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Greener Pastures: Outside Options and Strategic Alliance Withdrawal
Abstract
Departing from prior work that demonstrates the stickiness and stability of alliance networks resulting from embeddedness, we extend matching theory to study firms’ withdrawal from alliances. Viewing alliance withdrawal as a result of firms’ pursuit of more promising alternative partners – outside options – rather than failures in collaboration, we predict that a firm is more likely to withdraw from an alliance when there is a higher density of outside options that have better match quality than the current partners. We also propose that, because matching is two-sided, outside options have a greater impact on a firm’s withdrawal when they are more likely to initiate new alliances. Using data on alliances in the global liner shipping industry, we show that, controlling for internal tensions in the alliance, outside options predict alliance withdrawals. Thus, despite the alliance stickiness and stability, firms alter their alliances in response to the availability of promising outside options, even leaving alliances that appear successful.
... Some issues have been reported, such as conflicting resources between firms, lack of trust, low individual attachment, bargaining power conflicts, and lack of previous bonds (Greve et al., 2010;Gulati, 1995;Puranam & Vanneste, 2009;Rowley et al., 2005). Additionally, the firms' resources may not be compatible with partners (Greve et al., 2010); individuals may have a reduced attachment (Broschak, 2004); new alternatives outside the alliance may appear (Greve et al., 2013); power relations between firms may cause an imbalance (Rowley et al., 2005), and so forth. Due to these difficulties, a gap is created between expected outcomes and the realized outcomes from engaging in strategic alliances (Das & Teng, 2000;Inkpen & Beamish, 1997). ...
... Recent studies call for the use of more inclusive frameworks of analysis in order to capture the variety of reasons why firms involve themselves in alliances more thoroughly and to offer better forecasts in the presence of competing explanations Krammer, 2016;Lin et al., 2009;Wang & Zajac, 2007). Also, the literature of alliances is moving in new directions such as partner selection processes (Dickson & Weaver, 2005;Eisenhardt & Schoonhoven, 1996;Hitt et al., 2000) and the resourced-based view (Das & Teng, 2000;Eisenhardt & Schoonhoven, 1996), towards a more diverse perspective focusing on reputation (Zhelyazkov & Gulati, 2013), alternatives that can be found outside the alliances (Greve et al., 2013), how flexible an alliance is (Bakker & Knoben, 2015), signaling (Reuer & Ragozzino, 2014), experience spillovers (Zollo & Reuer, 2010) and contractual change (Argyres et al., 2007). ...
... Therefore, those circumstances explain the difficulties to obtain ex-pected results when engaging in strategic alliances (Das & Teng, 2000;Inkpen & Beamish, 1997). More specifically, the firms' resources may not be compatible between partners (Greve et al., 2010), individuals may have a reduced attachment (Broschak, 2004), there are existent or new alternatives outside the alliance (Greve et al., 2013), or because of the differences in power relations within firms (Rowley et al., 2005). However, factors provoking alliances' dissolution require further studies and there is a need to treat them with a more holistic viewpoint (Rogan, 2014). ...
This monograph investigates the involvement of firms in strategic alliances and the interplay with organizational absorptive capacity and organizational ambidexterity. The theoretical work highlights the positive aspects, as well as the negative aspects, for firms engaging in strategic alliances. The main contribution relates to the evaluation of both positive and negative outcomes of various types of strategic alliances. This monograph presents different avenues for firms regarding how to benefit from strategic alliances in terms of innovation, while avoiding threats such as unintended knowledge spillovers.
... Inkpen and Beamish 1997;Kogut 1989;Makino et al. 2007;Reuer and Zollo 2005). Typically, literature assumes that firms terminate alliances prior to contract expiration only in the event of failure (Greve et al. 2013;Reuer and Zollo 2005). However, more recent studies on alliance termination show that firms intentionally end alliances earlier if one or both partners' targets are achieved (Reuer and Zollo 2005) or alternative alliance partners with a higher strategic and resource-related fit become available (Greve et al. 2013). ...
... Typically, literature assumes that firms terminate alliances prior to contract expiration only in the event of failure (Greve et al. 2013;Reuer and Zollo 2005). However, more recent studies on alliance termination show that firms intentionally end alliances earlier if one or both partners' targets are achieved (Reuer and Zollo 2005) or alternative alliance partners with a higher strategic and resource-related fit become available (Greve et al. 2013). ...
... Dyer and Singh 1998;Eisenhardt and Schoonhoven 1996;Kogut 1988), knowledge regarding alliance termination (e.g. Baker et al. 1998;Greve et al. 2013;Rowley et al. 2005, Seabright et al. 1992) and dynamics (e.g. Doz 1996;Larson 1992;Ring and Van de Ven 1994;Zajac and Olsen 1993) is still limited. ...
Historically, research on alliance termination assumes that alliance partners only withdraw from alliances in the event of alliance failure (failure-driven alliance termination). However, recent research on the dissolution of alliances shows that firms also withdraw from alliances through alliance partner switch when they find options with higher match quality than the current partner (option-driven alliance termination). This paper builds on previous work in that field and develops a comprehensive conceptual model of drivers of and barriers to partner switch in interfirm alliances. Based on matching theory, the rectification of alliance partner fit is defined in relation to strategic need, social status and social power as the main drivers and switching costs, social embeddedness and social norms as the main barriers to partner switch. Furthermore, it is argued that market uncertainty and behavioural uncertainty as well as the financial strength and social status of the focal firm have a moderating effect on such drivers and barriers.
... We build arguments using the literature on alliance portfolios (Lavie, 2007), value chain integration (Mitchell, 2014), and studies of competition among allies (Bresser, 1988;Cui, Calantone, & Griffith, 2011;Gimeno, 2004;Gomes-Casseres, 1996;Silverman & Baum, 2002). Several studies examine the effects of dyadic competition on alliances (e.g., Blodgett, 1992;, but provide little understanding of how competition among a focal firm's partners influences the stability of alliance portfolios (Greve, Baum, Mitsuhashi, & Rowley, 2010;Greve, Mitsuhashi, & Baum, 2013), and particularly, of what factors moderate the challenges posed by competition between partners. Network studies, commonly based on board interlocks, examine how competition between a firm and its indirect partner impacts termination of the relationship with its direct partner (e.g., Hernandez, Sanders, & Tuschke, 2015), but do not examine how this risk is affected by characteristics of the relationship between the firm and its partners. ...
... We identify competition between partners as a significant potential influence on the termination of the focal firm's alliances and highlight mechanisms that moderate the impact of this competition, thereby offering insights on the interplay of competition and cooperation within alliance portfolios. This approach expands explanations of alliance termination, which currently focus on failed cooperation, successful completion, exogenous change, or the emergence of alternate opportunities (Greve et al., 2013;. In doing so, we respond to calls from alliance researchers to study "how and why firms change the configuration of their alliance portfolios over time" (Wassmer, 2010, p. 162) using "multi-firm panel data on the evolution of alliance portfolios in particular industries" (Lavie & Singh, 2012, p. 803). ...
... This focus aligns with the alliance portfolio level of analysis, while offering insights into the complexity of managing portfolios containing cooperative and competitive relationships. Despite investigation of the causes of alliance instability (e.g., Borys & Jemison, 1989), explanations for termination of inter-firm cooperation are incomplete (Greve et al., 2010(Greve et al., , 2013. FIGURE 1 Focal firms and partners in an alliance portfolio F: Focal firm; P: Partner firm; PC: Other firms in F's portfolio that compete with P in the market for technology; PNC: Other firms in F's portfolio that do not compete with P; Solid lines: Cooperative relationship between F, PCs, and PNCs. ...
Research Summary: Firms with resources that make them attractive allies are also desirable partners for competitors so that competition among partners is embedded in alliance portfolios. We develop a framework in which competition within a portfolio creates benefits for a focal firm but threatens partners, increasing the hazard of alliance termination. We then propose four mechanisms for managing the threat of competition to partners reflecting aspects of portfolio configuration: alliance governance, social cohesion, social structure of competition, and partner similarity. We test our framework using a sample of 204 biopharmaceutical firms with alliance portfolios comprising 1,621 alliances between 1990 and 2000. The study addresses the interplay of competition and cooperation in alliance portfolios, and more generally, key aspects of value chain integration strategy.
Managerial Summary: Alliance portfolios comprise a focal firm's set of direct partners, some of which compete with each other because of overlapping resources, capabilities, and strategies. The threat of actual or perceived competition from other partners may cause some firms to terminate their alliance with the focal firm. We develop a framework comprising four mechanisms related to alliance portfolios—alliance governance, social cohesion, social structure of competition, and partner similarity—that allows focal firms to attenuate the hazard of termination of their alliances. We find support for our framework in a study of 204 biopharmaceutical firms with alliance portfolios comprising 1,621 alliances between 1990 and 2000. We improve understanding of how firms can manage competition and cooperation within their alliance portfolios.
... We build arguments using the literature on alliance portfolios (Lavie, 2007), value chain integration (Mitchell, 2014), and studies of competition among allies (Bresser, 1988;Cui, Calantone, & Griffith, 2011;Gimeno, 2004;Gomes-Casseres, 1996;Silverman & Baum, 2002). Several studies examine the effects of dyadic competition on alliances (e.g., Blodgett, 1992;, but provide little understanding of how competition among a focal firm's partners influences the stability of alliance portfolios (Greve, Baum, Mitsuhashi, & Rowley, 2010;Greve, Mitsuhashi, & Baum, 2013), and particularly, of what factors moderate the challenges posed by competition between partners. Network studies, commonly based on board interlocks, examine how competition between a firm and its indirect partner impacts termination of the relationship with its direct partner (e.g., Hernandez, Sanders, & Tuschke, 2015), but do not examine how this risk is affected by characteristics of the relationship between the firm and its partners. ...
... We identify competition between partners as a significant potential influence on the termination of the focal firm's alliances and highlight mechanisms that moderate the impact of this competition, thereby offering insights on the interplay of competition and cooperation within alliance portfolios. This approach expands explanations of alliance termination, which currently focus on failed cooperation, successful completion, exogenous change, or the emergence of alternate opportunities (Greve et al., 2013;. In doing so, we respond to calls from alliance researchers to study "how and why firms change the configuration of their alliance portfolios over time" (Wassmer, 2010, p. 162) using "multi-firm panel data on the evolution of alliance portfolios in particular industries" (Lavie & Singh, 2012, p. 803). ...
... This focus aligns with the alliance portfolio level of analysis, while offering insights into the complexity of managing portfolios containing cooperative and competitive relationships. Despite investigation of the causes of alliance instability (e.g., Borys & Jemison, 1989), explanations for termination of inter-firm cooperation are incomplete (Greve et al., 2010(Greve et al., , 2013. FIGURE 1 Focal firms and partners in an alliance portfolio F: Focal firm; P: Partner firm; PC: Other firms in F's portfolio that compete with P in the market for technology; PNC: Other firms in F's portfolio that do not compete with P; Solid lines: Cooperative relationship between F, PCs, and PNCs. ...
... ! Recent contributions to the literature have emphasised the central role of partner substitutability in the instability of alliances (Greve et al., 2013;Katila et al., 2008;Rahman and Korn, in press;Xia, 2011). The presence of outside options clearly influences relationships between partners because of the possibility of partnering with other firms when an alliance fails. ...
... First, our study contributes to the existing literature on alliance formation and partner selection (Casciaro & Piskorski, 2005;Shah & Swaminathan, 2008). In addition to the traditional factors highlighted in the literature -including the complementarity and compatibility of partners -this research underlines the crucial role played by the existence of substitutes (Bae & Gargiulo, 2004;Greve et al., 2013). We show how firms can benefit from the availability of substitutes when negotiating a value-sharing scheme with a partner in an alliance. ...
... In so doing, a firm does not have leverage on the number of substitutes because that number is set by the boundaries of the market. However, as has been shown in several key contributions (Greve et al., 2013;Xia, 2011), partnering or threatening to partner with substitutes may play a significant role in explaining the focal firm's alliance dynamics. Nevertheless, substitutes must be understood not only as alternative partners within the same industry but also as partners belonging to neighbouring industries or markets. ...
