types of
partners needed to implement a lignin-based forest biorefinery at the Case Mill.

As

explained in the methodology Chapter 3, SWOT analysis is the tool we used for this purpose.
4.2 The purpose o f SWOT Analysis of the mill
The SWOT analysis of the Case Mill provided the necessary details and information
about its capabilities and deficiencies for implementing a biorefinery.

The activities

analyzed under this analysis include research and development, raw materials and sourcing,
operations and processes, distribution infrastructure, and marketing and sales.
The purpose of the SWOT analysis is as follows:
1) To ascertain areas of weaknesses and strengths of the Case Mill.
2) To identify opportunities and threats in pursuing lignin biorefinery integration at the
Case Mill.
3) To identify the types of partners needed to implement a lignin-based biorefinery at
the Case Mill.
4.3 About the Case Mill
The Case Mill produces Northern Bleach Softwood Kraft (NBSK) pulp and produced
370,000 tonnes of pulp in 2012. The mill was completely renovated in the 1990s and is
considered a modem Kraft pulp mill. The mill uses a Kraft pulping process, which is one of
the most widely used chemical processes for making pulp from wood. Lignin is one of the
39

by-products that is produced at the mill; currently it is burned to generate power to ran the
mill’s production process.
4.4 Results o f SW OT analysis of the Case Mill
The analysis is divided into five sections representing each important production
activity performed at the pulp mill.
4.4.1 Research and Development (R&D)
Given that the technology for producing bioproducts from lignin are in the nascent
stage (Ackom, 2013), the focus of the implementation of a lignin-based forest biorefinery is
on technology and R&D. Indeed, R&D activities that continuously improve technology and
processes are essential for long-term sustainability of a forest biorefinery.
The management at the Case Mill claims to be committed to R&D activities that
create new wood and wood-based products. However, the mill’s R&D needs are supported
by subsidiary organizations in the region and outside research organizations. The relationship
with subsidiaries and outside organizations could be helpful for the mill to continuously
create innovative lignin-based bioproducts. The R&D activities are also supported by the
provincial government through funding for various environment friendly projects.
Besides research initiatives and government funding, the geographic location of the
mill is of strategic importance, since the western Canadian region has well established
forestry,

petrochemicals,

automotive,

pharmaceuticals,

construction,

mining,

and

agribusiness industries. These industries may contain companies that could be potential
collaborators for R&D activities.

40

Within the Alberta and British Columbia region, many companies and institutions are
involved in R&D of bioproducts, which can serve as an opportunity for the mill to
collaborate with these organizations. For example, FPInnovations is a Canadian organization
that is among the world’s largest private not-for-profit forest research institutes
(FPInnovations, 2013)

involved in lignin bioproducts R&D.

Another example of an

institution involved in biotechnology R&D activities is Alberta Innovates-Technology
Futures. The latter provides research and development, testing and pre-commercialization
support to companies in the region (Alberta Innovates-Technology Futures, 2013).
Although there are opportunities for the Case Mill to collaborate with outside
organizations and gather funds from other sources for R&D activities, there is a lack of
funding for such activities at the mill level. The focus of the mill’s research program is on
process improvement, new equipment, energy efficiency, and sustainable practices. In
addition, the Case Mill does not have an in-house R&D facility (Interviewee A, 2012), which
can be an impediment for the long-term sustainability of biorefinery at the mill.
4.4.2 Raw material and sourcing
One of the most essential parts of a manufacturing process for lignin-based forest
biorefinery is raw materials. For a biorefinery, securing a low-cost feedstock is essential for
production of bioproducts from lignin. The availability and type of feedstock will determine
the process and technology required to integrate a biorefinery at the mill (Chambost et al.,
2008).
The geographic location of the Case Mill provides access to high quality wood fibre
that facilitate the production of pulp and possible lignin products. The mill has long term
41

harvesting contracts with the provincial governments, which secures a consistent supply of
raw materials. The raw materials in the form of wood chips are procured locally through
subsidiary and other sawmills. This reduces exposure to price and quality fluctuations. The
mill’s proximity to sawmills and harvesting lands reduces transportation cost which is a
substantial cost component. The recent acquisition of a sawmill by the company will also
secure the ftiture supplies of wood chips for pulp production. The presence of a large number
of sawmills in the region can fulfill any additional raw materials needs for a lignin
biorefinery operation (Interviewee A, 2012). These advantages make the mill a feasible
location to produce lignin-based bioproducts.
However, there are some inherent risks to feedstock supply for the mill. These risks
include harvesting contracts connected to government policies. Any change in the policies
will affect the cost of fibre for pulp and possible lignin products. Another challenge is the
mountain pine beetle epidemic, which is spreading within the region and making the future
level of harvesting in the region uncertain. About 50 percent of the total volume of lodgepole
pine was killed in BC (Canadian Forest Services , 2012c) and nearly six million hectares of
pine forest in Alberta is expected to be affected by mountain pine beetle, that is about 15
percent of the total forest area of Alberta (Alberta Government, 2013). There is even a threat
that the outbreak will continue eastward through the boreal forests of Canada (Natural
Resources Canada, 2013).
These challenges will create imbalance in demand and supply of raw materials that
are needed to produce lignin-based bioproducts. Furthermore, this will affect pricing of the
lignin bioproducts due to higher procurement and transportation cost of inputs

The

transportation cost for up to 50 percent of fibre supply costs at Canadian mills, and 25-40
42

percent of products delivered by the industry (Lehou et al., 2012), therefore, it has to be
managed effectively. Any movement away from current harvesting land due to either
mountain pine beetle or a change in harvesting contracts will increase the cost of the final
product such as Kraft pulp and lignin products.
4.4.3 Operations and Processes
The role of operations, processes, and equipment for the transformation of a Kraft
pulp mill into a biorefinery are very cmcial. There are several processes available for
production of lignin, but the selection is largely dependent on the type of feedstock available
and type of products the mill wants to manufacture (Interviewee B, 2012; Chambost et al.,
2008).
The Case Mill is self-sufficient for its energy needs, and recently installed energy
efficient technology (Interviewee A, 2012). There are processes that can be integrated into
the existing Kraft pulping process to produce lignin-based bioproducts (Holladay et al.,
2007). Also there are several companies, research organizations, and institutions in the region
that are working on the development of various bioproducts from lignin (Holladay et al.,
2007). The mill can collaborate with these organizations to use their technology and
processes for manufacturing lignin bioproducts. Within such arrangement the mill can be
used as a pilot plant for the production of lignin products due to available infrastructure and
manpower at the mill.
However, there are also a few challenges the Case Mill will face. First, lignin is an
important fuel for a Kraft pulp mill since it contributes to the mill’s energy self sufficiency
by running its recovery boilers and generating power (Holladay et al., 2007). The amount of
43

lignin that can be recovered from the process will be limited due to its importance in energy
self-sufficiency. The availability of lignin extraction depends on the cost of energy procured
from the other sources such as natural gas. Second, the mill has no experience managing
processes for producing bioproducts. Third, the mill does not have an in-house process to
produce lignin-based bioproducts (Interviewee A, 2012). Therefore, the mill has to rely on
outside organizations for technology and also for the maintenance and technical problems.
Finally, the integration of lignin manufacturing process within the existing Kraft pulp
production process will disturb the existing operations at the mill. Given their seriousness, all
of the above issues need to be addressed while implementing a lignin biorefinery at the mill.
4.4.4 Distribution Network
A distribution network is an arrangement of people, storage facilities, and
transportation that move goods and services from producers to consumers (Hiam & Rastelli,
2007). Distribution infrastructure is considered as one of the most important sources of
competitive advantage (Stalk, 1989). The lignin-based products are competing with
petroleum-based products such as oil based PF resin and carbon fiber that have welldeveloped distribution infrastructure. Lignin-based products require a strong distribution
infrastructure support to make them available in the prospective markets and competitive
with other products.
The geographic location of the Case Mill provides a strategic advantage over the
other pulp mills in the region. Apart from its location, there are several established industries
in western Canada such as forestry, petrochemicals, pharmaceuticals, aerospace, automobile
manufacturing, construction, mining, and agribusiness that could benefit from the

44

biorefinery. A lignin-based biorefinery can manufacture products that can be used in all or
some of these industries. Lignin-based products are derived from renewable sources while
some of the inputs used in these industries are derived from non-renewable sources such as
petroleum. The addition o f lignin-based input will provide environmental benefits in the
form of renewable inputs in the production operations of these industries. Furthermore,
currently the Case Mill exports NBSK to Asia, North America, South America, and Africa
(Interviewee C, 2012). These are the potential overseas markets for lignin products (NNFCC,
2011). The mill also has access to a wide distribution network across the globe and also has
established long-term relationship with shipping companies. This distribution network can be
used to reach domestic and overseas markets for lignin bioproducts.
In the region there is availability of strong infrastructure around utilization of natural
resources, which can be used by the mill to its advantage (Government of Alberta, 2013;
Government of British Columbia, 2013). Apart from local infrastructure, organizations in the
region are also investing in expanding to create new products from renewable sources. This
provides the mill with an opportunity to collaborate with these industries by introducing
lignin-based bioproducts in their operations. Governments of Alberta and British Columbia
are also building infrastructure to support the development of biorefining capabilities in the
region (Government of Alberta, 2013; Government of British Columbia, 2013).
Although there is support from the government and an availability of well-developed
infrastructure, there are a few challenges that still need to be addressed. Firstly, a ligninbased biorefinery needs special delivery infrastructure due to its chemical composition and
nature (Holladay et al., 2007). Secondly, the mill does not have knowledge about existing
bioproducts distribution channels which may be very different from forest products
45

distribution channels. Finally, it would be challenging for the mill to adjust its current
distribution channel to introduce new products. These challenges can be addressed through a
collaborative strategy where Case Mill can provide the necessary support alongside partners
with strong distribution channels.
4.4.5 Marketing and sales
Key components of marketing and sales are to know you consumer and to deliver
products that are appealing to them (Hiam & Rastelli, 2007). Traditionally, marketing in the
forestry industry had no significance due to the large market demand in relation to the
number of producers (Stuart, 1970). More recently, the marketing and sales function in the
forestry industry is significant due to intense competition (Canadian Forest Service, 2011).
The successful implementation of a biorefinery also involves marketing and sales
strategies and infrastructure for promoting lignin-based bioproducts since many companies
find it challenging to develop a market for bioproducts (World Economic Forum, 2011;
Ackom, 2013; International Energy Agency, 2009). A key to develop a strategy for the
marketing of lignin bioproducts is choosing the right product (Holladay et al., 2007).
The Case Mill studied in this research has marketing and sales office on West Coast
of Canada (Interviewee C, 2012). The sales and marketing is also supported by the mill’s
parent company’s sales office in Asia, especially China and Japan. The local and overseas
sales offices could be beneficial for lignin bioproducts sales. The Case Mill brand recognition
in North America and Asian markets can be used to promote lignin bioproducts using the
same brand name.

