The importance of the Baltic states has increased due to increase of capital inflow from the West. A large part of the foreign involvement takes the form of alliance with local partners in the region. But how these alliances operate and fulfill the objectives of the partners in the Baltic states remain almost unexplored. By the help of depth interviews, four alliances, two in Estonia and the other two in Lithuania, have therefore been studied in this research work. The theoretical framework is based on the concepts of motives, resources, learning, network, performance and general environment. Cost reduction, market seeking, and development and maintenance of services have been the main motives of foreign firms in entering into the alliances. No clear cut motive is observed from the local partners’ side. Learning has been found important for both the partners and concerns cultural differences, local knowhow and adaptation to the Western way in doing business. A broader view of performance is presented by including network development in the article. Profitability, market share, and sales have been seen as short term while network development and relationships as longterm performance criteria in the alliances. The role of general environment on alliances and its impact on network development have also been observed. This study further suggests that alliances offering service dominated products concentrate on the local markets, while alliances offering products with less service elements have export as the target.