This article studies power imbalances in alliances. More precisely, we seek to understand how-and under what circumstances-firms can leverage market redefinition strategies to change the structure of their markets and to reduce the bargaining power of actual or potential partners. Based on resource dependence theory, our analysis examines the causes of disproportionate power in alliances and describes various power-balancing operations that can be implemented to reduce dependence. In previous research, the presence of alternative sources that might reduce resource dependence has been given exogenously, and the set of power-balancing operations has been rather limited. Based on the alliance literature, the bargaining power literature and the market redefinition literature, we elaborate a theoretical framework to study the extent to which firms can leverage market redefinition strategies to shape the structure of their markets, in general, and reduce the bargaining power of partners, in particular. We illustrate our theoretical framework by means of multiple case studies and discuss our conclusions. Focusing on air-rail intermodal strategies, we emphasise that firms can proactively redesign their market boundaries to find new partners. These market redefinition strategies reduce dependence on powerful partners in the traditional market and offer new strategic partnership options for firms. In addition, we note that processes can be implemented to increase the quality offered by these new substitutes. Finally, we elucidate several theoretical and managerial implications regarding the role of market redefinition strategies in alliance development.
... From the unit of analysis such as primary focus being mostly on the dyad and partner/s (see : Chang, Chung, & Moon, 2012;Gimeno, 2004;Inkpen & Currall, 2004;Shipilov, 2006) focusing more on trust, access to resources, relationships to foster growth for the parent firms and basing more on a transaction cost (Gulati, 2012) and the resource based view (e.g.. Das & Teng, 2000;Gulati, 1999;Robert M. Grant, 1991) for theoretical explanations; the studies see a shift in the unit of analysis towards the use of an alliance as a source of information for partners and the alliance link in self as a source of competitive advantage: beseeching the unit of analysis specifically on the link, on the theoretical front we find theories such as relational views (see: Dyer & Singh, 1998;Lechner, Dowling, & Welpe, 2006) being brought into focus. However, the recent studies in alliance research have seen a shift towards Networks (Greve, Mitsuhashi, & Baum, 2013;Gulati, 2012;Newbert, pg. 3 Tornikoski, & Quigley, 2013; Phelps, 2010;Yin, Wu, & Tsai, 2012) and Multipartner Alliances (Brass, Galaskiewicz, & Greve, 2004;Lavie, Lechner, & Singh, 2007;Dan Li, Eden, Hitt, Ireland, & Garrett, 2012;Dan Li, 2013;Ozmel, Reuer, & Gulati, 2012;Paruchuri, 2010;Yin, Wu, & Tsai, 2012) on the theoretical front we find a gradual attempt to shift from a static towards a more dynamic view of firm alliances (Anand, Oriani, & Vassolo, 2010) with an attempt to learn from the partners (Yang, Lin, & Peng, 2011), the studies also find the utilization of network theory (e.g. Phelps, 2010), and also the relative importance of a firm within a network (based on position and not endogenic factors) as a source of competitive advantage. ...
... Another important line of thought, albeit existing in a narrow stream of literature is that alliance termination in earlier studies was seen as a "failure". That however is not the case in the recent studies, a termination is no longer seen as a failure but as a voluntary withdrawal out of an alliance (Greve, Mitsuhashi, & Baum, 2013) for the availability of better options to both partners owing to the presence of networks. Clearly the focus has shifted from a multi partner and now multi-lateral networks. ...
... The development of network theory from the traditional literature on alliances has also started to see fissures: Most network literature attribute alliance stability to inertial and embededness in a network, and a failure of the alliance to internal conflict between partners But there is it is another stand by Greve, Mitsuhashi, & Baum (2013) who use matching theory to show that partners also seek to optimize the commercial and technical value of the alliances in pursuit of which they may be attracted to options outside their dyad/alliance. Instead of looking at terminating an alliance as failure the Greve et al., ( 2013) also look at it as availability of more options. ...
This paper attempts to review empirical papers over a period of 10 years (from 2004-2013) in the following journals: Strategic Management Journal, Academy of Management Journal, Journal of Management Studies, Organizational Science and the Journal of Business Venturing. The objective of the study is to identify the important themes, theoretical underpinnings and research ideas along with capturing important points of discussion. Also studied are, the Variables, Methods & Analysis along with the Data sources used to evaluate them. Furthermore, I glean the current state of knowledge in alliance research and also charter the road ahead for alliance research. This paper contributes by pointing how the nature of the word " alliances " has been looked into by scholars and how the conduct of inquiry has evolved over the last decade, serving as a bedrock to management scholars.
... From the unit of analysis such as primary focus being mostly on the dyad and partner/s (see : Chang, Chung, & Moon, 2012;Gimeno, 2004;Inkpen & Currall, 2004;Shipilov, 2006) focusing more on trust, access to resources, relationships to foster growth for the parent firms and basing more on a transaction cost (Gulati, 2012) and the resource based view (e.g.. Das & Teng, 2000;Gulati, 1999;Robert M. Grant, 1991) for theoretical explanations; the studies see a shift in the unit of analysis towards the use of an alliance as a source of information for partners and the alliance link in self as a source of competitive advantage: beseeching the unit of analysis specifically on the link, on the theoretical front we find theories such as relational views (see: Dyer & Singh, 1998;Lechner, Dowling, & Welpe, 2006) being brought into focus. However, the recent studies in alliance research have seen a shift towards Networks (Greve, Mitsuhashi, & Baum, 2013;Gulati, 2012;Newbert, pg. 3 Tornikoski, & Quigley, 2013; Phelps, 2010;Yin, Wu, & Tsai, 2012) and Multipartner Alliances (Brass, Galaskiewicz, & Greve, 2004;Lavie, Lechner, & Singh, 2007;Dan Li, Eden, Hitt, Ireland, & Garrett, 2012;Dan Li, 2013;Ozmel, Reuer, & Gulati, 2012;Paruchuri, 2010;Yin, Wu, & Tsai, 2012) on the theoretical front we find a gradual attempt to shift from a static towards a more dynamic view of firm alliances (Anand, Oriani, & Vassolo, 2010) with an attempt to learn from the partners (Yang, Lin, & Peng, 2011), the studies also find the utilization of network theory (e.g. Phelps, 2010), and also the relative importance of a firm within a network (based on position and not endogenic factors) as a source of competitive advantage. ...
... Another important line of thought, albeit existing in a narrow stream of literature is that alliance termination in earlier studies was seen as a "failure". That however is not the case in the recent studies, a termination is no longer seen as a failure but as a voluntary withdrawal out of an alliance (Greve, Mitsuhashi, & Baum, 2013) for the availability of better options to both partners owing to the presence of networks. Clearly the focus has shifted from a multi partner and now multi-lateral networks. ...
... The development of network theory from the traditional literature on alliances has also started to see fissures: Most network literature attribute alliance stability to inertial and embededness in a network, and a failure of the alliance to internal conflict between partners But there is it is another stand by Greve, Mitsuhashi, & Baum (2013) who use matching theory to show that partners also seek to optimize the commercial and technical value of the alliances in pursuit of which they may be attracted to options outside their dyad/alliance. Instead of looking at terminating an alliance as failure the Greve et al., ( 2013) also look at it as availability of more options. ...
Abstract: This paper attempts to review empirical papers over a period of 10 years (from 2004-2013) in the following journals: Strategic Management Journal, Academy of Management Journal, Journal of Management Studies, Organizational Science and the Journal of Business Venturing. The objective of the study is to identify the important themes, theoretical underpinnings and research ideas along with capturing important points of discussion. Also studied are, the Variables, Methods & Analysis along with the Data sources used to evaluate them. Furthermore, I glean the current state of knowledge in alliance research and also charter the road ahead for alliance research. This paper contributes by pointing how the nature of the word “alliances” has been looked into by scholars and how the conduct of inquiry has evolved over the last decade, serving as a bedrock to management scholars.
Keywords: Alliance Research, Strategic Alliances, Evolution in Alliances, Joint Ventures, Networks.
... Answering this question is fraught with empirical challenges because unobserved characteristics, such as endogenous quality and network centrality, are easily confounded in the partner selection and performance estimations. Regressing performance on partners' characteristics exposes the coefficients to omitted variable biases if unobserved characteristics influence partner selection and alliance performance (Greve et al., 2013;Shaver, 1998;Sørensen, 2007). ...
... Firms can use alliances to access high-quality inputs and to create and sell new products (Hoetker, 2005). Firms self-select into such alliances to increase their respective performance (e.g., Greve et al., 2013;Mindruta, 2013;Shaver, 1998). Partners' main goal is to maximize the joint value of the alliance (e.g., Hagedoorn, 1993;Hamel et al., 1989;Teece, 1992). ...
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Research summary
Network centrality is an important determinant of alliance performance. However, it is difficult to estimate how each alliance member's centrality affects alliance performance because the end market might value each partner's contribution differently. We solve this empirical question with a two‐sided matching model that accounts for the partners’ endogenous selection and estimates the effect of each side's centrality and input quality on performance. We implement the method in the novel context of the Thoroughbred horse industry, in foal‐sharing alliances between buyers and suppliers. We find that the buyer centrality has a larger marginal effect on the alliance performance than the supplier centrality because buyers, who on average are less central in our context, are more likely to diffuse valuable information to the end market.
Managerial summary
Alliance partners often struggle with identifying what their contributions and their partner's contribution are to the alliance performance. We use a new method to identify each side's contribution to their alliance. Our findings offer a few recommendations to firms forming similar alliances. First, we find that the less central partner in the business network has greater impact on the alliance performance due to their ability to diffuse more valuable information to the market. Second, our results suggest that product input quality that is relatively unknown impacts alliance performance more than low and average quality. Alliance partners may benefit more from experimenting with unknown inputs. Third, more central actors may reduce spending on mass communications if valuable information comes to the market through their less central partners.
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... Heidl, Steensma, and Phelps (2014) Outside opportunities to form ties can raise the hazard of dissolving the current tie. Greve, Mitsuhashi, and Baum (2013) Proximity-based mechanisms Actors' closeness in social, cultural, and geographic spaces Country-level cultural proximity lowers the hazard of dissolution of international joint ventures. ...
... We controlled for a firm's tendency to switch exchange partners often by including a measure of supplier churn: the number of terminated relationships in the preceding five years (Baker, Faulkner, and Fisher, 1998). Because prior work has found that tie breakage is more likely if a firm has more ''outside options,'' we controlled for the number of engine makers active in the focal year (Greve, Mitsuhashi, and Baum, 2013). 12 Prior work has found that personnel mobility, such as the departures of key decision makers and exchange managers, often precedes interorganizational tie dissolution (Broschak, 2004;Rogan, 2014;Bermiss and Greenbaum, 2016). ...
Managers need to periodically evaluate any exchange partner to decide whether to continue or dissolve the exchange tie, but doing so can be challenging because of causal ambiguity: it can be difficult to attribute organizational performance to any specific underlying factor. One way managers may evaluate their exchange partners is by observing the performance trajectories of competitors who rely on the same exchange partners. We propose a theory of vicarious performance feedback and test it in the context of Formula One motor racing. We find that a firm building a Formula One racing car is more likely to end an exchange relationship with an engine supplier after that supplier’s other customers experience an episode of poor performance relative to their historic track record. In line with an attention-based view of the firm, this behavior occurs when the firm’s own performance is below its aspiration level. This work extends our understanding of how managers use vicarious learning to supplement their direct experience when evaluating their exchange partners, expands our thinking about network dynamics by showing how network neighbors’ experiences can influence tie decisions made within a dyad, and contributes to the cognitive foundations of problemistic search by showing how external information is integrated into managers’ responses to their own firm’s underperformance.
... Over the past decades, scholars have analyzed how firms select alliance partners and the performance consequences of these partner selection behaviors. Seminal works have focused on alliance formation with a single partner and its influence on performance from a variety of theoretical perspectives, such as the resource-based view [14], social capital [15], institutional theory [16], transaction cost theory [17], outside options [18], and signaling [19]. However, these studies, taking a single alliance perspective, generally overlook the interdependencies among multiple partners [5]. ...
... Then, some scholars began to integrate two measures of partner reconfigurations, including dropping active partners or allying with outside partners [8]. Thus, the possible antecedents of these alliance partner reconfigurations, including the relative importance of the alliance [32], resource compatibility between partners [33], the bright side and dark side of embedded ties [34,35], attractiveness of outside options [18], and power asymmetry [36] have been investigated. The literature provides important clues as to why alliance reconfiguration occurs, and what factors make its occurrence more likely. ...
