Competition Within and Between Networks: The Contingent Effect of Competitive Embeddedness on Alliance Formation

The author examines how firms use alliances to respond to the alliance networks of their rivals by either allying with their rivals' partners or by building countervailing alliances. Evidence from the global airline industry (1994-98) suggests that these strategic responses depend on alliance co-specialization. Co-specialized alliances by rivals may involve exclusivity, precluding alliances with the rivals' partners and thus encouraging countervailing alliances. Non-specialized alliances are less exclusive, and are used when rivals share the same partners.