46

One of the challenges the mill will face at this level is to balance its marketing efforts
for pulp products and lignin bioproducts. Another challenge is competition from other
companies producing or considering production of bioproducts. This could create a very
competitive marketing environment for the Case Mill, which could lead to higher marketing
and sales expenses. Several companies have adopted collaborative strategies to address this
challenge. For example, DuPont and BP entered into a joint venture to manufacture
biobutanol, where DuPont used BP’s distribution network and marketing capabilities to enter
new markets and its technological capabilities to create unique products (Butamax, 2013).
The mill can collaborate with companies from either the petrochemical or agribusiness
industries to expand its distribution infrastructure.
4.5 Conclusion
On the basis of the SWOT analysis, we find that the Case Mill has geographic and
strategic advantages as far as the feedstock is concerned which the mill procure from
subsidiary sawmills and other sawmills in the region. The mill has long term harvesting
contracts in BC and Alberta regions, which provides sawmills access to lumber, and wood
chips and residuals to mill for pulp production.
The SWOT analysis of the mill also highlighted that the company does not have
sufficient R&D infrastructure to support a biorefinery technology. Apart from technology,
the mill does not have the necessary infrastructure required to market and distribute ligninbased products.
The types of partners the Case Mill need might include: a) a technology partner that
will provide access to lignin technology for the mill, and b) a partner with capital and
47

marketing and distribution infrastructure to support market development of lignin products.
In this scenario, the possible strategy for the Case mill is to create a multi-company joint
venture where the mill can be used as a pilot plant and provide feedstock material, skilled
workforce, and part of the capital investment. The other companies in the joint venture,
could include a technology provider for process and technical assistance and a company to
provide capital in addition to marketing and distribution infrastructure. The multi-company
joint venture will then bring together three separate firms with different sets of expertise and
shared vision and goals. The proposed partnerships will then address the issues uncovered in
the SWOT analysis and provide a strategy in support of a successful transformation of the
Case Mill into a lignin-based biorefinery.

48

Chapter 5: Value chains for lignin-based products and list of potential
partners or customers

5.1 Introduction
This chapter seeks to establish value chains for lignin-based products in western
Canada. We identified various players within these value chains that can help the Case Mill
to implement a lignin biorefinery. The products that our analysis focusses on are PF resin and
carbon fibers. These two products are chosen due to their potential markets and the
availability of technology to produce these products from lignin. The potential market value
for these two products is estimated to be $9.6 billion for PF resin and $1.6 billion for carbon
fibers (Smolarski, 2012). Furthermore, there are technologies available that can be integrated
within the existing Kraft pulping process to make these products (Holladay et al., 2007). All
this makes these products a good alternative for the Case Mill.
The methodology we adopted to do a value chain analysis is based on the primary and
secondary research consisting of interviews, case studies, and industry and government
reports. We identified a number of industries in western Canada related to these products.
Further, we identified companies within these industries that use carbon fibers and PF resins.
These two products are selected due to their current and future market demand as highlighted
in Chapter 1.

49

5.2 Value chain identification
The Case Mill’s current value chain starts with the procurement of harvesting
contracts from the provincial government. Then the harvesting contractors are hired to
provide wood chips to the mill for the production of Kraft pulp. Apart from the wood chips,
the mill also needs several chemicals such as sodium hydroxide and sodium sulfide, which
are procured locally (Interviewee A, 2012). The wood chips are then processed with
chemicals to produce Kraft pulp. The extracted pulp is then sent to packaging and storing
facility. Finally, orders are received by the marketing and sales office and the packages are
sent via rail and trucks to the customers in North America and to the nearest port for shipping
to China and other international markets (Interviewee C, 2012). Figure 7 presents the value
chain of the Case Mill.
It can be seen from the value chain of the Case Mill that the lignin is currently burnt
in the process to produce energy for the mill. As highlighted in the previous chapter on
SWOT analysis, there is a need to introduce technology, equipment, and market and
distribution infrastructure at the Case Mill. The Case Mill could follow a collaborative value
chain approach since it does not possess all the resources needed to implement a lignin-based
biorefinery as highlighted in the SWOT analysis.
The collaborative strategy can be implemented by identifying the potential partners.
In order to find potential partner the first step is to find applications of carbon fibers and PF
resins in various industries, as this will help the Case Mill to focus on industries that are
already either using or producing these products. Table 6. provide a list of industries that use
these products.

50

Harvesting or Logging
Companies - 3rd Parties
or company owned
Logs o r Chip*

—S

(

Transported to th e mill via
Truck (3rd p arty or ow ned by
th e mill

Pulp Mill

Chips

Process

Chips

Lignin

Pulp

v ___

b urned In the

Figure 7. Value chain of the Case Mill

51

for

torgy

Table 6. List of industries for carbon fiber and PF resins
Carbon Fibers industrial applications

PF Resins industrial applications

A erospace and Aircraft
M ilitary and D efen se
Sporting Equipm ent
H om e Furnishings
M edical Instruments
A utom obile

Forest products - P lyw ood , LVL, M D F, and O SB
C oating and A dhesive
F ood additives
A utom obile
A erospace
Healthcare

5.2.1 Value chain of Kraft lignin-based carbon fiber
Kraft lignin originates from both hardwood and softwood and is isolated with various
chemical processes. Kraft lignin can be converted into carbon fiber (Holladay et al., 2007).
Currently, over 90 percent of the carbon fiber originates from oil-based raw-material
(Norberg, 2012). This is an opportunity for the forest product industry to replace a part of
carbon fiber produced from petroleum with Kraft lignin-based carbon fiber. A simple value
chain for the Case Mill to produce Kraft lignin-based carbon fiber is shown in Figure 8. As
highlighted in the SWOT analysis in the previous chapter the Case Mill does not have the
technology and strong market development infrastructure. The value chain for Kraft lignin
based carbon fiber can be completed with the help of a technology organization and a
company with a strong marketing and distribution infrastructure and capital needed to
procure equipment.
The value chains of the carbon fiber depend on the type of the carbon fiber products
that companies are manufacturing. A good example to explain the value chain of carbon fiber
is the automobile industry. The automobile industry uses carbon fiber in some car parts to
make them lighter and stronger. The companies will procure the required carbon fiber from a
forest biorefinery, a renewable source, and provide consistent supply of carbon fiber sources
52

compared to petroleum-based carbon fiber which rely on crude oil resources and prices
(Holladay et al., 2007).

Trucked,

Figure 8: A simple value chain of a Kraft lignin-based carbon fiber

53

The value chain of carbon fiber in western Canada includes industries within the
region that can use carbon fibers in their production process. The industries in western
Canada that are already using carbon fibers include:
1) Aerospace: There is a strong presence of the aerospace industry in western
Canada, especially in the province of Alberta. Carbon fiber has a high demand in this
industry due to its lightweight and high thermal conductivity properties (Traceski, 1999). The
sector is involved in the manufacturing and R&D of equipment and components from carbon
fibers.
2) Aircraft: Carbon fiber’s light weight and strength properties are ideal for replacing
aluminum alloy components. There are several original equipment manufacturers (OEMs) in
western Canada that can use carbon fiber in manufacturing components. Several aircraft
manufacturers are already using carbon fiber in aircraft manufacturing. The use of carbon
fibers for component manufacturing increases fuel efficiency and decreases emissions.
3) Automobile: This industiy use carbon fiber reinforced plastics to make automotive
structure to reduce weight and improve fuel efficiency (Traceski, 1999). There are several
automobile parts manufacturers in the province of Alberta who can use a part of carbon fiber
produced at the Case Mill.
4) Petrochemicals: Western Canada is a leading petrochemicals manufacturer in
Canada. The sector produces chemicals and biochemicals. The Case Mill can create
partnerships with petrochemical companies to make carbon fiber from lignin instead of using
petroleum as an input for carbon fiber manufacturing.