This study develops multi-dimensional partner reconfiguration strategies and addresses how they affect firm performance in a series of alliance portfolios by applying the dynamic sustainable perspective. Using data collected from 565 fund product alliance portfolios initiated by 61 Chinese fund firms during a five-year period from 2007 to 2011, the empirical results indicate that both dropping active partners and adding new ones will reduce firm performance. By contrast, reintroducing previous partners will increase firm performance. The average tie strength of the last alliance portfolio moderates the influences of partner reconfigurations on firm performance. Specifically, it negatively moderates the effect of dropping active partners and positively moderates the effect of adding new partners. However, its moderating effect on the influence of reintroducing previous partners is insignificant. These findings have positive theoretical and practical significance for firms pursuing sustainable development by clarifying when and how partner reconfiguration strategies influence firm performance.
... Matching theory states that relationships need to address both actors' preferences, opportunities, and constraints by considering the qualities that one actor values in the other (Mitsuhashi & Greve, 2009). The central idea of matching theory is that players seek specific characteristics in others and also impart their own unique characteristics to others (Greve, Mitsuhashi, & Baum, 2013). Matching theory has been used to study various management and social issues, such as hiring employees, marriage, and coalition formation, as well as in B2B contexts such as firm alliances. ...
... Firms look for business partners that can offer superior capabilities in areas where they lack resources in order to help them manage strategic interdependencies (Rothaermel & Boeker, 2008). Complementarity includes not only physical resources but also nonphysical assets such as expertise and experience (Greve et al., 2013). ...
... In focusing on the negative consequences of the ties formed, this line of work overlooked the frequently observed issue of discontinued ties and their consequences. Moreover, only a small body of research has considered tie dissolutions (Ahuja, Polidoro, & Mitchell, 2009;Greve, Baum, Mitsuhashi, & Rowley, 2010;Greve, Mitsuhashi, & Baum, 2013). Our perspective here differs from previous work, as we consider the performance consequences of tie discontinuations in the context of young entrepreneurial ventures. ...
... First, we add to the literature on discontinuations of interorganizational relationships. The main focus of this literature has been on the antecedents of withdrawals (Greve et al., 2010;Greve et al., 2013;Guler, 2007;Li & Chi, 2013;Polidoro, Ahuja, & Mitchell, 2011), giving predictions that are distinct from those of tie formation studies. For instance, Li and Chi (2013) highlighted the influence of portfolio configurations of VCs (such as portfolio diversity) on the propensity to withdraw from a portfolio venture. ...
... Answering this question is fraught with empirical challenges because unobserved characteristics, such as endogenous quality and network centrality, are easily confounded in the partner selection and performance estimations. Regressing performance on partners' characteristics exposes the coefficients to omitted variable biases if unobserved characteristics influence partner selection and alliance performance (Greve, Mitsuhashi, & Baum, 2013;Shaver, 1998;Sørensen, 2007). ...
... Firms can use alliances to access high-quality inputs and to create and sell new products (Hoetker, 2005). Firms self-select into such alliances to increase their respective performance (e.g., Greve et al., 2013;Mindruta, 2013;Shaver, 1998). The partners' main goal is to maximize the joint value of the alliance (e.g., Hagedoorn, 1993;Hamel, Doz, & Prahalad, 1989;Teece, 1992). ...
Research Summary Network centrality is an important determinant of alliance performance. However, estimating how each alliance member's centrality affects alliance performance is challenging because the end market might value each partner's contribution differently. We solve this empirical question with a two‐sided matching model that accounts for the partners' endogenous selection and estimates the effect of each side's centrality and input quality on performance. We implement the method in the novel context of the Thoroughbred horse industry, in foal‐sharing alliances between buyers and suppliers. We find that buyer centrality has a larger marginal effect on the alliance performance than the supplier centrality because buyers, who on average are less central in our context, are more likely to diffuse valuable information to the end market. Managerial Summary Alliance partners often struggle with identifying what their contributions and their partner's contribution are to the alliance performance. We use a new method to identify each side's contribution to their alliance. Our findings offer a few recommendations to firms forming similar alliances. First, we find that the less central partner in the business network has greater impact on the alliance performance due to their ability to diffuse more valuable information to the market. Second, our results suggest that product input quality that is relatively unknown impacts alliance performance more than low and average quality. Alliance partners may benefit more from experimenting with unknown inputs. Third, more central actors may reduce spending on mass communications if valuable information comes to the market through their less central partners.
... However, reputation gaps represent costs as well as benefits for the high-and low-reputation partners (Castellucci & Ertug, 2010;Mayer, 2006;Yu & Lester, 2008), and 190 Norheim-Hansen this also applies to environmental reputations. Moreover, the corresponding differing environmental performance suggests differing stances towards society embedded in the organizational culture (Banerjee, 2001), and discrepant priorities, temporal orientations (Das, 2006) and goals, which can all influence alliance performance (Chen, Liu, & Hsieh, 2009;Greve, Mitsuhashi, & Baum, 2012). Then again, reputation asymmetry is not a constant. ...
... Still, large environmental reputation asymmetry indicates negative effects regarding conditions for creating common benefits. Conversely, if the environmental reputation gap is reduced it should positively affect coordination in the alliance postformation phase; this since managing resource flows effectively and efficiently is facilitated by resource compatibility (Greve et al., 2012). ...
The need for including sustainability in higher education curricula and defining the role of higher
education institutions in teaching for sustainability has been much discussed in literature. A rather new career has
emerged with the advancement of sustainability change programs in organizations. Which key capabilities constitute
a good sustainability manager and how best to educate them is yet to be defined. Based on the recent developments
in the field there is a need to define this new career; including the competency requirements and the current roles in
sustainability leadership. The current research is based on a qualitative inquiry involving ten sustainability managers
of publicly listed companies in Turkey. A competency map is used for guiding the questions. The findings address
the issues on the role of business schools on education for sustainable development. It defines sustainability
management as a new career path for future graduates.
... Termination provisions can support alliance governance in three ways. First, they offerif not tied to the occurrence of specific contingencies-the flexibility to pursue available opportunities outside the focal alliance (Greve, Mitsuhashi, & Baum, 2013;Vanneste & Frank, 2014). This not only creates room for alliance portfolio restructuring but also encourages alliance partners to maintain their competitiveness. ...
Termination provisions establish vital governance mechanisms in alliances, offering essential safeguards and incentives by providing the flexibility to exit (underperforming) partnerships. However, they can also foster distrust and instability by potentially undermining commitment and continuity. We argue that the motivation behind termination provisions lies in the need to address safeguarding and flexibility concerns arising from increases in alliance scope, upfront payments, and technological uncertainty. Conversely, alliances with strong relational commitment and social embeddedness stemming from prior and indirect ties tend to omit termination provisions. Drawing on an analysis of 1,576 biopharmaceutical alliance contracts, we scrutinize various conditional and unconditional termination rights, along with their partner-specific allocations. Among other findings, we observe a positive association between broad alliance scope and termination rights for patent challenge, for lack of reasonable effort, and for specific countries assigned to the research and development (R&D) firm contributing technological expertise and, furthermore, termination rights for convenience for the client firm sponsoring the alliance. Larger unilateral upfront payments increase the likelihood that the client firm receives termination rights for lack of reasonable effort and for convenience. Higher technological uncertainty is associated with termination rights for convenience for the client or R&D firm. In contrast, prior ties negatively correlate with termination rights for convenience for the client firm, while indirect ties show a negative association with termination rights for convenience and specific countries for the R&D firm. Conceptually, our study highlights the relevance of termination provisions as elastic governance mechanisms that enable partners to accommodate postcontractual disturbances.
... For example, partner trust can justify committing resources to partners when formal governance mechanisms are otherwise unavailable (Doney and Cannon, 1997;Dyer and Singh, 1998) and is an essential element for building collaborative relationships (Chin et al., 2008). As such, when partner trust significantly informs a collaborative relationship, organisations become more likely to prioritise mutual outcomes over a longer time horizon; even at the expense of personal performance maximisation in the short-term (Contractor et al., 2011;Greve et al., 2013;Lavie et al., 2011). This relationship is particularly relevant to SMEs that generally lack the human, network, or slack resources necessary to contractually control partner behaviours or seek recompense when collaborative expectations are violated. ...
... Instead, the ultimate success of ISAs depends on the ability of partners to respect mutual obligations and modify alliance terms to attain the goal of an alliance, thus value co-creation. The exit relates to the ease of withdrawal from an alliance in which partners are unsatisfied or no longer meet partners' needs (Greve et al., 2012;Gulati et al., 2008). As the partner needs and strengths continuously change in ISAs (Ireland et al., 2002;Kohtamäki et al., 2018), these can deteriorate interests of partners in alliance tasks (Bakker, 2016). ...
Purpose
This study investigates to what extent strategic flexibility of international strategic alliances (ISAs) affects export performance of emerging market small and medium-sized enterprises (ESMEs) via international marketing capability in crises. It also examines whether these ESMEs’ adoption of digital technology strengthens the impact of strategic flexibility of ISAs on international marketing capability.
Design/methodology/approach
Based on the international alliance and dynamic capability perspectives on strategic flexibility, the authors develop a conceptual model and empirically examine the mediation and moderation effects between strategic flexibility of ISAs, international marketing capability, export performance and adoption of digital technology. The authors collected survey data from 129 ESMEs located in Pakistan between May 2021 and August 2021 and tested the conceptual model with hierarchical-moderated regression analysis.
Findings
The findings suggest that strategic flexibility of ISAs positively impacts on export performance of ESMEs in crises. Moreover, the authors found that international marketing significantly mediates the relationship between strategic flexibility of ISAs and export performance of ESMEs. Also, the adoption of digital technologies significantly moderates the relationship between strategic flexibility of ISAs positively and international marketing capability.
Originality/value
The authors take strategic flexibility of ISAs in the context of the emerging market and how ESMEs enhance export performance in a time of crisis, which extends the prior ESMEs’ international marketing strategy and crisis management literature. In particular, the authors show that strategic flexibility of ISAs is a vital dynamic capability to enhance export performance of ESMEs via international marketing capability and adoption of digital technologies.
... Instead, the ultimate success of ISAs depends on the ability of partners to respect mutual obligations and modify alliance terms to attain the goal of an alliance, thus value co-creation. The exit relates to the ease of withdrawal from an alliance in which partners are unsatisfied or no longer meet partners' needs (Greve et al., 2012;Gulati et al., 2008). As the partner needs and strengths continuously change in ISAs (Ireland et al., 2002;Kohtam€ aki et al., 2018), these can deteriorate interests of partners in alliance tasks (Bakker, 2016). ...
This paper examines how and to what extent strategic flexibility of international strategic partnerships (ISPs) affects export performance of emerging market small and medium-sized enterprises (EMSMEs) via international marketing capability in crises. Also, it investigates whether these EMSMEs’ adoption of digital technology strengthens the impact of strategic flexibility of ISPs on international marketing capability. We developed a conceptual model based on the international partnership and dynamic capability perspectives on strategic flexibility. The study empirically examines the mediation and moderation effects between strategic flexibility of ISPs, international marketing capability, export performance, and adoption of digital technology. We test the model using 129 Pakistani EMSMEs with hierarchical regression analyses. The findings suggest that strategic flexibility of ISPs positively impacts on export performance of EMSMEs in crises. Moreover, we found that international marketing significantly mediates the relationship between strategic flexibility of ISPs and export performance of EMSMEs. Also, the adoption of digital technologies significantly moderates the association between strategic flexibility of ISPs positively and international marketing capability. We take strategic flexibility of ISPs in the context of the emerging market and how EMSMEs enhance export performance in a time of crisis, which extends the prior EMSMEs international marketing strategy and crisis management literature. The result demonstrates that strategic flexibility of ISPs is a vital dynamic capability to enhance export performance of EMSMEs via international marketing capability and adoption of digital technologies.
... As in the interpersonal literature on dyadic change, tie dissolution has tended to receive less theoretical attention in the interorganizational research than tie formation 13 . A study of alliance in the global liner shipping industry found greater rates in the dissolution of ties as a function of market competition and time-dependent effects of earlier direct and third-party effects, suggesting that the factors that drive alliance dissolution differ from those that drive alliance formation (Greve, Mitsuhashi, & Baum, 2013). In addition to research on strategic alliances and board interlocks, market exchange ties have been a common topic in tie dissolution studies. ...
