Abstract
Collaboration and mutual learning motivate many firm alliances, but realizing these sources of value can also have the paradoxical effect of transforming alliance partners into future competitors. This paper revises models of alliance governance mode to capture the inherent tension between entry cost, mutual learning, and bilateral safeguarding by simultaneously analyzing the asymmetry between partner firms and that alliance based on industry relatedness. Using a sample of 2,878 U.S. alliances from 1985-2017, we find that instead of prioritizing low entry costs by using non-equity alliances, managers opt for equity governance when the partner firm may attempt to become a future competitor. Specifically, equity-based governance increases with partner industry asymmetry as firms safeguard against potential competition from both the alliance and their partner in a bilateral and dynamic way.
Published Version
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