54

5)

Defense: Carbon fiber has been extensively used in defense sector due to its light

weight and high strength. The defense sector in western Canada is expanding into new
markets and industries. This provides opportunities for the Case Mill to collaborate and
manufacture carbon fiber with this industry. Western Canada provides significant
opportunities as a market and to find potential partners to manufacture carbon fiber at the
Case Mill.
5.2.2 Value chain of Kraft lignin-based PF resins
PF resins have a wide range of industrial applications due to their physical strength,
hardness, glossy finish, electrical properties, heat resistance, and chemical stability (Pye,
2006). The global demand for PF resins is rising due to the general increase in world
economic activity. The largest market for PF resins is plywood and other related wood
products (IHS , 2011).
The market for PF resins in western Canada is dominated by the wood adhesives
industry especially in production of plywood, LVL, MDF, and OSB. The other industries
that use PF resins in their production processes include construction, specialty chemicals,
automotive, and aerospace. A simple value chain of the Case Mill producing Kraft ligninbased PF resins is shown in Figure 9. Again, the mill does not possess the technology,
marketing and distribution infrastructure, and required investment, this can be provided by
the partners within the value chain.
The industries within the value chain of PF resins, which could be the potential
partners or customers for the Case Mill include:

55

1) Panel board: PF resins based binders for panel board manufacturing is the largest
market representing nearly half of the PF resins used (IHS , 2011). The market is segregated
between plywood, OSB, MDF, LVL, and other engineered panel boards. There is a large
market for PF resins as binder in western Canada due to the large number of panel board
manufacturers in the region. These companies could be potential partners or customers.
There are also a large number of chemical companies involved in manufacturing of PF resins
in BC and Alberta. The Case Mill can collaborate with these companies for R&D activities.
2) Construction: PF resins have been used in construction industry as adhesives and
concrete admixtures (Pye, 2006). The construction sector in Alberta accounted for 7.8
percent of its GDP in 2011 (Goverment of Alberta , 2013), similarly the sector in British
Columbia accounted for 7.0 percent of its GDP in 2011 (Wilson, 2012). There are
opportunities for the Case Mill to produce PF resins for this industry.
3) Specialty chemicals: PF resins have been used as antioxidants in lubricants,
animal feed supplements, specialized adhesives, and in the rubber industry. They are used as
dye dispersants, dispersants for herbicides, pesticide, and fungicides, and in the
manufacturing o f circuit boards. Western Canada has a presence of national and international
chemical and agri-business companies that are involved in R&D activities around PF resins.
The Case Mill can collaborate with these companies and provide them with PF resins they
require.
4) Aircraft, Aerospace and Automobile: PF resins have high thermal stability and
fire resistant properties which are utilized in a wide range of manufactured components.
These applications include gas valves, automotive brake pistons, pulleys, and hydraulic and

56

water pump seals. The applications of phenol resins in the aircraft and aerospace
manufacturing, due to its resistance to chemical and corrosiveness, include electrical
commutators, switches, and wiring devices. There are several automobile original equipment
manufacturers (OEMs) in the province of Alberta, they can use PF resins produced at the
Case Mill.
To conclude, PF resins from a forest biorefinery could add environmental value to
these industries in the region since the majority of PF resins is currently manufactured using
petroleum-based raw materials.
5.3 Prospective partners or customers
The prospective partners or customers are selected based on their current product
portfolio, geographic location, and potential use of identified products. As highlighted in the
SWOT analysis, the western Canadian region has a presence of a large number of forestry
and chemical companies with strong infrastructure for biorefinery development. The
illustrative list is prepared from a complete list of forestry, petrochemicals, and technology
companies in the region.
The criteria we use to create an illustrative list of companies are: first, whether the
company has a production facility in the western Canada and use or manufacture either
carbon fiber or PF resins, second, whether the company has a technology to produce either
carbon fiber or PF resins, and finally, involvement in future and current projects around
biorefinery. We selected a company if it satisfies at least one of the criteria.

57

W »1
Figure 9: A simple value chain of Kraft lignin-based PF resins

58

The list of prospective partners or customers includes partners or customers from
three different industries which include forestry, chemicals, and biotechnology. The list of
such partners or customers is summarized in Table 7. These companies are part o f the value
chain identified in the previous section. All of these companies are either part of the value
chain or provide raw-materials to the industries identified in the value chain. Some of the
companies in the list are already manufacturing both PF resin and carbon fibers sourced from
petroleum based raw materials.

Table 7. List of prospective partners or customers
Industry

Forestry

Companies

Potential
Partner
or
Customer

Current Products

Identified product

West Fraser LVL
Weyerhaeuser

Customer
Partner

PF resin
PF resin

Ainsworth Engineered
Richmond Plywood
Canoe Forest Products

Both
Both
Both

LVL
Lumber, OSB, Plywood,
Engineered wood
Engineered wood
Wood panel
Plywood

Tolko Industries

Both

Lumber, panels, specialty
wood, Kraft paper

PF resin

Momentive

Both

PF resin or Carbon fiber

BASF Chemicals

Partner

Specialty chemicals and
materials
Chemicals and plastics

Dow Chemicals

Partner

PF resin or Carbon fiber

Chemtron

Partner

specialty chemical, advanced
materials, agro sciences and
plastics
Adhesive and sealants

Sika Canada

Partner

Ashland Industries
Lignol

Partner
Partner

FPInnovations

Partner

Chemicals

Technology

Specialty chemicals and
materials
Specialty chemicals
Biorefinery technology
Research and development for
Canadian forestry industry

59

PF resin
PF resin
PF resin

PF resin or Carbon fiber

PF resin
PF resin or Carbon fiber
PF resin
PF resin or Carbon fiber
PF resin or Carbon fiber

5.4 Conclusion
The value chains of PF resins and carbon fibers are very diverse due to their
applications in several different industries. The majority of PF resins are used in wood
adhesive sector for manufacturing plywood, MDF, LVL, and OSB. Similarly, carbon fiber
has huge market potential in automobile, aerospace, and aircraft manufacturing industries.
Western Canada contains significant opportunities for the Case Mill. The presence of
strong

industries

such

as

forest

products,

agribusiness,

chemicals,

automobile,

petrochemicals, and aerospace provide impetus to setup a lignin-based biorefinery to fulfill
current and future demand of these industries.
The next chapter uses the evaluation criteria and weights from the AHP survey
results to evaluate some of the potential partners identified in this chapter. The results have
been used to demonstrate how a Kraft pulp mill can use evaluation criteria to select potential
partners.

60

Chapter 6: Partner evaluation criteria and MCDM-AHP to evaluate
potential partners

One of the research objectives is to create partner evaluation criteria that can be used
by the Case Mill to select appropriate partners. The overarching results of the literature
review and case studies analysis highlighted two important aspects of partner evaluation
criteria. First, there are no specific criteria that can be used by a Kraft pulp mill to evaluate
potential partners. Secondly, each criterion is assigned equal importance than relative
importance based on criterion importance in the decision making. To overcome these
challenges Kraft mill specific partner evaluation criteria is created that can be used to
evaluate and select potential partners and each criterion is assigned relative importance
through a questionnaire survey.
This chapter seek to develop criteria that can be used to rank some of the potential
partners identified in the previous chapter. We use previous literature and case studies to
develop partner evaluation criteria for the Case Mill. Furthermore, AHP survey is used to
assign relative importance weights to each criterion. This chapter also provides an illustrative
example of application of the evaluation criteria by using some of the organizations
identified in the previous chapter.
The evaluation criteria for the Case Mill are divided into strategic criteria and
technical criteria. The technical criteria pertain to the operational skills and resources most
needed as determined by the SWOT analysis of the Case Mill. These include financial
resources, technology, and marketing and distribution resources and infrastructure. The
strategic criteria address the efficiency and effectiveness of the partnership in the longer-run.
61

These criteria are to assure the long-term sustainability of the collaboration. This category
includes hard to quantify attributes such as corporate culture, partnership history,
complementary resources, and research commitment. These criteria are discussed in detail in
the following sections of this chapter.
6.1 Technical Criteria

The first technical criterion is ‘financial resources’. The study of 810 alliances by
Duisters-Twardy (2008) showed that financial resources is the most important criterion for
evaluating potential partners and companies that use this criterion are more successful. For a
successful implementation and operation of a forest biorefinery need initial investment and
regular funding for R&D and marketing activities (Chambost et al., 2008). Therefore, a
sound financial structure of a potential partner is essential for the long-term financial
sustainability of a biorefinery. The indicators that can be used to assess financial status of a
company are presented in table 8.
Table 8. Indicators of financial status
Indicators
Profit margins
Average annual
growth rate
Return on assets
Current/Liquidity
ratio

• A measure of the amount of revenue remained after operating
expenses, interest, and taxes
• Measures the average increase in company’s revenue over a period. It
is a useful ratio to determine growth trends of a company
• An indicator of how effectively company is utilizing its assets and
gives an idea about the revenue that can be generated from the capital
• A useful ratio to measure company’s ability to fund its day-to-day
operations over the next 12 months

The second technical criterion is ‘technological compatibility’. The successful
implementation of a forest biorefinery at a Kraft pulp mill relies greatly on adaptation of new

62

technology and its integration into the existing operations (Chambost et al., 2008). The
indicators that can be used to identify technological compatibility should be based on a Kraft
pulp mill needs. The first indicator used to assess technological compatibility is the type of
technology a potential partner possesses. There are several technologies available such as
lignin precipitation and solvent pulping to implement lignin-based biorefinery at a Kraft pulp
mill. The second indicator is the implementation challenge a Kraft pulp mill may face while
integrating the technology within the existing process. Each technology for lignin-based
forest biorefinery brings its own unique adaption challenges and this needs to be analyzed
before deployment. The final indicator within the technological compatibility criterion is
safety and security considerations, as there are several important safety concerns with each
technology for producing lignin these needs to be understood before adaptation.
The third technical criterion is ‘marketing and distribution resources’. A strong
marketing and distribution infrastructure is crucial for the success of lignin-based biorefinery
(World Economic Forum, 2011). Lignin-based bioproducts need to be marketed and
distributed through different channels than traditional pulp and paper products. Therefore,
there is a need to assess potential partners’ marketing and distribution infrastructure.
Appropriate indicators for marketing and distribution evaluation criterion should include:
brand image, such as number of products manufactured and markets the potential partner
have access; and, distribution infrastructure such as marketing channels, distributors, and
retailers. The transformation of a Kraft pulp mill into a forest biorefinery is a challenging
task that involves many technological and commercial risks. A Kraft pulp mill can mitigate
these risks by collaborating with other businesses.