This paper reviews the growing body of work on network dynamics in organizational research, focusing on a corpus of 187 articles -- both “micro” (i.e., interpersonal) and “macro” (i.e., interorganizational) -- published between 2007 and 2020. We do not see “network dynamics” as a single construct; rather, it is an umbrella term covering a wide territory. In the first phase of our two-phase review, we present a taxonomy that organizes this territory into three categories: network change (i.e., the emergence, evolution, and transformation of network ties and structures); the occurrence of relational events (i.e., modeling the sequence of discrete actions generated by one actor and directed towards one or more other actors); and coevolution (i.e., the process whereby network and actor attributes influence each other over time). Our review highlights differences between network dynamics based on relational states (e.g., a friendship) and relational events (e.g., an email message); examines the drivers and effects of network dynamics; and, in a methodological appendix, clarifies the assumptions, strengths, and weaknesses of different analytical approaches for studying network dynamics. In the second phase of our review, we critically reflect on the findings from the first phase and sketch out a rough agenda for future research, organized in terms of four overarching themes: the interplay between the dynamics of social networks conceived as relational states and relational events; mechanisms underlying network dynamics; outcomes of network dynamics; and the role of cognition.
... There has long been research on how firms establish network ties with other firms that hold complementary capabilities, and this research has examined strategic considerations and different forms of social similarity or proximity (Chung, Singh, and Lee, 2000;Mitsuhashi and Greve, 2009;Powell, White, Koput, and Owen-Smith, 2005). Elaborations of this research include an increased focus on how network ties are broken when they are no longer useful or better alternatives become available (Greve, Baum, Mitsuhashi, and Rowley, 2010;Greve, Mitsuhashi, and Baum, 2013). There is also increased work on how firms can adjust their network tie formation to fit their current strategy (Shipilov, Li, and Greve, 2011;Sytch, Tatarynowicz, and Gulati, 2012). ...
The organizational view of strategic management views strategic decisions as outcomes of organizational goals and environmental influences. Central research streams are institutional theory and network theory on environmental influences, and learning theory and resource dependence theory on organizational interaction with the environment. Currently active research topics are centered on how societal groups influence organizations, intraorganizational individuals and groups pursue their own goals, and organizations pursue their goals by choosing strategic actions that maneuver societal constraints. Research is beginning to crystallize a view of environments and organizational structures interacting closely with strategy, with organizations learning to shape their interorganizational networks and surrounding institutions to their benefit. Comparison of performance and aspiration levels on multiple goals helps organizations time and direct strategic changes. The organizational view is a prominent part of strategic management and has enough unanswered questions to spur significant future research.
... They encompass either physical assets or intangible resources (e.g. knowledge) (Greve et al., 2013). For this reason, technological innovation often results from the combination of the distinct resources from small firms and large ones (King et al., 2003). ...
Purpose – The purpose of this study is to recognize the facilitators and inhibitors of value co-creation in the industrial service environment.
Design/methodology/approach – First, a systematic literature review (SLR) based on the systematic search flow (SSF) method was conducted, using six databases. Then, the content analysis proposed by Bardin (2011) was used to analyze the selected papers from SLR.
Findings – The authors identified a total of 11 facilitators and four inhibitors of value co-creation in industrial services. The findings show that concerning facilitators, the involvement of actors and synergy among participants reported a higher presence. As for the inhibitors, incompatibility among actors and actors’ inexperience in the context of value co-creation were the ones that registered the most frequency.
Research limitations/implications – Even though the SLR covered a large proportion of the studies available, this research may not have enabled a complete coverage of all existing peer-reviewed papers in the field of value co-creation in industrial services.
Practical implications – This study assists managers in enhancing the performance of the value co-creation process. This is because, by knowing both the facilitators and inhibitors, managers can have an improved understanding of this process, thereby pondering these elements on the elaboration of their strategies and
decision-making.
Originality/value – This study is one of the first attempts to recognize both the facilitators and inhibitors of value co-creation in industrial services.
... Dyer and Hatch, 2006). Greater trust among partners decreases dysfunctional conflicts and lowers the need for contractual safeguards (Greve, Mitsuhashi and Baum, 2013). Trust can also stimulate greater closeness, dialogue, flexibility and open information and knowledge exchange (Krishnan, Martin and Noorderhaven, 2006), couched in the assumption that partners will neither misuse nor misappropriate the knowledge. ...
... For example, Greve, Baum, Mitsuhashi, and Rowley (2010) demonstrated that firms tend to terminate their alliances as their market overlap increases. Likewise, Greve, Mitsuhashi, and Baum (2013) indicated that a firm is more likely to terminate its alliance when it faces more valuable opportunities for other alliances. Yamanoi and Cao (2014) clarified that a firm is more likely to terminate its alliance when its alliance partner's capability is lower than that of its other partners. ...
This study examines the impact of an acquisition announcement on the market reaction to an acquirer’s alliance partner. From a transaction cost perspective, we argue that the market valuation of an alliance partner around an acquisition announcement is negative because the stock market recognizes that an acquisition causes an unanticipated increase in the uncertainty of the acquirer’s behavior, thereby decreasing the expected value from the alliance. Additionally, the negative impact of an acquisition announcement depends on the alliance and acquisition characteristics, which determine the degree of the unanticipated increase in the acquirer’s behavioral uncertainty. Using an event study of 347 alliances associated with 150 acquisitions of Japanese public non-financial firms, we find that an acquirer’s acquisition announcement triggers a negative market valuation of its alliance partner. Moreover, past alliance experience reduces the negative impact of an acquisition announcement, while non-horizontal alliance type and acquisition deal value enhance the negative impact.
... The relational view stresses the importance of repeated ties and trust among allying firms (e.g., Dyer and Hatch, 2006). Greater trust among partners decreases dysfunctional conflicts and lowers the need for contractual safeguards (Greve et al., 2013). Trust can also stimulate greater closeness, dialogue, flexibility, and open information and knowledge exchange (Krishnan et al., 2006), couched in the assumption that partners will neither misuse nor misappropriate the knowledge. ...
For family firms, alliances represent a form of heightened entrepreneurial risk-taking. However, a dearth of research exists on the implications of forms of alliance governance for family firms. In a study of 939 non-equity alliances of family and non-family firms, we analyse how contracts and trust influence mutual knowledge creation. Both contract completeness and trust assist non-family firms in knowledge creation. However, family firms rely on high levels of trust for the creation of knowledge. Knowledge creation suffers when family firms encounter very complete contracts tied to attempts at high levels of trust. The negative interaction effect is especially strong for non-owner-run family firms.
... Previous studies actually give convincing evidence on the development of new products as a trigger of strategic cooperation across organisational frontiers. Expanding on this debate, different researchers have accentuated that organisations are motivated to look for a wider array of R&D capabilities as this has been an observable phenomenon in the biotechnology industry (Greve et al., 2013;Noyes et al., 2014). The contention here is that, organisations that have vigorous R&D capabilities facilitate the formation of various ties with different organisations (Love et al., 2014). ...
... Extant literature related to traditional network theory shows that firms that have an abundance of resources are more attractive as alliance partners than those with inadequate resources, and strategic alliances with higher levels of complementarity or resource compatibility should have more positive effects on firm performance than other alliances. A firm's existing ties should lessen uncertainty and the search cost required to determine alliance readiness (Goerzen, 2007;Greve et al., 2013). Furthermore, traditional network theory underscores the important role of strong social ties, trust and knowledge reciprocity in the formation of alliances. ...
Purpose
The purpose of this paper is to respond to the call of international marketing professionals for more studies on strategies that firms use in response to the complexities of interacting with other institutions in the emerging markets (EMs) of sub-Saharan Africa. The key research question investigated by employing the exploratory qualitative data gathered is: What strategies and global alliances do small local firms (SLFs) in Nigeria adopt to succeed under complex market conditions?
Design/methodology/approach
The methodology employed is exploratory qualitative research. The authors conducted extended interviews to generate rich case study data from the top management of the selected SLFs in Nigeria. The interview data were assessed using open, axial and selective coding to uncover macro-narratives that guide SLFs’ strategies and global alliances.
Findings
The macro-narratives derived from the qualitative case analysis reveal a theoretical framework centered on three major elements of competitive strategies in Nigeria: build global capacity and strategic alliances from the get-go; develop local strategic alliances; master matching alliance partners’ needs to create innovative payment plans and, when necessary, shift the transaction cost burden to alliance partners. Matching theory rather than traditional network theories is better at explicating SLFs’ alliances in Nigeria. Implementation of these strategies requires flexible strategic initiatives.
Originality/value
The study adapts institutional interaction theory, network theory, matching alliance perspective, trade credit theories and the literature on small firms’ strategies in EMs to explicate successful small local firm strategies and global alliances under complex market conditions in Nigeria. The recognition that SLFs regularly migrate and shift the burden of transactions’ cost to multiple stakeholders in the supply network by matching customers and supplier needs is important. The discovery of matching theory in explicating SLFs’ global alliances in Nigeria is unique to this study.
... Given that our age 9 With regard to the mean centering of category spanning, the true turning point is obtained by adding the mean (1.32) to the turning point that was calculated by using the estimates of the transformed data (Haans et al., 2016). This results in a true turning point of 3.77 in Model 2. However, we observe a slight turning point shift to 2.81 when we include the interaction between category density and category spanning in Model 4. measure is a dummy variable, we followed Yip and Tsang (2007) and applied a partitioning approach-i.e., in this model, we did not include the main effect of category spanning but rather included the full set of interaction terms of category spanning and time episode dummy variables (for a similar approach see Greve, Mitsuhashi, & Baum, 2013;Tsang & Yamanoi, 2016). ...
In this article, we apply the concept of optimal distinctiveness to test whether category spanning has a nonlinear effect on new ventures’ risk to fail. We argue that by being optimally distinct, i.e., by attaining a level of category spanning that allows new ventures to benefit from balancing the competing needs of conformity with and differentiation from competitors, new ventures can improve their survival chances. In addition, we argue that the relevance of optimal distinctiveness varies with a venture's age and a category's density. We tested our hypotheses using data from 1668 metal bands that were founded in the United Kingdom between 1967 and 2005. The results indicate that optimal distinctiveness is relevant to new ventures’ failure risk. Moreover, we show that venture age attenuates the relevance of optimal distinctiveness, whereas category density strengthens that factor's relevance.
... Recent research on non-routine events and alliance instability has taken a further step, showing that alliance partner defection can be triggered by events and decisions independently from internal tensions, thus uncovering an under-explored field of discontinuous external sources of alliance instability. Specifically, these studies have shown that alliance partner defection could also be triggered by the availability of more suitable alliance partners (Greve, Mitsuhashi, & Baum, 2013), changes in partners' overall partnering, and resource deployment strategies independent of any internal frictions (Cui, Calantone, & Griffith, 2011;Madhok et al., 2015). ...
... Previous studies actually give convincing evidence on the development of new products as a trigger of strategic cooperation across organisational frontiers. Expanding on this debate, different researchers have accentuated that organisations are motivated to look for a wider array of R&D capabilities as this has been an observable phenomenon in the biotechnology industry (Greve et al., 2013;Noyes et al., 2014). The contention here is that, organisations that have vigorous R&D capabilities facilitate the formation of various ties with different organisations (Love et al., 2014). ...
... Previous studies actually give convincing evidence on the development of new products as a trigger of strategic cooperation across organisational frontiers. Expanding on this debate, different researchers have accentuated that organisations are motivated to look for a wider array of R&D capabilities as this has been an observable phenomenon in the biotechnology industry (Greve et al., 2013;Noyes et al., 2014). The contention here is that, organisations that have vigorous R&D capabilities facilitate the formation of various ties with different organisations (Love et al., 2014). ...
The acquisition of inter-organisational network ties remains a
functional pre-requisite in the survival of a business venture. We sought in this
study, to explore the extent to which strategy-driven motivational factors and
relational motivational factors significantly influence acquisition of
inter-organisational network ties. Our data was procured from a sample of
150 managers and owners of small scale automobile firms recruited from an
automobile cluster in Ghana. We adapted but modified a feed-forward neural
network model where data propagate along the connections in the direction
from the network inputs to the network outputs from the extant literature. Our
results showed a complementary relationship between the effects of
interactions that precede the development of cooperation among organisations
and strategic forces which involve the deployment of a firm’s core
competencies. We proposed the need for automobile SMEs in Ghana to harness
potential sources of competitive strength such as previous experience of
working together with others.
... The research showed that informal knowledge sharing ties among business units provided access to distinct sources of knowledge, which in turn enhanced the focal units' ability to generate innovations and performance. Analogous to business units (Hansen, 2002;Tsai, 2002;Tsai, 2000;Tsai and Ghoshal, 1998;Nobel and Birkinshaw, 1998), organizations have also been the basis for defining boundaries that demarcate networks (Greve, Mitsuhashi and Baum, 2013;Sytch, Tatarynowicz and Gulati, 2012;Baum, McEvily, and Rowley 2012;Mahmood, Zhu, and Zajac, 2011;Shipilov and Li, 2008;Shipilov, 2006;Owen-Smith and Powell, 2004;Rosenkopf and Nerkar, 2001;Baum, Calabrese and Silverman, 2000;Powell, Koput, and Smith-Doerr, 1996). For example, McEvily and Zaheer (1999) identified organizational boundaries as the context within which informal relationships are defined and influence performance. ...
