Professor of Entrepreneurship
Journal Article | Organization Science | 24 | February 2013
Greener Pastures: Outside Options and Strategic Alliance Withdrawal
Departing from prior work that demonstrates the stickiness and stability of alliance networks resulting from embeddedness, the authors 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, the authors 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.The authors 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, the authors 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.