63

6.2. Strategic Criteria
The first strategic criterion is ‘complementary capabilities’.

Complementary

resources significantly contributes to the project success (Brouthers et al., 1995; Chung et
al., 2000). With the help of complementary resources a Kraft pulp mill may be able to
overcome some of the technological and marketing challenges. The complementary
resources a Kraft pulp mill may be able to provide include: production facility, feedstock,
and workforce. In exchange the potential partner could provide technology, capital, and
marketing and distribution infrastructure.
The second strategic criterion is ‘cultural compatibility’, which assesses whether
companies will be able to work together or not. Several researchers concluded that cultural
compatibility is the most significant and critical criteria in partners evaluation (Chung et al.,
2000; Dacin et al., 1997; Dyer et al., 2001). However, indicators of cultural compatibility are
somewhat vague and difficult to measure. One of the indicators to assess cultural
compatibility is compatible goals, a collaboration is likely to fail if both organizations have
dissimilar goals (Brouthers et al., 1995). It is therefore, of outmost importance to have
compatible goals to mitigate the failure rate. Another indicator to test cultural compatibility is
the way decisions are reached in an organization. In different organizations decisions are
made differently. The decision making could be authoritative in which the organization’s
leader is the sole decision maker, an example of such business is a family-owned. A decision
could be reached through facilitation by involving the organization’s leader and subordinates.
The other way to arrive at a decision is delegative where the organization’s leader passes on
the responsibility of decision making to subordinates. For long-term sustainability of forest
biorefinery at a Kraft pulp mill, there is a need for a facilitative approach, otherwise there
64

may be delays in strategic decisions such as investment in R&D, feedstock procurement, and
establishing distribution infrastructure.
The third strategic criterion is ‘research commitment’. For a Kraft pulp mill there are
significant challenges around developing, adapting, and deploying new biorefinery
technology. Therefore, there is a need for shared commitment to R&D. The indicators that
can be used to evaluate research commitment of an organization should include: history of
R&D and relationships with outside R&D organizations. The indicator to assess research
commitment of a company may include financial commitment to R&D activities, and the
number of collaborative research initiatives.
The fourth and final strategic criterion is ‘history of partnerships’. Zollo et al. (2002)
found that previous experience in partnerships positively enhances the performance of new
collaborations. Prior experience helps companies to formalize the partnership establishment
process and on-going partnership management process.
6.3 Results and analysis o f the AHP survey
This section presents results of the survey conducted to assign relative weights to
each criterion established in the previous section. As explained in the methodology chapter,
relative weights assigned to each criterion are more practical than equal weights since each
criterion has a unique role to fulfill in ranking and selection potential partners. One or more
criterion could be more important than the others.
The survey was conducted to assign relative weights with the help of biorefinery
industry experts. We asked experts to prioritize each criterion in order of importance. Table
9 provides the list of criteria developed in the previous section. The electronic questionnaire
65

(see appendix I) was created based on AHP methodology to assign weights to each criterion.
A total of 28 questionnaires were emailed to the experts. Returned questionnaires totaled 17
(9 from industry experts and 8 from academicians) for a response rate of 60.7 percent.
Through the questionnaire, participants were asked to use a pair-wise comparison
scale to assign relative weights to each evaluation criterion based on their professional
judgment. 1Expert Choice ’ software was used to facilitate ease in computation of the survey
data.

Table 9: Partner evaluation criteria and sub-criteria
Criteria

Sub-criteria (indicator)

C om plem entary resources
C u ltu ral com patibility:

a) Compatible goals

R esearch com m itm ent:
H istory o f successful an d failed
partn ersh ip
Financial resources:

Technological com patibility:

M arketing and distribution resources:

b) Decision making
a) History o f Research and development
b) Relationship with outside organizations

a) Profit margin,
b) Average annual growth rate,
c) Return on assets,
d) Current ratio
a) Type o f technology,
b) Implementation challenges,
c) Safety, security, and environmental
implications
a) Brand image,
b) Distribution infrastructure

66

6.3.1 Data analysis and result
Table 10 presents weights assigned by each participant to each criterion. The results
show that 9 out of 17 experts believe that financial resources are the top priority when
selecting partners for implementation of forest biorefmery at a Kraft pulp mill. These account
for 52.9 percent of the total participation, which means that the majority of the participants
consider financial resources to be the key criterion. The other top priorities are marketing and
distribution (3 out of 17), research commitment (2 out of 17), history of successful or failed
partnership (2 out of 17), and complementary resources (1 out of 17). Similarly, the least
preferred criterion based on the number of responses is research commitment (6 out of 17),
followed by cultural compatibility (5 out of 17), history of successful or failed partnership (4
out of 17), marketing and distribution infrastructure (1 out of 17), and financial resources (1
out of 17). The results show that technological compatibility is neither the least nor the most
preferred criterion, which means experts have consensus about the importance of technology
while selecting partners for a forest biorefinery.
The aggregate priorities can be seen in Figure 9. According to the survey results, the
top three criteria for partner selection for setting up a biorefinery at a Kraft pulp mill are
financial, complementary resources, and marketing and distribution resources. Figure 9
shows that among seven criteria, participants believe that financial resources should be the
first priority with a weight of 0.211, followed by complementary resources (0.181). These are
followed by marketing and distribution (0.172), technological compatibility (.153), research
commitment (.100), history of failed or successful partnership (0.097), and finally cultural
compatibility (0.086).
67

As indicated in Figure 10 the technical criteria together account for 53.6 percent and
strategic criteria for 46.4 percent of the decision about the selection of a partner for
establishing a forest biorefmery. Also, the majority of the experts surveyed strongly believe
that financial resources (21.1 percent) have a greater role than other criteria in establishing a
partnership for forest biorefmery.
Some of the results such as financial resources are considered as the most of the
important are consistent with the literature. Other findings like cultural compatibility being
the least important criterion according to the survey participants is exactly the opposite to the
findings of existing related literature.
Furthermore, to better understand the results of the survey we have segregated the
weights assigned by academicians and industry experts. The results in Figures 11 and 12
show that the top priority for academicians is complementary resources (.219), which are
closely followed by financial resources (.192). On the other hand, industry experts believe
that financial resources are top priority with 0.226, followed by marketing and distribution
infrastructure (.167). A close examination of the results revealed that marketing and
distribution infrastructure play a significant role according to both industry and academicians
since both assigned similar weight to the criterion. The least preferred criterion according to
academicians is cultural compatibility, and for industry experts is the history of successful or
failed partnerships. There is insignificant difference between weights assigned to technical
and strategic criteria by academician and industry experts as shown in figure 11 and 12.

68

Table 10. Weights assigned by each participants

Participant no.

1

2

3

4

S

6

7

8

9

10

11

12

13

14

IS

16

17

Cultural
Compatibility

0.066

0.037

0.222

0.119

0.222

0.039

0.159

0.045

0.043

0.129

0.093

0.035

0.093

0.034

0.232

0.085

0.060

Research
Commitment

0.248

0.082

0.09

0.106

0.090

0.199

0.242

0.061

0.037

0.057

0.069

0.331

0.047

0.065

0.022

0.017

0.135

History of
Successful or Failed
Partnerships

0.043

0.236

0.043

0.020

0.043

0.023

0.084

0.179

0.096

0.060

0.118

0.060

0.129

0.418

0.026

0.084

0.070

Technological
Compatibility

0.205

0.069

0.094

0.148

0.173

0.083

0.173

0.185

0.117

0.165

0.139

0.149

0.201

0.158

0.164

0.056

0.206

Marketing and
Distribution
Capabilities

0.063

0.157

0.067

0.172

0.188

0.166

0.063

0.168

0.189

0.063

0.204

0.076

0.243

0.095

0.302

0.310

0.100

Financial
Resources

0.287

0.208

0.100

0.276

0.199

0.390

0.193

0.227

0.352

0.268

0.255

0.186

0.083

0.017

0.061

0.200

0.236

Complementary
Resources

0.088

0.212

0.384

0.119

0.074

0.100

0.086

0.133

0.166

0.217

0.122

0.163

0.204

0.213

0.193

0.248

0.193

C7\

v©

Aggregate weights assigned to each criterion
Financial Resources

Complementary Resources

Marketing and Distribution Capabilities

Technological Compatibility

Research Commitment

History of Sucessfiil or Failed Partnerships

Cultural Compatibility
History of
Marketing and
Complements!
Sucessfiil or
Technological
Research
Cultural
Distribution
y Resources
Failed
Commitment Compatibility
Compatibility
Capabilities
Partnerships
0.097
0.100
0.172
| ■ Aggregate weights assigned to each criterion
0.153
0.181
0.086

■ Strategic criteria - 46.4%

Financial
Resources
0.211

Figure 10: Overall priorities
Industry priorities with respect to partner evaluation criteria
History o f Sucessfiil or Failed Partnerships
Cultural Compatibility
Research Commitment
Complementary Resources
Technological Compatibility
Mariceting and Distribution Capabilities
Financial Resources

■ Strategic criteria - 45.4%
[■Weights assigned by participants

Financial
Resources
0.226

Marketing and
Research
Technological Complementar
Distribution
Compatibility y Resources Commitment
Capabilities
0.167

0.153

Figure 11. Comparison of weights: Industry

70

0.149

0.111

Cultural
Compatibility
0.102

History of
Sucessfiil or
Failed
Partnerships
0.093

Academic priorities with respect to partner evaluation criteria
Cultural Compatibility
Research Commitment
History o f Sucessfiil or Failed Partnerships
Technological Compatibility
Marketing and Distribution Capabilities
Financial Resources
Complementary Resources
■ Technical c n te n a - 52.5%
■ Strategic criteria - 47.5%

| ■ Weight assigned to each criterion

Complementar
y Resources

Financial
Resources

0.219

0.192

Marketing and
Technological
Distribution
Compatibility
Capabilities
0.175

0.158

History of
Sucessfiil or
Failed
Partnerships
0.101

Research
Commitment

Cultural
Compatibility

0.087

0.069

Figure 12. Comparison of weights: Academia

The comparison leads to the conclusion that both academics and industry experts
strongly agree that financial resources are one of the key criteria in partner selection for
forest biorefinery. They also accept that the technology compatibility and marketing and
distribution infrastructure are very crucial for successful implementation of forest biorefinery
at a Kraft pulp mill.
Furthermore, we consolidated the top five partner evaluation criteria (Table 11)
based on AHP survey ranking to reduce the likelihood of partnerships failure. It is hoped that
these criteria can serve as a reference for Kraft pulp mills interested in setting up a forest
biorefmery with the help of partners.