... Contrary to their expectations, Polidoro et al. (2011) also found that two-partner alliances where the partners had higher levels of combined centrality were more likely to dissolve when these firms had prior direct ties. Greve et al. (2013) suggested that given viable alternative partnering options outside of their current alliances, firms are more likely to withdraw from their current alliances. Similarly, we found that multipartner alliances comprising primarily centrally positioned partners were more likely to dissolve when there were faultlines resulting from particularly strong ties among a subgroup of partners. ...
... Trust implies an expectation that a partner will act according to rules, morals, or verbal conditions alleviating the fear of opportunistic action (Bradach & Eccles, 1989). Greater trust among firms allows less dysfunctional conflicts and need for contractual safeguards in collaboration (Greve, Mitsuhashi, & Baum, 2013). ...
... As a robustness check for the potential endogeneity bias associated with entrants' technology choices, we follow the procedure suggested by Hamilton and Nickerson (2003). Specifically, we employ a first-stage estimation of an entrant's technology choice to calculate the inverse Mill's ratio, which we then include in the second stage discretechoice event history model (e.g., Dahlander & O'Mahony, 2011;Greve, Mitsuhashi, & Baum, 2013;Petkova, Wadhwa, Xin, & Jain, 2014;Rogan, 2014). We report these results after presenting our main findings. ...
Research Summary: Explanations of entrants’ survival in an emerging industry are premised on pre‐entry capabilities or technology entry choices prior to the emergence of the dominant design. We consider how these drivers interact to strengthen or nullify firms’ pre‐entry advantage, and facilitate adaptation as the industry evolves. We also expand the treatment of exit by separating dissolution from acquisition, in which firms’ capabilities continue to be utilized in the industry. Studying a recent shakeout in the global solar photovoltaic industry, we find that pre‐entry capabilities and technology choices act in a complementary manner for some firms, thereby enhancing survival, and as buffers against exit for others. Nearly half of exits were via acquisitions, and technology choice at entry played an important role in determining how firms exited.
Managerial Summary: New industries are often characterized by intense technology competition that culminates in a dominant technology followed by industry shakeout. Although prior research underscores the central role of technology choice and firm capabilities to survival, we do not actually know how firms with different capabilities and who have made competing technology choices survive an industry shakeout. In this article, we show how entrants’ capabilities and technology choices can act in a complementary manner for some firms, enhancing their chance of survival, and as buffers against failure for others. Moreover, we explain why some firms that do exit are acquired, when others are dissolved.
... Members of joint ventures that have alternative joint ventures through which to reach certain goals might have a higher likelihood to leave a certain joint venture (Olk & Young, 1997). Greve et al. (2013) find that the effects of outside options are particularly strong when the alternatives offer more market complementarity. Similar dynamics may play a role in standards consortia, in that the number of outside memberships of current members may negatively impact membership continuity. ...
Standards consortia develop technical standards or specifications and promote these to reach market dominance. Research on competing standards has explored either firm-level or standard-level factors, but the dynamics of standards consortia and their survival have remained largely understudied. The pre- and post-competitive phase of standards consortia supporting standards may better explain why certain standard-setting efforts fail where others succeed. In this empirical study we operationalize the concepts of internal standards consortium competition and standards consortium commitment, and analyse the effects of these concepts on the survival of high-tech standards consortia. We find that the influx of new strategic members throughout the years is beneficial for the longevity of the consortium. In addition, we find that standards consortia possibly constrain the entrance of new members if their existing members have a multitude of other concurrent standards consortium memberships.
... eputation of the intermediary and the evaluatee-were all at the level of the intermediary-evaluatee tie. Any number of these ties could mediate a single intermediary-evaluatee relationship. Dichotomizing the mediating ties into types and assessing the relative effects of each type was the preferred approach for dealing with such data structure (cf.Greve, Mitsuhashi, and Baum, 2013). ...
Organizational theorists have extensively documented the increased likelihood that two organizations will form a relationship if they have preexisting relationships with the same third party, a phenomenon known as triadic closure. They have neglected, however, the importance of the shared third party in facilitating or reversing this process. I theorize that the collaboration outcomes and competitive concerns of the intermediary spanning an open triad play a crucial role in whether that triad closes. Using a longitudinal dataset of the investment decisions of limited partners investing in U.S. venture capital firms in the period 1997–2007, I find that an intermediary is less likely to facilitate a direct connection under two conditions: (1) the intermediary has experienced failed collaborations with one of the indirectly connected parties or (2) the intermediary has competitive concerns—driven by its replaceability or relative attractiveness—that it may lose future business to one of the indirectly connected parties. The paper goes beyond the conceptualization of indirect ties as passive scaffolding that supports creating direct ties and instills a greater appreciation for the role of the intermediary that sits across them.
... It is a source of partner asymmetry (Das and Teng 2002;Harrigan 1988) representing not only benefits, but also costs, for both the green and less green partner (Castellucci and Ertug 2010;Mayer 2006;Yu and Lester 2008). Moreover, dissimilar level of responsiveness to environmental sustainability issues indicates divergent stances toward society embedded in the organizational culture (Banerjee 2001), and opposing priorities and temporal orientations (Das 2006), which can all influence alliance performance (Chen et al. 2009;Greve et al. 2012). ...
Whilst strategic alliance performance has been extensively researched through the resource-based lens, it has yet to be examined under the natural-resource-based view (NRBV) of the firm. Building on the NRBV, this article argues that a firm’s level of environmental proactiveness affects its level of alliance satisfaction. The argument is tested by surveying Norwegian CEOs, and the results confirm a positive relationship. Moreover, the partner’s environmental proactiveness equally influences the focal firm’s satisfaction with the alliance, in consistent with related studies. In addition to providing new empirical evidence in support of the NRBV, and extending the alliance performance literature, the findings add to the corporate environmentalism literature by offering insights on the virtues of green strategies in an underexplored context.
... For instance, removing a coopetitive agreement from its context does not make sense. To study the stability of coopetitive agreements, it is necessary to identify alternate partners (Greve, Mitsuhashi, and Baum 2013) to determine whether they are more compatible than the coopetitive partner. A broader view of dyadic coopetitive agreements is thus required. ...
Most articles studying coopetition focus on horizontal relationships between homogenous actors using a single level of analysis. However, several recent theoretical contributions have emphasized that coopetition is a more complex phenomenon and could imply vertical relations or heterogeneous actors. We contribute to this debate on the nature of coopetition by constructing a typology of coopetition. This typology is the result of an abductive process in which we mobilize the concept of “level.” Using the airline industry, we combine activity levels and organizational levels to identify seven forms of coopetition. Finally, we discuss the implications of a multilevel analysis to gain a better understanding of coopetition.
... Hence, switching between vendors becomes costly for the client; in this case, the client will incur a switching cost, κ ≥ 0, which denotes the time and effort required to search for new partners (Prince & Everett, 2012). Empirical research has shown that the client's switching cost increases with the vendors' outside option or the likelihood of collaborating with other clients (Greve, Mitsuhashi, & Baum, 2013). ...
This study examines the impact of switching costs on vendor selection and contract efficiency in the outsourcing of knowledge-intensive business services (KIBS). We show that under most plausible scenarios in KIBS outsourcing, there is an intrinsic tension between vendor selection and contract efficiency: in the process in which the winning vendor's bid constitutes the terms of the contract between client and vendor (e.g., competitive bidding), there is good selection but contract inefficiency (positive information rent paid by the client). If, by contrast, the client establishes the contract terms, then its performance yields contract efficiency but poor selection. We also highlight the implications of performance metrics for contract design in KIBS outsourcing.
... For example, studies that examine status homophily note that low-status firms may be constrained in their access to high-status firms (Stuart, 1998). However, as Greve et al. (2013) note, a proper theoretical treatment of the issue requires the use of matching logic and consideration of outside options for allying firms. ...
Strategic alliances are undertaken to create value through complementarities of resources and capabilities of the partner firms. This paper uses a recently developed estimator of matching games, i.e. the maximum score estimator, to advance strategic management research on partner selection in strategic alliances, with a focus on the formation of research alliances in the bio-pharmaceutical industry. We contribute to the literature in three ways. First, we develop a matching framework to study strategic alliances, taking a market perspective that explicitly incorporates key features of alliance formation: two-sided decision making; quest for complementarities between indivisible and heterogeneous partner attributes; and competition on each side of the market for partners on the other side of the market. Second, we assess the relative performance of the maximum score and standard discrete choice estimators by performing simulations based on known functional relationships in various matching scenarios. Third, within the context of bio-pharmaceutical research alliances, we hypothesize and find support using the maximum score estimator for complementarity in partner size, and in upstream research capabilities.
... Similarly, in a different context, the withdrawal of VC firms from syndicates with other VC firms is highly disruptive for the portfolio companies, and field studies suggest that it can poison relationships with the abandoned coinvestors (e.g., Guler, 2007). A heightened appreciation of the importance of tie dissolutions has led to a growing effort to understand their antecedents (Greve, Baum, Mitsuhashi, & Rowley, 2010;Greve, Mitsuhashi, & Baum, 2013;Polidoro, Ahuja, & Mitchell, 2011). To date, however, few studies have examined the consequences of tie dissolutions on future tie formation. ...
Organizational theorists are increasingly interested in the antecedents of terminating interorganizational relationships, but have paid little attention to the disruptive consequences of such terminations on future tie formation. To redress this imbalance, the present study focuses on how venture capital (VC) firms’ withdrawals from VC syndicates are associated with their subsequent syndication over the 1985 through 2008 period. We argue that withdrawals disrupt the relationships of the withdrawing VC firms with the coinvestors and reduce the likelihood of them entering into subsequent exchange (relational consequences). Furthermore, public information on the withdrawals can undermine the withdrawing VC firm’s reputation for reliability, making it a less desirable exchange partner overall (global reputational consequences). Finally, we find that abandoned coinvestors can spread negative, private information about the withdrawing firm, reducing its chances of syndication with their other network contacts (local reputational consequences). We also show that the global and local reputational consequences attenuate each other, due to redundancy in the content of information each provides. We discuss the implications of our theory for the research on network dynamics and reputation.
... As a result, alliance networks must evolve to become denser and more cohesive in the direction determined by current relationships. However, in reality, some firms terminate even long-term alliances (Greve, Mitsuhashi, & Baum, 2013), and prefer strangers to embedded others as alliance partners (Baum, Rowley, Shilpilov, & Chuang, 2005). These discrepancies reveal theoretical limitations in the network embeddedness approach and prompt us to clarify when and why firms do not prefer relationally or structurally embedded others as alliance partners. ...
Prior research on network embeddedness suggests that relational embeddedness (i.e., the duration of previous alliances between two firms) and structural embeddedness (i.e., the number of partners common to both firms) facilitate alliance formation between firms. This study examines the opposite case—namely, the inhibition of alliance formation by relational and structural embeddedness. In this study, by considering these two types of embeddedness as drivers of partner choice sets, I propose that a choice set larger than a certain threshold size with sufficiently low variation in terms of the embeddedness of their options (i.e., relationally or structurally embedded potential partners) enables firms to recognize multiple options within the choice set. I also suggest that this in turn increases firms’ uncertainty about these options’ resources and reliability and inhibits the formation of alliances with them. These predictions are supported by empirical tests of code-share alliance data in the global airline industry from 1994 to 2006.
... Malgré les avancées considérables dans les développements théoriques sur les alliances stratégiques, certaines thématiques récurrentes continuent de faire l'objet de nombreuses recherches en management : la compréhension des critères de sélection des partenaires (Shah & Swaminathan, 2008), l'étude des mécanismes de gouvernance (Reuer & Ariño, 2007), l'analyse des échecs des alliances (Blanchot & Guillouzo, 2011 ;Meschi, 2003) et de leur instabilité (Greve et al., 2013 ;Makino et al., 2007 ;Prévot & Guallino, 2012), les interactions entre partenaires ou concurrents (Gimeno, 2004) ou encore l'analyse des facteurs de performance (Christoffersen, 2013 (Christoffersen, 2013), sur la sélection des partenaires (Mitsuhashi & Greve, 2009), sur les réactions des concurrents (Gimeno, 2004), sur les mécanismes de gouvernance (Reuer & Ariño, 2007), etc. D'autres méthodes ayant recours à des logiques quantitatives peuvent également être mobilisées pour analyser les stratégies inter-organisationnelles. C'est le cas de l'analyse des réseaux sociaux (Min & Mitsuhashi, 2012 ;Saglietto, 2009), de la simulation (Cartier, 2006), de l'analyse quali-quantitative (Leischnig et al., 2014) ou encore de l'expérimentation (Arend, 2009). ...
