Alliance Managers’ Assessment of Outside Options and the Propensity to Switch Alliance Partners: An Experimental Approach
Throughout the past years, increased scholarly attention has been paid towards both strategic alliance dynamics and termination of inter-firm collaborations, supplementing our already substantial knowledge on alliance formation issues. It is only recently, however, that research has begun to depart from a failure-driven perspective to explain alliance dissolution, to also incorporate exogenous changes such as the availability of outside options. We complement this emergent stream of literature by experimentally investigating how characteristics of existing as well as alternative alliance partners induce decision makers to conduct a ‘partner switch’, i.e. to substitute an established alliance by forming a new relationship with an outside partner that provides higher net benefit. Our results provide support for the impact of outside options on alliance instability. Specifically, we found that partner characteristics pertaining to the alliance’s value creation potential (resource complementarity, industry prominence, and cultural fit) matter more than partner characteristics that determine value appropriation by the focal firm (bargaining power). Moreover, our results suggest that the impact of economic and social barriers to partner switch (relational embeddedness and partner-specific investments) is limited. We complement existing research on alliance termination and alliance formation to form an integrative perspective on outside option-induced alliance withdrawal.
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