71

Table 11: Top five evaluation criteria
Criteria
Financial resources:

Complementary resources
Marketing and distribution
resources:
Technological compatibility:

Research commitment:

Sub-criteria (indicator)
a) Profit margin,
b) Average annual growth rate,
c) Return on assets,
d) Current ratio
a) Brand image,
b) Distribution infrastructure
a) Type of technology,
b) Implementation challenges,
c) Safety, security, and
environmental implications
a) History of Research and
development b) Relationship with
outside organizations

6.4 An example of MCDM AHP - ranking potential partners
The previous chapter identified value chains for lignin-based products in BC and
Alberta and also identified a few of the potential partners or customers. This section seeks to
demonstrate how to evaluate potential partners using top five evaluation criteria established
in the previous section. For this purpose we evaluated a technology company, a
petrochemical, and a forestry company from the list of potential partners’ already identified.
For this reason, we have arbitrarily chosen three organizations from the list of potential
partners a) BASF Chemicals, b) Weyerhaeuser, and c) Lignol.
Figure 13 provide a schema of AHP methodology in which criteria are established to
achieve specific goals and each alternative is evaluated based on each criterion. A more
detailed computation on how to use AHP methodology can be found in Appendix 2. The
information and data needed to evaluate potential partners was collected through publically
available sources mainly comprising company annual reports, financial statements, and press
72

releases. The required information is consistent with the top five criteria established by AHP
survey in this chapter.

GOAL
Selecting potential partner

Criterion 3
Technological
Compatibility

Criterion 4
Marketing «od

Distribution
IntmMnKfem

Criterion S
Research
Commitment

Alternative 2
Weyerhaeuser

Figure 13. AHP hierarchy
‘Expert Choice ’ software is used to evaluate and assign ranking to each organization.
Rankings are assigned according to the company performance, for example companies were
evaluated with respect to their published profit margins, average annual growth rate, and
current ratios. Similarly, companies were compared based on their R&D expenditure and
activities, and number of partners. Table 12 presents the types of data and information
collected to assign ranking. This information is combined with the weights assigned to the
criteria by AHP surveyed participants.

73

Table 12. Type of data and information needed to evaluate potential partners
Criteria
Financial resources
Complementary resources
Marketing and Distribution
Infrastructure
Technological compatibility
Research commitment

Data or Information type
Profit margin, average annual growth rate, current ratio,
and return on assets
Financial statements, technology related information, R&D
activities, and marketing and distribution infrastructure.
Financial statements, marketing and sales market access,
distribution channels, and products manufactured
Information about available technology, and projects
related to biotechnology
Financial statements, number of partners in R&D,
investment in R&D, and number of R&D projects

6.4.1 Company backgrounds

This section provide a brief overview of the companies that are arbitrarily chosen to
provide an example of how AHP MCDM methodology can be applied to select potential
partners for a Kraft pulp mill using criteria established in this research.
BASF Chemicals
BASF Chemicals is a world leading chemical manufacturing company. It owns 380
production facilities around the world (BASF, 2013). The portfolio of its products is vast and
there are several products within its existing portfolio that can be replaced with renewable
sources such as lignin-based bioproducts. It is also exploring new carbon-based materials. Its
customers are from several industries such as chemicals, agribusiness, oil and gas,
petrochemicals, construction, and nutrition and health. Some of these are potential industries
to market products such as PF resins and carbon fibers. It has research centers for process,
chemical engineering, advanced material research and has more than 600 partners (BASF ,
2013).

74

Weyerhaeuser
Weyerhaeuser is one of the largest forestry manufacturers of wood and specialty
cellulose fiber products (Weyerheauser, 2013). It owns production facilities in the US and
Canada and has a strong presence in the provinces of BC, Alberta, Saskatchewan, and
Ontario. It has strong R&D interest in bioproducts and established partnerships to build
biorefining capabilities

and share

several R&D

projects

with other companies

(Weyerhaeuser, 2013b). It sells products globally through its own sales organizations and
distribution facilities (Weyerheauser, 2013).
Lignol
Lignol is a Canadian company involved in the development of biorefining
technologies (Lignol, 2013). It provides R&D services to companies interested in biorefining
(Lignol, 2013). It has developed technology for production of lignin-based products, and has
pilot plant that uses lignocellulosic feedstock to produce biofuels and biochemicals. It is also
involved in R&D activities for lignin-based bioproducts with other organizations.
Furthermore, the data collected for each of the above firms for comparison and
evaluation is presented in Tables 13 and 14. This information is used to complete the
pairwise comparison. A detailed pairwise comparison is provided in Appendix 3. As it can be
seen from Table 13 that Weyerhaeuser and BASF Chemicals both have profit compared to
Lignol. This is because Lignol is primarily involved in technology development and testing,
while Weyerhaeuser and BASF Chemicals have well-developed sales portfolios. The R&D
expenditure of Lignol is substantial compared to the other two companies. This makes this

75

list of potential partners more reliable, since not every firm possess the resources needed to
implement forest biorefinery, as highlighted in the literature review.
Table 13. Financial information for indicators

Weyerhaeuser
Profit Margin:
(Net Profit/Revenue)X100

Average Annual Growth Rate- last 3 years:
Growth rate in (2010 +2011+2012)/3

Return on Assets:
(Net income/Total Assets)Xl 00

Current Ratio:
(Current Assets/Current Liabilities)Xl 00

Lignol

BASF
Chemicals

+5.43

-82.7

+6.19

+12.26

-75.3

+16.06

+3.05

-22.02

+14.06

+1.7

+0.27

+1.65

Table 14. Indicators data and information

R&D expenditure
growth rate
R&D expenditure as
a percentage o f sales
Selling expenses as a
percentage o f sales
Number o f Partners
in forest
biotechnology
Product Portfolio:
Industries
specifically for
lignin products
Possession o f Lignin
Biorefining
technology
Strategic Interest in
Biotechnology
Product Markets
access - relevant to
lignin products

Weyerhaeuser

Lignol

BASF Chemicals

+6.6 percent

-41.3 percent

+8.8 percent

+0.4 percent

+36.1 percent

+2.2 percent

+2.7 percent

Not reported

+9.7 percent

6

3

3

5

5

6

Yes

Yes

No

Yes

Yes

Yes

5

4

5

76

6.4.2 Results
The rankings were assigned to the organizations based on the weights established by
surveyed participants and information gathered about finance, technology, marketing and
distribution, and R&D activities of the organizations. Figure 14 presents the ranking of the
three organizations. The left side of the figure presents aggregate weights assigned to the top
five criteria. The right side of the figure shows the ranking of each company. According to
the weights Weyerhaeuser is the most preferred organization with 36.6 percent, closely
followed by BASF with 35.5 percent and the least preferred organization is Lignol with 27.8
percent.
There is a need to further understand the performance of organizations on each
criterion and Figure 15 provides these details. As highlighted in the SWOT analysis the Case
Mill need technology, capital, and marketing and distribution infrastructure, hence it is
essential to understand which organization provides a balance of these needed resources.
There is a need to stress that any change in the priority to any criterion could affect the
ranking. The figure shows that Weyerhaeuser has the greatest amount of complementary
resources needed to implement a lignin-based forest biorefinery. However, Weyerhaeuser’s
research commitment is at par with Lignol, but lags behind BASF, which leads in terms of
R&D initiatives. Additionally, Weyerhaeuser lags behind BASF in financial performance and
marketing and distribution infrastructure. However, BASF does not possess the technology to
produce lignin-based products.
A close examination reveals that if the Case Mill is interested in a partner with R&D
capabilities, and marketing and distribution infrastructure then BASF is the best alternative.
However, if the Case Mill is interested in partners with technological capabilities then either
77

Weyerhaeuser or Lignol is a good fit. Although, any change in priorities to any criterion will
affect the ranking of each organization. The next section will assess various scenarios to
illustrate how a change in ranking occurs due to a change in the priorities assigned to each
criterion.

20.4% Complementary Reeourcee

35.5% BASF Chemicals

12.7% Research Commitment

36.6% Weyerhaeuser

26.0% Financial Resource*

27.8% Lignol Energy

20.8% Technological Compatibility
20.2% Marketing and Distribution Resources

0

.1

2

.3

I

.4

.

I

.5

i

I

.6

i

l

.7

i

I

.8

i

L-

.9

10

.3

.1

.5

Figure 14. Overall ranking of potential partners

.90
.80
Weyerhaeuser

.70

BASF Chemicals

.60

Ugnel Energy

.50
.40
.30
.20
.10

.00 u------------------- —
CompfemtMary R e m rd i
ftuaw cM
ComraHn

Marketing
And Distribution

78

OVERALL

Figure 15. Performance of each organization against each criterion
6.4.3 Scenario analysis
This subsection is to understand the impact of a change in priority assigned to each
criterion on the overall ranking of the organizations. The AHP methodology relies on weights
assigned to each criterion to rank alternatives, we further analyzed the results of the previous
example to measure the impact of change in weights assigned to each criterion. For this
purpose we created several scenarios to examine the change in ranking of the organizations
with respect to change in weights assigned to each criterion.
There could be several sources of uncertainty in AHP methodology such as rank
reversal due to the addition or deletion of an alternative or criterion, and using of different
scale to assign ranking and weights. This example of scenario analysis is done to test the
uncertainty in ranking when different weights are assigned to each criterion. As defined by
Saltelli et al. (2004) that the scenario analysis is “the study of how the uncertainty in the
output of a model (numerical or otherwise) can be apportioned to different sources of
uncertainty in the model input”. The scenario analysis will help a Krafit pulp mill to plan for
different scenarios while implementing a forest biorefinery at the mill. This analysis will help
a Kraft mill to understand the impact of a particular criterion to the rankings compared to
others. This analysis was done with the help of ‘Expert Choice ’ module on scenario analysis.
Scenario 1: Emphasis on complementary resources
Figure 16 represents results of the scenario analysis 1; where the Case Mill rely more
on complementary resources followed by financial performance and technological
compatibility. The weights assigned to each criterion were decreased to increase the weight
79

assigned to complementary resources. It can be seen from this Figure that there is no change
in ranking of the organizations. But preference to BASF is reduced by 2.4 percent while at
the same time it has increased by 1.0 and 1.5 percent for Weyerhaeuser and Lignol
respectively. This scenario does not affect the ranking of the organizations drastically. This
implies that even if the Case Mill would like to keep complementary resources as their top
priority, Weyerhaeuser is still provide the maximum value to the partnership compared to
BASF Chemicals and Lignol Energy.
33.7% ComplTfiantary Rwourcaa