L'analyse de la dynamique concurrentielle des alliances stratégiques nécessite le développement d'outils qualitatifs spécifiques. Nous proposons un dispositif d'analyse longitudinale qui intègre les trois dimensions traditionnelles de la stratégie – le marché, les structures de marché et le hors-marché – en plus d'une dimension propre aux alliances, les relations inter-marchés. Les modalités d'utilisation de l'ASMA – Analyse Séquentielle et Multidimensionnelle des Alliances – sont détaillées avant d'être appliquées dans le secteur ferroviaire européen. Par rapport aux méthodes qualitatives traditionnelles, l'ASMA permet de mettre évidence la dynamique des effets de portefeuilles d'alliances qui résultent de la multiplication des points de contacts entre partenaires et concurrents. Abstract: Analyzing the competitive dynamics of strategic alliances requires the development of original specific qualitative research tools. We propose a qualitative method for longitudinal analysis which integrates the three traditional dimensions of strategy – the market, market structures and the non-market environment – plus an additional dimension specific to alliances: inter-market relationships. We explain how to use the SMAA – Sequential and Multidimensional Analysis of Alliances – before applying it to the European railway sector. Compared to the traditional qualitative methods, the SMAA allows highlighting the dynamics of alliance portfolio effects resulting from the multiplication of points of contact between partners and competitors.
Research Summary
How does an acquisition initiated by a firm's alliance partner affect the value that the firm can create and capture from its alliance with that partner? We conjecture that the similarity between the businesses of the firm and its partner's acquisition target restricts the firm's ability to create and capture value from its alliance, whereas the complementarity between their businesses enhances the firm's gain from its alliance. We further expect relational embeddedness between the firm and its partner to mitigate the competitive tension associated with similarity while reinforcing synergies ascribed to complementarity. Our analysis of 361 firms and their 590 alliances with 91 partners that acquired 164 targets during 2000–2016 supports our predictions about business similarity and complementarity but refutes those concerning relational embeddedness.
Managerial Summary
When a firm's partner engages in an acquisition, this can impact the value of their alliance. We show that when the acquired target competes with the firm, the value of the alliance declines. In turn, when the target and firm's businesses are complementary, the alliance creates more value. We also find that when the firm and the partner had extensive experience working together, this reinforces the negative effect of business similarity with the target, probably because of perceived betrayal and knowledge leakage. Joint experience also reduces the value of complementarity, likely due to the difficulty of modifying collaborative practices. We encourage managers to scrutinize their partners' corporate initiatives, reduce commitment when the partner acquires a competing target, and leverage new complementarities following the partner's acquisitions.
Research on interfirm alliances indicates that partner firms’ asymmetry in network centrality increases the likelihood of alliance dissolution because it gives rise to a power imbalance and opportunism in the partnership. We contend that this view of centrality asymmetry does not consider the binding force that network resource complementarity can provide in an alliance, which motivates partners to ally for the long term. We propose that centrality asymmetry can have both divisive and cohesive forces in an alliance, which – when considered together – lead to a prediction that centrality asymmetry has a U‐shaped relationship with alliance dissolution. Moderate levels of asymmetry lead to lower rates of dissolution than high and low levels of asymmetry. The degree of cooperation between partners and the degree of external competition reduce the effects of centrality asymmetry on alliance dissolution because they mitigate power imbalances while encouraging partners to strengthen the alliance to withstand competitive challenges.
As últimas décadas apresentaram um crescimento vertiginoso da pesquisa em alianças estratégicas, espelhando um fenômeno mundial de empresas buscando parcerias para fazer frente a mercados cada vez mais competitivos e globalizados. No entanto, esse aumento considerável da produção acadêmica tem como consequência a fragmentação da literatura, tornando árdua a tarefa do pesquisador em acessar o conhecimento acumulado na área. Embora existam revisões de literatura na área, estas são bibliometrias ou meta-revisões, com pouca análise sobre o estado-da-arte no tema. O presente estudo teve como objetivo preencher essa lacuna, realizando uma revisão da produção acadêmica recente sobre alianças estratégicas. Foram analisados 113 artigos das áreas de administração e negócios publicados entre 2007 e 2017 com enfoque em alianças. A revisão desses artigos permitiu a construção de um panorama sobre a pesquisa em alianças no que tange às motivações para sua formação, às formas de governança e ao desempenho, com levantamento de tendências e sugestões para pesquisas futuras.
This study examines how venture capital (VC) firms terminate investments in an emerging economy context. We contend that due to the weak institutional environment, it is appropriate to draw on insights from power and social relation perspectives for a better understanding of the phenomenon. Specifically, we argue that a termination decision hinges on not only the dependence relationship between a VC firm and its portfolio companies, but also the social relationships among VC firms. Event history analyses of approximately 12,000 VC deals made in China between 2001 and 2012 reveal that when a VC firm has a greater number of investments in an industry, it is more likely to terminate investments on a portfolio company in that industry. Moreover, such effect on termination is moderated by the focal VC's embeddedness with its syndicate partners and collaboration opportunities with other VC firms outside the immediate access of the syndicate partners. Our study sheds light on research on VC decision making in emerging markets by integrating insights from resource dependence relationships and interorganizational network characteristics. © 2016 John Wiley & Sons Ltd and Society for the Advancement of Management Studies.
In a sample of Canadian investment bank cliques from 1952 to 1990, we examined whether social similarity and cohesion reduced exits of members from these cliques; whether complementarity through differentiated roles reduced such exits; and whether inequality in structural holes increased exits. We found that complementarity and inequality were more powerful antecedents of clique exits than similarity and cohesion. Our results suggest that clique stability is a function of three social and instrumental processes: building social attraction to govern exchanges, developing complementarity to accomplish collaborative tasks, and distributing the value created by a clique among its members.
In this paper, we introduce performance feedback models to specify conditions under which organizations' decision makers are more (or less) likely to accept the risk and uncertainty of nonlocal interorganizational partnership ties rather than prefer embedded ties with partners with which they have either past direct or third-party ties. Learning theory suggests that organizations performing far from historical and social aspirations may be more willing to accept the uncertainty and risk of such nonlocal ties with relative strangers. An analysis of Canadian investment banks' underwriting syndicate ties from 1952 to 1990 supports predictions from learning theory and, in addition, indicates that inconsistent performance feedback (i.e., performance above either historical or social aspirations but below the other) triggers the greatest risk taking in selecting partners.
We propose a theory of the market as an "intertemporal" process that integrates multiple theoretical perspectives. Using event-history methods, we analyze the dissolution of interorganizational market ties between advertising agencies and their clients as a function of three forces - competition, power, and institutional forces. The informal "rules of exchange" institutionalized in the "emergence" phase of the advertising services market include exclusivity (sole-source) and loyalty (infrequent switching). We find that most exchange relationships between advertising agencies and their clients are indeed exclusive, and most last for several years; but competition, power, and institutional forces support or undermine these rules. Most institutional forces reduce the risk of dissolution of agency-client ties. Powerful advertising agencies mobilize resources to increase tie stability, but powerful clients mobilize resources to increase or decrease stability. Competition is the weakest market force, but it has a consistent and substantial effect on tie dissolution: Competition always increases the risk of dissolution. We conclude that the market is institutionalized as imperfectly repeated patterns of exchange, because competition and changing norms about the duration of market ties destabilize market relationships.
This study examined the effects of partner nationality, organizational dissimilarity, and economic motivation on the dissolution of joint ventures. Event-history analysis was used to test the hypotheses in a sample of 186 ventures. Cultural distance in general did not have an effect on dissolution, but U.S.-Japanese joint ventures lasted longer than U.S.-U.S. joint ventures. Prior relationships between partners appeared to negate some complexities arising from cultural differences. Opportunistic threat and rivalry appeared to be a stronger indication of the dissolution of joint ventures than organizational variables.
In this study, we examined how firm-specific competitive conditions influence firms' patterns of market entry and exit, focusing on two features of firms' competitive conditions: market domain overlap, which measures the potential for competition, and multimarket contact, which measures the potential for mutual forbearance. A dynamic analysis of California commuter airlines from 1979 through 1984 showed that increases in market domain overlap raised airlines' rates of market entry and exit, but increases in multimarket contact lowered them, especially in markets clearly dominated by a single airline. Thus, paradoxically, close competitors are not the most intense rivals: airlines that meet in multiple markets are less aggressive toward each other than those that meet in one or a few markets.
n this study, we address the topic of interorganizational network change by exploring factors that affect the choice of alliance and interlock partners. While many studies have been devoted to investigating various factors driving network partner choice, there is also an interesting and unexplored tension in this body of work. On the one hand, much work emphasizes change in social structure—showing that firms expand networks by forming new relationships with new part- ners. At the same time, other scholars emphasize stability of social structure—showing that firms tend to choose past exchange partners. We seek to reconcile this tension by proposing that firms form new relationships with new partners as a form of exploration, and form additional relationships with existing partners as a form of exploitation (March 1991). Further, whether exploration or exploitation is chosen depends on the type of uncertainty that firms are facing: whether it is firm-specific or market-level uncertainty. We test our hypotheses using data on both interlock and alliance networks for the 300 largest U.S. firms during the 1988-1993 period. The results provide some evidence that whether networks are stable or changing depends on the type of uncertainty experienced by firms.
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This paper applies evolutionary economics reasoning to the strategic alliance context and examines whether and how routinization processes at the partnering-firm level influence the performance of the cooperative agreement. In doing so, it introduces the concept of interorganizational routines, defined as stable patterns of interaction among two firms developed and refined in the course of repeated collaborations, and suggests that partner-specific, technology-specific, and general experience accumulation at the partnering-firm level influence the extent to which alliances result in knowledge accumulation, create new growth opportunities, and enable partnering firms to achieve their strategic objectives. We also consider how governance design choices at the transaction level shape the effectiveness of interorganizational routizination processes. Based on a sample of 145 biotechnology alliances, we find that only partner-specific experience has a positive impact on alliance performance, and that this effect is stronger in the absence of equity-based governance mechanisms. We interpret these results to support the role of interfirm coordination and cooperation routines in enhancing the effectiveness of collaborative agreements.
Dummy variables have been employed frequently in strategy research to capture the influence of categorical variables. However, misinterpretation of results may arise, especially when interaction effects between dummy variables and other explanatory variables are involved in a regression. We discuss two approaches of entering dummy variables into a regression and their associated interpretations. We discuss some common mistakes of interpretation and hypothesis testing found in two recently published strategy papers, and highlight the advantages of our recommended approach over the approach usually adopted by management researchers.
Data on market relations between a large population of corporations and investment banks are used to study the organization-market interforce-the pattern of direct market ties between a firm and its banks. Forms of interfaces range from a long-term, exclusive tie (the relationship interface) to many short-lived, episodic ties (the transaction interface), with hybrid forms between the two poles. Contrary to widespread belief, the article finds that strong relationships still exist. Transactions interfaces are rare. Most firms use hybrid interfaces. A firm's interface is conceptualized as the intentional result of its efforts to reduce dependence and exploit power advantages. Observed interfaces are shown to be related systematically to various power-dependence concepts, including resource intensity (number of transactions and dollar amounts raised), criticality (the availability of resource alternatives), power asymmetry between a firm and its main bank, organization size, standardization of exchange, and ...
This study examines the impact of localized competition on rates of failure in the Manhattan hotel industry from 1898 to 1990. The study investigates whether the organizations in a population with more similar resource requirements compete more intensely. This approach builds on existing density-based models of interorganizational competition by including variation at the organizational level directly in both the model and measures of competition. A dynamic analysis shows that hotels located in densely populated regions of the distributions of organizational size, geographic location, and price experienced significantly higher failure rates. The findings show how an ecological approach to competition that incorporates intrapopulation variation can provide a more detailed understanding of the competitive dynamics and evolution of organizational populations.