133.1% BASF Chemicals

114% Ro aarch Commitment

37-6% Weyerhaeuser

23.2% Financial Resources

29.3% Lignol Energy

22 8% Technological Compatibility
9.0% Mariceting end Distribution Resources

0

_l

.1

I

I

2

1

I

.3

I

L-

4

JS

.«

.7

.8

.3

.9

Figure 16: Scenario analysis 1

Scenario 2: Emphasis on technology
Figure 17 represents results of scenario analysis 2 where technological compatibility
is considered the top priority and 50 percent of the decision relies on this criterion. The
weights to each criterion were decreased to increase the weight assigned to technological
compatibility. The result changes the ranking of the organizations, but Weyerhaeuser is still
the best alternative since it owns technology related to lignin bioproducts. Lignol is now the
second best alternative in this scenario even with the poorer financial performance. This is

80

due to the fact that Lignol has technology to develop lignin-based products. This scenario is
highly likely during the implementation of lignin biorefmery at the mill since the case-study
Kraft pulp mill does not possess technology for lignin-based products manufacturing.

17.0% Comptom*ntary Rwourcw

302% BASF ChtmicaU

8.4% Research Commitment

37.3% Weyerhaeuser

15.9% Financial Resources

32-5% Lignol Energy

50.1% Technological Compatibility
8.6% Marketing end Distribution Resources

Figure 17. Scenario analysis 2

Scenario 3: Emphasis on financial resources
Figure 18 represents results of the scenario analysis 3 in which the financial
performance is considered as the most important criterion, followed by technological
compatibility. The weights to each criterion were adjusted accordingly to increase the weight
assigned to financial resources, 44 percent of the decision about partner selection relies on
financial performance of the company. The result of this analysis is similar to actual overall
results presented in Figure 14. The result implies that both Weyerhaeuser and BASF
Chemicals are financially comparable to each other. This scenario does not affect ranking of

81

the organizations since both Weyerhaeuser and BASF generated strong financial results
compared to Lignol Energy

114,1% Compteroantary Resources

135.3% BASF Clwmicais

[7.0% Rwcarch Commitment

|37.5%WSy«baausar

|443% Financial Rwourceg

272% lignol Eiwrgy

^^^^^otoJcalCompatiWlity
19.5% MariwUng and Distribution Rasourcas

1

0

*

.1

1

I

i

2

.3

I

J

I 1

I

4 S

I

t

M

I

I

.7

I

I

.8

I

t

L

_ l _________ L .

.9

F igu re 18: S cen ario analysis 3

Scenario 4: Emphasis on marketing and distribution
Figure 19 shows the results of scenario analysis 4 where marketing and distribution is
assigned top priority closely followed by technological compatibility. The weights to each
criterion were adjusted to increase the weight to marketing and distribution resources and
technological compatibility. Again, the change in weight to both of the criteria does not
affect final decision about the ranking of the organizations since both Weyerhaeuser and
BASF possess strong distribution and marketing infrastructure.

82

17J%Compl«iwntary Rmoutcm

34.0% BASF Ctwmicate

4.1%RtMtreh Commitment
6.0%Financial Resource*

29.5%Lignol Energy

34J% Tachnotogicel Compatibility
37.6%Meffceting and Distribution Reeourcw

Figure 19: Scenario analysis 4
6.4 Conclusion
An attempt has been made in this chapter to establish partner evaluation criteria for
the Case Mill. AHP methodology has been used to assign weight to each criterion. The
financial resources of the prospective partners are considered as the top priority by the survey
participants. This is closely followed by complementary resources. The technical criteria
which comprise technological compatibility, marketing and distribution infrastructure, and
financial resources account for 52.5 percent of the decision while selecting partners for forest
biorefinery. On the other hand, strategic criteria which comprise cultural compatibility,
research commitment, complementary resources, and history of partnership account for 47.5
percent of the decision while selecting partners for forest biorefinery. This chapter also
demonstrated the effect of change in weight assigned to each criterion on the ranking of
alternatives with the help of scenario analysis. The result highlighted the consistency in
ranking generated with AHP methodology even with diverse group of survey participants and
companies with diverse strengths and weaknesses.

83

Chapter 7: Conclusions
The goal of this research was to answer some of the important questions for a Kraft
pulp mill that is trying to implement a lignin-based biorefinery: what types of partners are
needed to implement a lignin-based forest biorefmery at a Kraft pulp mill; where to find
potential partners for a Kraft pulp mill; what is the process of partner selection; and how to
evaluate potential partners? The study is conducted using diverse quantitative and qualitative
methods including, interviews, surveys, document analysis, government and industry reports,
and literature on the subject.
The research focused on a case-study approach and a Kraft pulp mill in western
Canada has been used as a base case and referred as Case Mill throughout this research. This
Case Mill produces pulp from softwood, that is further used to manufacture paper and paper
based products. In order to implement a biorefinery at the Case Mill, there are several
technologies available, but the selection of technology depends on the feedstock type and
availability, implementation challenges, costs involved, and the type of products the mill
wants to produce.
What is the process of partner selection for a Kraft pulp mill interested in
transforming its pulp mill into a lignin forest biorefmery? There is limited research on partner
selection process. The process suggested in this research has eight steps. This process is
based on previous literature and case studies on partner selection process. The most
important steps identified in this process are SWOT analysis o f the mill, identification of
partner evaluation criteria, and identification of potential partners. However, each Kraft pulp
mill is unique and may choose to create its own selection partner selection process. Some of

84

the steps from this process were followed to accomplish objectives of this research and
answer research questions.
What types of partners are needed to implement a lignin biorefinery at a Kraft pulp
mill? The Case Mill’s strengths, weaknesses, opportunities, and threats were examined and
information was gathered through interviews of Case Mill representatives, documents and
annual reports, and press releases. Based on the analysis and observations we came to the
conclusion that the Case Mill should consider partnering with a technology company and a
company with marketing and distribution infrastructure and financial resources. This is due
to the reason that the mill does not possess the technology, and marketing and distribution
infrastructure needed to commercialize lignin-based products. A partner with financial
resources can help the mill to mitigate financial risks involved with biorefinery
implementation. This can be done through several collaborative strategies that may include
joint venture, licensing, or joint R&D initiative.
Our recommendation based on the examination of case studies and examples from the
forestry industry is that the Case Mill should consider creating a multi-company joint venture
where the Case Mill can be used as a production facility and provides feedstock, manpower,
and machinery. The other companies should include a technology provider and either a
petrochemical or forestry company. This way the mill can mitigate the financial,
technological, and commercial risks involved with forest biorefmery implementation and
have access to technology, capital, and marketing and distribution resources. Another
alternative for the Case Mill is to get a license for lignin technology from a technology
provider and partner with a petrochemical or forestry company that can provide capital and
marketing and distribution support.
85

Where to find potential partners for lignin-based forest biorefinery? The answer to
this question was found in the analysis of the value chains related to lignin-based products.
There are several products that can be manufactured with lignin as mentioned in Chapter 1,
but there are very few that can be profitably produced due to technological and cost
constraints. This research concentrated on two products that are carbon fibers and PF resins,
based on their current and future market prospects. Both products have a wide range of
applications in several industries such as petrochemicals, forestry, construction, automobile,
aerospace and aircrafts, agribusiness, defense, and oil and gas. The geographical focus of this
research was western Canada and this region has strong presence of similar industries. To
find potential partners we used value chain analysis of lignin-based products in BC and
Alberta. Based on this analysis we have identified several companies that could either be
potential partners or potential customers. Our recommendation to the Case Mill is to search
for partners within the existing value chain of carbon fiber and PF resins.
How to evaluate potential partners? The evaluation criteria for potential partners in
this research are based on strategic and technical needs of the Case Mill. The evaluation
criteria were based on the previous research, and case studies. The criteria comprise several
quantitative and qualitative criteria, therefore, there was a need to assign weights to each
criterion. For this purpose MCDM AHP survey was conducted. The weights were assigned to
each criterion through this survey. The evaluation criteria for demonstration were confined to
the top five criteria according to the surveyed participants that are: financial resources,
technological compatibility, research commitment, complementary resources, and marketing
and distribution infrastructure. The weights were assigned to each criterion based on AHP
MCDM survey results. Financial resources were considered the most important criterion

86

while selecting partners, followed by complementary resources, and marketing and
distribution infrastructure. Since each Kraft pulp mill is unique, the criteria used should be
based on its specific needs and requirements. For the Case Mill, lignin production
technology, capital, and marketing and distribution resources are needed for the mill to
successfully implement a lignin biorefmery. The survey results underscore the importance of
these three criteria. Also highlighted that there is difference in literature and survey results
especially for cultural compatibility which according to the literature is one of the most
important criterion, but survey participant consider it least important in decision making.
In a nutshell, if a company is interested in implementing a lignin-based forest
biorefinery, firstly, it needs to understand its own requirements. Secondly, it must identify
how and with which partners they can fill these needs. Finally, it must use evaluation criteria
to choose from several alternatives.
The research provides a partner selection process specially designed for Kraft pulp
mills interested in lignin biorefmery. This research contributes to the existing knowledge on
strategic partnerships within the existing value chain of a company. The process suggested in
this research can be used by other Kraft pulp mills to find and select partners for
implementing a forest biorefinery. The research developed criteria with the help of MCDM
AHP methodology, which is unique and has never been attempted before within the
biorefmery context. The evaluation criteria developed in this research can be used as
guidance for future research on the topic. The results highlighted the most important criteria
for selecting partners for a mill interested in developing a forest biorefinery. Similar
methodology can be adopted by other industries to develop partner evaluation criteria.