In this paper, I attempt to advance the concept of embeddedness beyond the level of a programmatic statement by developing a formulation that specifies how embeddedness and network structure affect economic action. On the basis of existing theory and original ethnographies of 23 apparel firms, I develop a systematic scheme that more fully demarcates the unique features, functions, and sources of embeddedness. From this scheme, I derive a set of refutable implications and test their plausibility, using another data set on the network ties of all better dress apparel firms in the New York apparel economy. Results reveal that embeddedness is an exchange system with unique opportunities relative to markets and that firms organized in networks have higher survival chances than do firms which maintain arm's-length market relationships. The positive effect of embeddedness reaches a threshold, however, after which point the positive effect reverses itself.
Abstract Do rivals’ alliances increase or decrease the competitive pressure experienced by a firm? Drawing on the resource-based view and on organizational ecology, we propose that the effect of rivals’ alliances on an industry’s competitive dynamics is determined by two conditions: the degree to which they foreclose alliance opportunities for a focal firm, and the degree to which they increase overall carrying capacity of the industry. We distinguish between horizontal, upstream, and downstream alliances according to these conditions. Based on these distinctions, we
Using social embeddedness arguments, this study examines how the mobility of managers in professional service and client firms affects dissolution among their firms' market ties for that service. My analyses from a sample of agencies and clients in the advertising industry from 1986 to 1998 show that the exit of managers from client firms increases the likelihood that market ties dissolve and that the results are contingent on the size of the firm. In professional service firms, both the exit and promotion of managers affect the number of market tie dissolutions, but these results are contingent on managers' functional roles and the number of market ties maintained by professional service firms. Taken together these findings illustrate how dynamics in managerial labor markets affect market ties for services and how firms' characteristics moderate these effects. The results suggest several refinements to the social embeddedness perspective. *
In this article we offer a view that suggests that a firm's critical resources may span firm boundaries and may be embedded in interfirm resources and routines. We argue that an increasingly important unit of analysis for understanding competitive advan- tage is the relationship between firms and identify four potential sources of interor- ganizational competitive advantage: (1) relation-specific assets, (2) knowledge- sharing routines, (3) complementary resources/capabilities, and (4) effective governance. We examine each of these potential sources of rent in detail, identifying key subprocesses, and also discuss the isolating mechanisms that serve to preserve relational rents. Finally, we discuss how the relational view may offer normative prescriptions for firm-level strategies that contradict the prescriptions offered by those with a resource-based view or industry structure view. Scholars in the strategy field are concerned fundamentally with explaining differential firm performance (Rumelt, Schendel, & Teece, 1991). As strategy scholars have searched for sources of competitive advantage, two prominent views have emerged regarding the sources of super- normal returns. The first-the industry structure view-associated with Porter (1980), suggests that supernormal returns are primarily a func- tion of a firm's membership in an industry with favorable structural characteristics (e.g., rela- tive bargaining power, barriers to entry, and so on). Consequently, many researchers have fo- cused on the industry as the relevant unit of analysis. The second view-the resource-based view (RBV) of the firm-argues that differential firm performance is fundamentally due to firm heterogeneity rather than industry structure (Barney, 1991; Rumelt, 1984, 1991; Wernerfelt, 1984). Firms that are able to accumulate re- sources and capabilities that are rare, valuable, nonsubstitutable, and difficult to imitate will achieve a competitive advantage over compet-
This article highlights several important dimensions of planning for exit from strategic alliances and also offers several examples of the disastrous consequences of inadequate exit-planning. While many companies fall into the trap of having no exit plan, other companies take too simple a planning approach, wondering if the exit will be unconditionally easy or hard. A more effective approach involves questions such as "When should the exit be easy and when should it be hard? And for which partner?" The article develops a framework that stipulates contingency-specific exit provisions for each partner in the alliance-specifically, situations in which exit should be symmetric and easy for both partners, symmetric and hard for both partners, or asymmetric, hard for one partner and easy for the other. Furthermore, many alliances today reflect complex deals that cover several distinct developmental stages, each of which contains a distina set of contingencies. Such alliances require a dynamic application of the exit framework, wherein each stage of the alliance development entails a different set of exit provisions, and exit from one stage would signify the beginning of the next.
We combine theory and research on alliance networks and on new firms to investigate the impact of variation in startups’ alliance network composition on their early performance. We hypothesize that startups can enhance their early performance by 1) establishing alliances, 2) configuring them into an efficient network that provides access to diverse information and capabilities with minimum costs of redundancy, conflict, and complexity, and 3) judiciously allying with potential rivals that provide more opportunity for learning and less risk of intra‐alliance rivalry. An analysis of Canadian biotech startups’ performance provides broad support for our hypotheses, especially as they relate to innovative performance. Overall, our findings show how variation in the alliance networks startups configure at the time of their founding produces significant differences in their early performance, contributing directly to an explanation of how and why firm age and size affect firm performance. We discuss some clear, but challenging, implications for managers of startups. Copyright © 2000 John Wiley & Sons, Ltd.
One of the main reasons that firms participate in alliances is to learn know‐how and capabilities from their alliance partners. At the same time firms want to protect themselves from the opportunistic behavior of their partner to retain their own core proprietary assets. Most research has generally viewed the achievement of these objectives as mutually exclusive. In contrast, we provide empirical evidence using large‐sample survey data to show that when firms build relational capital in conjunction with an integrative approach to managing conflict, they are able to achieve both objectives simultaneously. Relational capital based on mutual trust and interaction at the individual level between alliance partners creates a basis for learning and know‐how transfer across the exchange interface. At the same time, it curbs opportunistic behavior of alliance partners, thus preventing the leakage of critical know‐how between them. Copyright © 2000 John Wiley & Sons, Ltd.
I argue that the linkage‐formation propensity of firms is explained by simultaneously examining both inducement and opportunity factors. Drawing upon resource‐based and social network theory literatures I identify three forms of accumulated capital—technical, commercial , and social —that can affect a firm’s inducements and opportunities to form linkages. Firms possessing these capital stocks enjoy advantages in linkages formation. However, firms lacking these accumulated resources can still form linkages if they generate a radical technological breakthrough. Thus, I identify paths to linkage formation for leading as well as peripheral firms. I test these arguments with longitudinal data on technical collaborative linkages in the global chemicals industry. Copyright © 2000 John Wiley & Sons, Ltd.
This paper attempts to explain why innovating firms often fail to obtain significant economic returns from an innovation, while customers, imitators and other industry participants benefit. Business strategy - particularly as it relates to the firm's decision to integrate and co1laborate - is shown to be an important (actor. The paper demonstrates that when imitation is easy. markets don't work wen, and the profits (rom innovation may accrue to the owners of certain complementary assets. rather than to the developers of the intellectual property. This speaks to the need, in certain cases, for the innovating firm to establish a prior position in these complementary assets_ The paper also indicates that innovators with new products and processes which provide value to consumers may sometimes be so iJt positioned in the market that they necessarily win fai1. The analysis provides a theoretical foundation (or the proposi. tion that manufacturing often matters. particularly to innovating nations_ Innovating finns without the requisite manufacturing and related capacities may die. even though they are the best at innovation_ Implications for trade policy and domestic economic policy are examined.
Discussions of the link between firm size and innovation are outmoded because the boundaries of the firm have become fuzzy in recent decades. Strategic alliances — constellations of bilateral agreements among firms — are increasingly necessary to support innovative activities. Such alliances can facilitate complex coordination beyond what the price system can accomplish, while avoiding the dysfunctional properties sometimes associated with hierarchy. Antitrust law and competition policy need to recognize that these new organizational forms are often the functional antithesis of cartels, though they may have certain structural similarities. A more complete understanding of bilateral contracts and agreements ought to reveal when and how cooperation can support rather than impede innovation and competition. © 2003 by World Scientific Publishing Co. Pte. Ltd. All rights reserved.
We show how the tension between cooperation and competition affects the dynamics of learning alliances. 'Private benefits' and 'common benefits' differ in the incentives that they create for investment in learning. The competitive aspects of alliances are most severe when a firm's ratio of private to common benefits is high. We introduce a measure, 'relative scope' of a firm in an alliance, to show that the opportunity set of each firm outside an alliance crucially impacts its behavior within the alliance. Finally, we suggest why firms might deviate from the theoretically optimal behavior patterns. (C) 1998 John Wiley & Sons, Ltd.
In this chapter I will offer a literature review and some thoughts on processes that may systematically account for the formation networks among economic actors. After reviewing why sociologists (and, increasingly, economists) see networks as essential to the functioning of markets, and then review much of the work that has been done in economic sociology on the formation of networks and a smaller portion of the research on the subject in economics and applied mathematics. Although I describe research on networks at both the organizational and the individual level, I focus on the organization level. In the interest of brevity, I emphasize horizontal relationships among organizations, rather than vertical (that is, buyersupplier) transactions. What, exactly, is meant by "horizontal inter-organizational networks"? To fix ideas, imagine a venture capital firm that has identified a promising young company that it wishes to finance. Further, suppose that the venture capitalist chooses to form a syndicate-a small group composed of other high-risk investors-to finance the startup company. Although not all venture investments are made in syndicates, the majority of them are. In the context of the venture capital industry, the question of where inter-organizational networks come from translates into a question about the mechanisms that guide venture capital firms in the search for and selection of syndicate partners. To give another example that has been the site of much empirical research, consider the case of a pharmaceutical firm that has a promising drug candidate but lacks sufficient internal capacity to launch a worldwide marketing campaign. What regularities guide its selection of a marketing partner? Both of these examples are about the formation of horizontal inter-organizational networks. Why examine the question of what determines the formation of particular transactions, or of patterns of connections, in inter-organizational networks? The most straightforward answer is that we believe we know that the shapes of networks-the particular structures of relations in place-is consequential for important outcomes experienced by the actors in networks. Research on social and economic networks has thrived during the last few decades, but the overwhelming thrust of the empirical literature has been to document the consequences of occupancy of different locations in established networks on outcomes of all types. In the economic sociology and organization theory literature-the area in which the author works-there are literally hundreds of studies that examine "network effects." For instance, in the tradition of Mark S. Granovetter (1973), a number of studies consider the role of networks in the job search process (see Fernandez, Castilla, and Moore 2000) and in the process of securing promotions inside firms (Podolny and Baron 1997). Extending classic work on the diffusion of innovations (Coleman, Katz, and Menzel 1966; Burt 1987), a large number of studies have assessed the influence of interfirm networks on explaining patterns of adoption of practices and processes (Mizruchi 1992). Building from network-based conceptions of market structure, a third thrust of the literature has been to show that firm positions influence performance outcomes, ranging from sales growth (Podolny, Stuart, and Hannan 1996; Ingram and Roberts 2000) to market valuation (Stuart, Hoang, and Hybels 1999) to innovation rates (Ahuja 2000). Can we be certain that the findings from this body of work are valid? It is possible to take issue with any one of these studies on empirical grounds. In particular, the vast majority of published work treats measures of network position as exogenous to the outcome variable under examination and in many cases does little adequately to account for plausible unobserved correlates of particular network positions. As is discussed at some length in chapter 6 in this volume, by Ray E. Reagans, Ezra Zuckerman, and Bill McEvily (and is implied in chapter 3, by Rachel Kranton and Deborah Minehart, and chapter 8, by James E. Rauch and Joel Watson), the endogeneity of network position may be particularly problematic in studies seeking to document the effects of networks on actors' performance (see Durlauf and Fafchamps 2004 for an introduction to the issues). The reason why unadjusted empirical estimates of network effects may be confounded is simple. If actors are aware that benefits accrue to those who possess certain network configurations, they have an incentive to elbow in to certain regions of a social structure. Conversely, if actors differ in their ability to create or benefit from certain types of links, apparent network effects may in fact be caused by some underlying, unobserved characteristic of the actors. One reason why questions loom about the empirical accuracy of studies of network effects is that the vast and growing body of research that documents them belies our quite limited knowledge of how networks emerge and evolve. To put it succinctly, without a reasonably rich understanding of how networks emerge and change-without a theory of where networks come from and how they evolve-the ground underneath the findings of network effects will always be at least a little shaky. Therefore, I see the literature on inter-organizational networks as facing something of a crossroads. It might continue as it has developed, with the vast majority of work looking at how heterogeneous network positions affect outcomes. Hopefully, the focus will shift to considering in greater depth the more difficult question of understanding the social and organizational principles that govern the formation of networks. These understandings may in turn inform the empirical work on the causal influence of network positions on outcomes of interest. I also describe the theoretical foundations for the basic claim that networks should matter for how markets behave and how outcomes in markets are shaped. There is far more to say on this point than there is space available, so I focus on the well-known argument that there is often considerable uncertainty in market exchanges, and that a consequence of this uncertainty is that networks among market participants play a prominent role in shaping patterns of exchange, or more precisely, which pairs of actors engage in exchange. I then describe the research on endogenous network formation in economic sociology. This research has adapted network-theoretic models to examine how the structure of an inter-organizational network in one period adumbrates the creation of next-period ties. In this section I also briefly describe work in economics, statistics, and mathematics that address the question of how networks change. Section IV offers a brief conclusion.