87

There are several limitations within this research. The conducted interviews and
surveys leading to some research biases. The information collected for assigning weight to
each criterion might be biased due to personal judgments of the experts. The selection of
survey participants is based on our personal judgment that might have led to a selection bias.
This bias can be reduced by increasing the number of participants to accommodate other
industries experts in future research and also by asking references from industry experts. The
geographic scope of the research was western Canada and this might have affected selection
of potential partners. Furthermore, some of the criteria might have been omitted due to their
qualitative nature or non-availability of data-set needed for the indicators. This research can
further be broadened in two main directions: by expanding the geographical scope of the
study, and applying similar selection process and evaluation criteria to other industries using
MCDM AHP methodology. The other area that needs to be further explored is by expanding
the scope of SWOT analysis of a Kraft mill by including political and environmental aspects
to the analysis. In order to do so PESTLE analysis can be used to understand the impact of
forest biorefmery at a mill level and community level.

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96

Appendix I - QUESTIONNAIRE
Forest Biorefinery1- Partner Selection Criteria Ranking Survey
T he p u rp o s e o f th is re se a rc h is to c re a te p a rtn e r se le c tio n c rite ria fo r fo re stry co m p an ies in te re s te d in a fo re s t
bio refin ery . T he goal o f th is q u e stio n n a ire is to c o m p a re a n d ran k c rite ria 2 fo r selectin g p a rtn e rs fo r an existing
K raft p u lp mill3. T h ese c rite ria will b e u se d w hile e v a lu a tin g a n d c o m p a rin g p ro sp e ctiv e p a rtn e rs . W e hav e
d e v e lo p e d a s e t o f 7 c rite ria an d 13 su b -criteria b a se d o n c a se s tu d ie s an d p rev io u s re s e a rc h : (D efinitions a re
p ro v id ed o n p a g e 3 a n d p a g e 4}
1)

C o m p le m en ta ry re s o u rc e s4

2)

C ultural co m p atib ility 5:
a) C o m p atib le go als6

3)

R esearch c o m m itm e n t8:
a) H istory o f R esearch a n d d e v e lo p m e n t

4)

H istory o f successful a n d failed p a rtn e rs h ip 9

5)

Financial re so u rc es:

6)

b) D ecision m aking7
b) R elatio n sh ip w ith o u ts id e o rg a n iz atio n s

a) Profit m arg in 10,

b) A v erag e a n n u a l g ro w th ra te 11,

c) R eturn o n a s s e ts 12,

d) C u rre n t ra tio 13

T echnological com patibility:
a) Type o f tech n o lo g y ,

b) Im p le m e n ta tio n challenges,

c) Safety, secu rity , a n d e n v iro n m e n ta l im p lica tio n s14
7)

M ark etin g a n d d istrib u tio n reso u rc e s:
a) B rand im ag e15,

b) D istribution in fra stru c tu re 16

Please take a few minutes to complete this questionnaire. Your response will provide us some valuable
information to help us rank the proposed criteria in order o f importance and utility.
This questionnaire uses pairwise comparisons17. Please mark your preference between criteria by using
the scale from 1-9. Please refer example 1 and 2.
This is an electronic questionnaire. You can submit this form electronically bv clicking on the SUBMIT
FORM BUTTON in the top right corner or vou can submit this form manually bv saving it and attaching
it in an email to shah2 @unbc.cal
P lease mark the right answer in T able 1 on page 2 and page 3.
1:1— Equally Preferred
2:1— Equally to M oderately Preferred
3:1— M oderately Preferred
4 :1 --M oderately to Strongly Preferred
5:1 --Strongly Preferred
6:l--S tro n g ly to V ery Strongly Preferred
7:1 --V ery Strongly Preferred
8:1—V ery to Extrem ely Strongly Preferred
9*:1— E xtrem ely Preferred

97

Example 1. —Complementary resources is moderately preferred to Cultural
compatibility
Complement
1

ary

9:

ft

7

ft

S:

Resources

1

1

1

*

; 1

£ I l»
1
>■1*

ft

*

1

Cultural
1

1:

1:

1:

1:

ft

1:

Compatibili

3

*

S

s

7

•

9

ty

Example 2. - Cultural compatibility is moderately preferred to Complementary
resources

1

Complement
ary
Resources

9:
3

7:
1

ft
1

ft

1

5:
1

I

,x

3:
1

3

3

1:
4

1:
5

U
%

1:
7

ft

sirs

1:
9

Cultural
Compatibili
ty

Table 1
Extremely Preferred

Equally

Extremely Preferred

■*
Cultural
Compatiblli

Complement
ary
Resources
Complement
ary
Resources

Research
Commitme
History of
Successful
or failed
partnershi

Complement
ary
Resources

Technologi
cal
Compatibili

Complement
ary
Resources
Complement
ary
Resources

Z

Financial
Resources

History of
Successful
or failed
partnershi

Cultural
Compatibility

Technologi
cal
Compatibili

Cultural
Compatibility
Cultural
Compatibility

Financial
Resources

98

Marketing
and
Distributio
n
infra struct
ure
History of
Successful
or failed
partnershi

Cultural
Compatibility

Research
Comm itm ent

P
Relationshi
p with
outside
organizatio
ns
Technologi
cal
Compatibili

History of
R&O

Research
Comm itm ent
Research
Comm itm ent

ty
Financial
Resources
Marketing
and
Distributio
n
infrastruct
ure
Technologi
cal
Compatibili
ty

Research
Comm itment
History of
Successful or
failed
partnership
History of
Successful or
failed
partnership
Marketing
and
Distribution
infrastructur

Financial
Resources
History of
Successful
or failed
partnershi
P

Distribution
infrastructur

Brand
Image

Extremely Preferred

Extremely Preferred

Equally

4 ----------------Technologica
1
Compatibilit
19

y

9:
1

19

Type of
Technology

9:
1

a

19

b

19

c

Im plem entat
ion
Challenges
Safety,
Security, and
Environment
al concerns

at
s

►

7:
1

■ f t.

S:
1

*

A -

3:
1

7:
1

1f t
i

5:
1

4:
-X

3:
1

ft

i
3

1:
ft
4 ' 5

ft
P

1
3

£
«

1:
5

f t- ^ 1:
'f t : 7

Fife.
p

1:
3

ft
4

1:
5

ft
•

fft.
it

1:
3

ft
4

1:
S

f t ’ j 1:
7
«

•a!
X

ft
•

1:
7

i f t ■ 1:
* ; 9

n

1:
9

t:
* '

1:
9

Financial
Resources
Im plem entat
ion
Challenges
Safety,
Security, and
Environment
alconcerns

ft

1:
9

Type of
Technology

ft

IlSI
9:
1

*
i

7:
1

f t - S:
* ; 1

4:

3:
1

9:
1

t:

7:
1

ft
1

4!
1

3:
1

I

S:
1

ft
1

99

1:
7

a

Technologies
1
Compatibilit
20

V

■
9:
1

f

7:
1

*
t,

5:
1

mj
:* H

lpf§g

m

3;

1

1:
3

i

1:
9

Marketing
and
Distribution
infrastructur
e
Marketing
and
Distribution
infrastructur
e
Average
Annual
Growth Rate

1:
9

Return on
Assets Ratio

1:
9

Current
Ratio

1:
9

Profit
Margin

.1

1:
9

Return on
Assets Ratio

u
t

1:
9

Current
Ratio

1:
5

St
#.

1:
7

St

1:
9

1:
S

.

1:
7

St
i p

1:
9

|i l |l

p i
Financial
Resources

9:
1
9:
1

21
b

Profit
Margin
Average
Annual
Growth Rate

9:
1

21
c

Return on
Assets Ratio

9:
1

21
d

Current
Ratio

9:
1

21

Profit
Margin
Average
Annual
Growth Rate

9:
1

21
21

a

a:
X

7:
1
7:
1

£

Cc

S:
1

3:

3%’

i

1:
3
1:
3

e
21
f

A

X.
ii|iiip

9:
1

f

1:
7

1:
5

|

1:
7

4s
4

l'

5:
1

4t
1

3:
i

7:
1

5:
1

4

3:
i

u
2$

1:
3

7:
1

5:
1

4;

3:
i

tl
xl

1:
3

1:
S

f P

1:
7

x

1:
3

1:
5

i

1:
7

1:
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1:
3

1:
5

t
S

1
7

7:
1

„

j B > r'

1i

z

X •< ",

J

1:
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5:
1

*

7:
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lilt

7:
Sc
1 11

S:
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5:
1

3:
i

K W

3:
t ' * 1

2: H
1

4s

W-

H

*•

1:
3

it

it
4

1:
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1:
7

g
IS

This is an electronic questionnaire. You can submit this form electronically bv clicking on the SUBMIT
FORM BUTTON in the top right corner or vou can submit this form manually bv saving it and attaching
it in an email to shahz@unbc.cal

Definitions
1.

Forest biorefinery: A forest biorefinery is a facility that converts w ood based b iom ass to produce
fuels, pow er, and chem icals.

2.

Criteria: An indicator, rule, or test w hich can be used to m ake a decision.

3.

Kraft pulp mill: Is a manufacturing facility that produces w ood pulp from w ood chips cook ed in an
alkaline solution.

4.

Complementary resources: Critical resources w hich create a unique com petitive advantage for both
firms w hen resources are com bined together. Example: Company “A ” p o ssesses unique tech n ology
and com pany “B ” p o ssesses feedstock and facility. “A ” and “B ” together can create new products.

5.

Cultural compatibility: Culture is com posed o f organizations’ b eliefs and values. It is the w ay
organization resolve day-to-day problem s and it is driven by em ployees at the organization. Culture
represents for an organization what personality is to individuals.

6.

Compatible goals: The end result that com panies w ould like to achieve. The goal could be financial or
strategic. It is one o f the indicators o f cultural com patibility.

7.

Decision making: The w ay decision s are reached by an organization. It could be authoritative: the
organization’s leader is the sole

decision

maker; facilitative: the organization’s leader and

subordinates work together to such a decision; delegative: the organization’s leader p asses on the
responsibility o f decision m aking to subordinates.

100

8.

Research commitment: M easured by the com pany’s involvem ent in research and developm ent
activities and initiatives.

9.

History o f partnership: A n organization’s prior experience in handling partnership process.

10. Profit margin: Is a m easure o f the amount o f profit accruing to an organization from the sale o f
products or services.
11 . Average Annual Growth Rate (AAGR): M easures the average increase in com pany’s revenue over a
period. It is useful for determ ining trends o f growth for a certain com pany.
12. Return on Assets: A n indicator o f h ow effectively com pany is utilizin g its assets. It g iv e s com panies
an idea about what earrings can be generated from invested capital.
13. Current ratio: Is an indicator that measures whether a com pany can fund its day-to-day operation
over the next 12 months.
14. Safety, security and environmental concerns: Som e o f the tech n ologies m ight need additional safety
and security measures at the production facility. Sim ilarly, so m e technology m ight have som e
environmental positive and negative impacts.
15. Brand Image: A nam e, sym bol, design, or som e com bination w hich identifies the product o f a
particular organization as having a substantial and differentiated advantage.
16. Distribution infrastructure: Infrastructure to distribute g o o d s produced.
17. Pair wise comparison: R efers to the process o f com paring entities in pairs to ju d ge w hich o f each
entity is preferred over the other or w hich one is more important than the other.

101

Appendix II - An Example of AHP methodology
This example is based on arbitrary values used to explain the mathematical model and
calculations in AHP method. Steps involved in AHP methods include:
Step 1: Stated the goal: To select a partner for forest biorefinery from several potential
partners
Step 2: Established criteria: Three criteria are chosen randomly for this purpose

1) Financial resources (FR)
2) Technology compatibility (TC)
3) Marketing and distribution infrastructure (MDI)
Step 3: Created questionnaire: A questionnaire was created to assign weights to each
criterion
Step 4: Selected participants: This example is based on preferences of one participant to simplify
the calculations
Step 5: Pairwise Comparison of criteria: Use 1 to 9 scale - These values are randomly
assigned to each criterion.

X
1

TC

9:1

f id

7:1

f id

5:1

2

FR

9:1

SI

7:1

f id

5:1

3

MDI

9:1

7:1

f id

5:1

3:1

2d

1:1

Id

1:3

Id

1:5

Id

1:7

Id

1:9

FR

«d

3.1

2d

1:1

1:2

1:3

id

1:5

Id

1:7

Id

1:9

MOI

f id

3:1

2d

1:1

l lp ltl
Id

1:3

id

1:5

Id

1:7

Id

1:9

TC

4si

X
X

source: (Saaty, 1990; Triantaphyllou & Mann, 1995; Vaidya & Kumar, 2006)
This means that financial resources are preferred to technology compatibility and marketing
and distribution infrastructure. Also technology is preferred over marketing and distribution
infrastructure.
This information can be expressed in a pairwise matrix as shown below:
TC

FR

MDI

TC
I 1/1
FR
I 2/1
MDI
ll/3
Adapted from: (Saaty, 1990)
102

Step 6: Assign ranking to each criterion.
The pairwise matrix can be used to assign ranking to each criterion with the help of
Eigenvector values (Coyle, 2004). In order to obtain ranking in Eigenvector the pairwise
matrix is successively squared (Triantaphyllou & Mann, 1995). This process must be iterated
until eigenvector values are not significantly different from previous iteration (Saaty, 1990).

The pairwise matrix can be converted into fractions as follows.
MDI
r TC
FR
3.0000
j 1.0000 0.5000
I 2.0000 1.0000
4.0000
FR
0.2500
L
0.3333
1.0000
MDI
Adapted from: (Saaty, 1990; Vaidya & Kumar, 2006)
TC

Pairwise matrix is squared to obtain Eigenvector values up to 4 places of decimals.
Squaring result:
TC

FR

MDI

8.0000
I 3.0000 1.7500
TC
14.0000
I 5.3332 3.0000
FR
0.6667
3.0000
.
1.1666
MDI
Adapted from: (Saaty, 1990; Vaidya & Kumar, 2006)

Calculate Eigenvector by first adding row values, second compute rows total, finally divide
row sum by rows total (Triantaphyllou & Mann, 1995).
TC

FR

MDI

+ 8.0000 1
1 3.0000 +1.7500
TC
+ 14.000ol
1 5.3332 + 3.0000
FR
+ 3.0000J
L 1.1666 + 0.6667
MDI
Adapted from: (Triantaphyllou & Mann, 1995).

= 4.8333

0.3194
0.5595
0.1211

Rows total 39.9165

1.00

Eigenvector Values
0.3194
0.5595
0.1211

103

=12.7500
=22.3332

The process o f squaring the matrix must be repeated until there is no significant change in
Eigenvector values from previous values (Saaty, 1990; Triantaphyllou & Mann, 1995).
Repeat squaring of previous matrix:

TC
FR
MDI

TC

FR

MDI

3.0000
5.3332
,1.1666

1.7500
3.0000
0.6667

8.0000
14.0000
3 .OOO0 J

TC

FR

MDI

1 27.6653 + 15.8330
I 48.3311 + 27.6653
L.10.5547 + 6.0414

TC
FR
MDI

+ 72.4984 I
+ 126.6642 1
+ 27.6653 J

= 115.9967
= 202.6615
= 44.2614

0.3196
0.5584
0.1220

Rows total

362.9196

1.000

Eigenvector Values
0.3196
0.5584
0.1220

Compute the difference between two eigenvector values.
Eigenvector
03194
05595
0 1211

Eigenvector
0.3196
0.5584
0.1220

Eigenvector values
-0.0002
0.0011
-0.0009

Since there is no significant difference between two eigenvector values, there is no need for
squaring the matrix again. The relative ranking of each criterion is mentioned below:

Technological capabilities
Financial Resources
Marketing and Distribution
Infrastructure

0.3196 - The Second most important criterion
0.5584 - The most important criterion
0.1220 - The least important criterion

Step 7 - Pairwise comparison of potential partners
104

Identify potential partners : Four potential partners are chosen randomly to explain AHP
method
1) Weyerhaeuser (WH), 2) BASF, 3) Lignol (LI), and 4) FPinnovations (FPI)

The pairwise comparison of alternatives can be computed in the same manner as the pairwise
comparison of criteria was done in the previous step. The four potential partners in this
example are Weyerhaeuser (WH), BASF, Lignol (LI), and FPinnovations (FPI). Pairwise
comparison of the potential partners according to the technological compatibility is as
follows:

BASF
LI
FPI
WH

Technological compatibility
BASF
LI
1/4
1/1
1/1
4/1
1/4
1/4
4/1
6/1

FPI
4/1
4/1
1/1
5/1

WH
1/6
1/4
1/5
1/1

Similarly, for financial resources and marketing and distribution infrastructure pairwise
comparison can be computed.
Repeat step 5 to assign weight to each potential partner in each criterion. The weights
computed from the process are as follows:

TC
FR
BASF '‘“.1160
.3790
.2900
.2470
LI
.0740
.0600
FPI
.5770
.2570
WH
Adapted nbm: (Coyle, 2004)

MDI
.3010
.2390
.2120
.2480

Step 8- Ranking
Once the ranking for the criteria and potential partners are assigned, these rankings can be
combined by multiplying both the rankings with each other (Coyle, 2004).

105

TC
BASF '*1160
.2470
LI
.0600
FPI
.5770
WH

s.

FR
.3790
.2900
.0740
.2570

MDI
.3010*
.2390
.2120
.248<L

Criteria
R anking^

X

0.3196
0.5584
*.0.1220 ^

Technology
Finance
M arketing and
distribution

Final ranking of the alternatives derived from multiplication of matrices
BASF
LI
FPI
WH

.3060
.2720
.0940
.3280

The ranking shows that Weyerhaeuser will provide the highest value with (.3280).
Similar methodology is used to assign ranking to each criterion and potential partners in this
research.

106

Appendix III - AHP potential partners pairwise comparison

Distributive mode

AID Alternative

Pairwise

Rairwse
Complementary
Resources
(6: .204)

Total

Research
Commitment
History of R&D
(6: .051)

Pairwise
Research
Commitment
Relationship wfth
outside R&D
organizations
(G: .076)

Al

0 BASFChemicals

.3641

.6%

1.000

1.000

A3

BWeyeihaeuser

.363

1.000

.315

.883

A4

0Ugnol Energy

.273

.744

.397

.801

Distributive mode

AID Alternative

Pairwise

Pairwise
Financial
Resources
Profit Margins
(G: .073)

Financial
Resources
Average Annual
Growth Rate
(G: .055)

Pairwise
Financial Resources
Return on Assets
(G: .068)

Al

0 BASFChemicals

1.000

1.000

1.000

A3

©Weyerhaeuser

.988

.830

.526

A4

0Ugno! Energy

.529

.534

.240

Pairwise

Pairwise

Pairwise

Distributive mode

AID Alternative

Financial
Resources
Current Ratio
(G: .063)

Technological
Compatibility (G
Implementation
Chalenges
(G: .079)

Technological
Compatibility (G
Safety, security, and
envbonmental
considerations
(G: .083)

Al

0BASFChemicals

.634

.461

.788

A3

©Weyerhaeuser

1.000

.998

.954

A4

©Lignol Energy

.445

1.000

1.000

107

Distributive mode

AID Alternative

Pairwise

Pairwise

Pairwise

Technological
Compatibility (G
Type of
Technology
(6: .045)

Marketing and
Distribution Res
Brand Image
(G: .062)

Marketing and Distribution
Res
Distribution Infrastructure
(G: .140)

Al

3BASF Chemicals

.439

1.000

1.000

A3

BWeyohaeuser

.896

.731

.767

A4

SUgnoi Snet^r

1.000

.532

.459

Generated with Expert Choice

108