The tendency for relationships to weaken and disappear I discuss as decay, and functions describing the rate of decay over time I discuss as decay functions. Three conclusions are supported with 4 years of network data on a study population of bankers and their colleagues in a financial organization. (1) Factors known from cross-sectional evidence to be associated with strong relationships are associated with slow decay; decay is slower in relations between colleagues with a strong prior relationship (inertia), working in the same corporate division (homophily), prominent in the social hierarchy of bankers (status), or connected indirectly through many third parties (embedding). (2) Regardless of slower decay in certain relations, decay has a pattern over time similar to the population ecology "liability of newness" attributed to selection and learning, with the added complication of networks and people aging simultaneously. Decay is a power function of time in which the probability of decay decreases with tie age (years for which a relationship has existed) and node age (years for which a banker has been in the study population). (3) Embedding stability is responsible for the greater stability of older relationships. The decay-inhibiting effects of age occur where embedding is disrupted but not where embedding is continuous. The third conclusion is interesting in highlighting the first derivative of social structure as a causal variable: embedding has to be measured for its change, rather than level, to see both of its distinct effects on relationship decay.
Employment outcomes depend on opportunity and choice both of which are subject to structural influences. This article presents a new approach to studying the factors that determine employment outcomes. It develops a statistical technique, two-sided legit (TSL) directly from a model of the preferences and resources of employers and workers. Opportunity and choice are functions of these preferences and resources. Application of the TSL model to 1972-90 GSS data shows substantial variation in the importance of the worker characteristics of education, race, and age for the opportunity for employment in different occupational categories, The relationships of TSL to other sociological and economic models are also discussed.
The outside opportunity structure is important in predicting the likelihood and direction of job change but has received little
attention. We view the ecology of organizations as a determinant of worker expectations of outside opportunity and connect
characterizations of organizational size diversity and inequality with job matching and firm reputation theory on how worker
expectations are affected by organizational characteristics. This leads to the predictions that greater organizational diversity
and inequality within a sector of the labor market will cause more intrasector job changes and fewer intersector job changes.
We test these predictions on intra- and interindustrial and regional job changes, yielding supportive results on both industrial
and geographical job mobility. Comparison of the results suggests stronger evidence in favor of reputation than matching theory.
Little attention has been given to the measurement of the concept of tie strength. Using survey data on friendship ties, we
apply multiple indicator techniques to construct and validate measures of tie strength. Vie conclude that: (1) there may be
two distinct aspects of tie strength, having to do with the time spent in a relationship and the depth of the relationship;
(2) a measure of “closeness” or intensity is the best indicator of strength; (3) there are difficulties with frequency and
duration of contact as indicators of strength; (4) predictors of strength (e.g., kinship, neighboring) are not especially
strongly related to the concept; and (5) the constructed measures of strength, particularly the one of “time spent,” are valid
in that they are related to predictor variables in anticipated directions.
This paper investigates the relationships between organizational interdependence, specifically the number of joint programs, and internal organizational behavior, for health and welfare organizations. A model of organizational interdependence produces five hypotheses about organizations, which are tested with data for sixteen social welfare and health organizations located in a midwestern metropolis in 1967. It was found that organizations with many joint programs tend to be more complex, more innovative, have more active internal communications channels, and somewhat more decentralized decision-making structures. No relationship was found between number of joint programs and degree of formalization. It is posited that, with increase in division of labor, organizations become more complex and more innovative; the need for resources to support such innovations promotes interdependent relations with organizations, and the greater integration of the organizations in a community structure.
A chief executive job is a pairing of an individual and an organization. A career within a system of chief executive jobs consists in a series of such pairings involving a single individual. This paper considers one system of careers, Wisconsin school superintendents from 1940 through 1972, and examines the extent to which statistical characteristics of that system are consistent with a simple Markov model that assumes both individuals and jobs to be indistinguishable and careers at that level to be essentially random. The results indicate that the system is nearly, but not entirely, random. Deviations from randomness appear to be due primarily not to differences among the individuals involved, but to differences among the jobs (districts) and to nonstationarity in exit rates over the duration of a job. These results are discussed in terms of their implications for understanding the consequences of control systems for organizations. It is suggested that there are some reasons for anticipating that careers in top management in many social systems would tend to be nearly random events involving nearly indistinguishable managers.
Past studies have consistently shown that firms favor past partners when forming new alliances. This behavior has been associated with a need to have knowledge of potential partners' capabilities and reliability. We consider inertia as an alternative rationale. Inertia and evaluation factors were tested in the context of underwriting syndicate formations in the U.S. investment banking industry. The results suggest both inertia and several evaluation criteria, including reciprocity, experience, and prior performance, influence partner selection.
The simplest social context for trust is an isolated dyad—two people away from others. The more usual context is two people surrounded by various close friends, foes, and acquaintances. We argue that third-party gossip amplifies both the positive and the negative in a relationship, making ego and alter more certain of their trust (or distrust) in one another. We draw three broad conclusions from an analysis of network data on a probability sample of diverse senior managers: (a) Trust is associated with relation strength, as expected in private games; (b) as predicted by the gossip argument for public games, trust is significantly amplified by third parties (third parties have a positive effect on trust within strong relations, and a negative effect on trust within weak relations); and (c) different forms of indirect connection are responsible for the third-party effects on trust.
There has been an increased interest recently in alliances as successors of the large consortia that used to operate in the context of the conference system. Today, having become a common means and term of co-operation in a variety of other industries, alliances are posited as the response of the supply side of liner shipping to important changes on the demand side; alliances have, thus, become predominant in the most important routes for container cargoes. In recent years, however, the list of major container traffic generators and the list of major carriers of containerized cargoes have begun to contain more common entries, generally originating from the Asian region. Asia is, however, a large continent and the entrance of Asian carriers into liner shipping has not been simultaneous; the position, strategies and co-operation strategies of Asian companies have more differences than they share common features. Nevertheless, this paper suggests that alliances are a distinct form of co-operation in liner shipping and the empirical evidence based on a survey in the region supports this hypothesis. The similarity of attitudes of the major Asian container carriers vis a vis alliances is in this way revealing in terms of the range of motivations for participating in the alliance system in a globalized transport environment.
Organizations enter alliances with each other to access critical resources, but they rely on information from the network of prior alliances to determine with whom to cooperate. These new alliances modify the existing network, prompting an endogenous dynamic between organizational action and network structure that drives the emergence of interorganizational networks. Testing these ideas on alliances formed in three industries over nine years, this research shows that the probability of a new alliance between specific organizations increases with their interdependence and also with their prior mutual alliances, common third parties, and joint centrality in the alliance network. The differentiation of the emerging network structure, however, mitigates the effect of interdependence and enhances the effect of joint centrality on new alliance formation.
Assuming heterogeneity among relationally-embedded ties, this study focuses on their classification. Network ties embedded within social relationships influence economic actions and represent a strategic form of organizing for emerging entrepreneurial firms. Research questions include the following: (I) What are the components of the social relationships of relationally-embedded ties? (2) How can relationally-embedded network ties be classified to identify different types of embeddedness based on variations in the social relationships? (3) What strategic implications can be drawn from a multidimensional view of relational embeddedness? This study uses case study methods to examine external network ties of eight emerging firms in the computer industry A classification typology of seven types of relational embeddedness emerges based upon combinations of three overarching social components-personal relationship, dyadic economic interaction, and social capital. The typology suggests multidimensionality of both embeddedness type and intensity. The discussion addresses strategic outcomes of heterogeneity within relational embeddedness
I argue that the linkage-formation propensity of firms is explained by simultaneously examining both inducement and opportunity factors. Drawing upon resource-based and social network theory literatures I identify three forms of accumulated capital— technical, commercial, and social—that can affect a firm's inducements and opportunities to form linkages. Firms possessing these capital stocks enjoy advantages in linkages formation. However, firms lacking these accumulated resources can still form linkages if they generate a radical technological break- through. Thus, I identify paths to linkage formation for leading as well as peripheral firms. I test these arguments with longitudinal data on technical collaborative linkages in the global chemicals industry. Copyright © 2000 John Wiley & Sons, Ltd.
This paper examines the mechanisms by which new organizations establish their initial network positions, or sets of network ties from which their future tie networks evolve. I develop hypotheses from two competing logics, one based on the effects of previously developed network ties and the human capital of a new organization's founders and the other based on the effects of a new organization's early accomplishments. I test these logics in a study of 92 Internet security ventures forming ties by receiving investments from venture capitalists and other investment organizations between 2000 and 2005. In contrast to how the network positions of established organizations evolve, I find that new organizations forming their first ties early obtain their initial network positions through their founders' ties and human capital, while new organizations forming their first ties later achieve their initial network positions through their organizational accomplishments.
To examine the effects of interorganizational network structures on acquisition decisions, we propose a model whereby firms learn by sampling the diverse experiences of their network partners. We tested this model by examining the effect of diversity of network partners' experience on firms' acquisition decisions, using data on acquisition premiums and acquirers' stock market performance from 1986 to 1997. Results show that firms tied to others with heterogeneous prior premium experience tend to pay less for their acquisitions and have better-performing acquisitions than those tied to others with homogeneous experience. Firms also pay lower premiums when their network partners (1) have completed deals of diverse sizes, (2) have unique information, and (3) are themselves of diverse sizes. Firms that have multiplex relationships with their partners receive even more benefit. The results extend prior research on networks and learning by showing that collective network experience affects firms' decision quality.
We show how the tension between cooperation and competition affects the dynamics of learning alliances. ‘Private benefits’ and ‘common benefits’ differ in the incentives that they create for investment in learning. The competitive aspects of alliances are most severe when a firm's ratio of private to common benefits is high. We introduce a measure, ‘relative scope’ of a firm in an alliance, to show that the opportunity set of each firm outside an alliance crucially impacts its behavior within the alliance. Finally, we suggest why firms might deviate from the theoretically optimal behavior patterns. © 1998 John Wiley & Sons, Ltd.
We discuss the 'gloomy' side of firms' embeddedness in networks of inter- firm partnerships. We propose a nested understanding of the effects of three levels of overembeddedness - environmental, inter-organizational and dyadic overembeddedness - on subsequent inter-firm partnership formation and argue for a joint examination of these three levels and their interactions over time. As a whole, increases in firms' embeddedness will generate decreasing returns to the firms involved, prompting (i) the search for and attachment to novel partners and (ii) the dissolution of extant partnerships. On the flipside, overembeddedness thus sparks network evolution - by cueing firms to look beyond their embedded partnerships.
This paper proposes that organizations overcome problems of market uncertainty by adopting a principle of exclusivity in selecting exchange partners. This general proposition in turn implies two specific hypotheses. First, the greater the market uncertainty, the more that organizations engage in exchange relations with those with whom they have transacted in the past. Second, the greater the uncertainty, the more that organizations engage in transactions with those of similar status. A study of investment banking relationships in the investment grade and non-investment-grade debt markets from 1981 to 1987 provides support for the hypotheses. The implications of this analysis for stratification and concentration in the market are discussed.
This study uses data on the U.S. film industry from 1982 to 2001 to analyze the effects on box office performance of prior relationships between film producers and distributors. In contrast to prior studies, which have appeared to find performance benefits to both buyers and sellers when exchange occurs embedded within existing social relations, we propose that the apparent mutual advantages of embedded exchange can also emerge from endogenous behavior that benefits one party at the expense of the other: actors offer better terms of trade and allocate more resources to transactions embedded within existing social relations, thereby contributing to the ostensible advantages of such exchange patterns. Findings show that not only do distributors exhibit a preference for carrying films involving key personnel with whom they had prior exchange relations, but also they tend to favor these films when allocating scarce resources (opening dates and promotion effort). After controlling for the effects of these decisions, films with deeper prior relations to the distributor perform worse at the box office. The results suggest that, rather than benefiting from repeated exchange, distributors overallocate scarce resources to these prior exchange partners, enacting a self-confirming dynamic.