A Literature Review of Interfirm Partnership Termination and Future Prospects

Abstract

Interfirm partnership is crucial for operation and success of firms, as it serves to provide various aspects of economic and social benefits. However, interfirm partnership is usually highly dynamic and unstable, thereby bringing great management challenges to managers and stimulating a lot of research interests in understanding interfirm partnership termination. Prior researchers have adopted a wide range of theoretical perspectives, trying to reveal the causes and outcomes of interfirm partnership termination. Research findings have been revealed plentifully, but interfirm partnership termination research has developed for decades without such a systematic synthesis. This paper attempts to fill the research gap above by providing a comprehensive literature review of interfirm partnership termination. It is organized around three major questions. Firstly, what is interfirm partnership termination? In answering this question, we first distinguish desired and undesired termination, and summarize major forms of partnership termination under various types of interfirm partnership. Secondly, what are the antecedents of interfirm partnership termination? Based on a review of seven major theories employed in this field, we supplement and perfect the inter-organizational relationship analysis framework put forward by Ring and Van de Ven (1994), propose a more comprehensive analytical framework and make a relevant literature review. Our framework identifies three core mechanisms of maintaining stable interfirm partnership, namely, efficiency, equity and legitimacy. The reasons for the volatility of these three mechanisms leading to partnership termination lie in three stages of interfirm partnership development, namely negotiations, commitment and execution & completion. Thirdly, how does interfirm partnership termination matter to firms? In this part, we identify termination outcomes revealed by the literature in three major aspects: influences on future collaboration potential, learning effects of termination, as well as the effects of termination communication strategies on termination outcomes. Based on a comprehensive review of prior literature, we identify seven research directions that are worthy of further investigation: (1) to explore interfirm partnership termination in more various forms; (2) to improve the consistency between theoretical construct and empirical measures; (3) to reconcile contradictory arguments proposed by different theoretical perspectives; (4) to explore complementarities among varied theoretical perspectives; (5) to investigate more rich antecedents of interfirm partnership termination; (6) to conduct more studies on the effects of interfirm partnership termination on firms; (7) to conduct more interfirm partnership termination studies embedded in Chinese context. We follow a four-step procedure of selecting our review sample to ensure the comprehensiveness of literature coverage. First, we search 20 high-level English academic journals in fields of strategic management, organization studies, innovation & entrepreneurship, international business, and marketing by using key words such as termination, dissolution, tie instability, tie continuity, alliance dynamics, joint venture failure, alliance withdrawal, partner buyout and joint venture exit. Articles containing these keywords in tittles or abstracts are further examined by reading their abstracts. Treatment of interfirm partnership termination as a core construct is used as the major criterion to determine relevance. Second, we conduct literature search for scholarly publications in EBSCO, Science Direct and ProQuest database by using the same set of key words. Third, for each search hit in prior two steps, we examine its forward and backward citation information to further collect pertinent articles. We also examine reference sections of published reviews on interfirm partnership, alliance and joint venture to obtain articles that may have been ignored. The procedure yields 22 conceptual articles and 103 empirical studies. Fourth, we code theoretical perspectives and core arguments for each article, as well as research design and empirical conclusions for all empirical studies, to develop a comprehensive picture of current theoretical and empirical development in this stream. Our review contributes to the literature of interfirm partnership in two aspects. First, we provide a systematic review of foreign literature of interfirm partnership termination including joint ventures, strategic alliances, and buyer-supplier relationship. We also sorts out forms, antecedents and outcomes of interfirm partnership termination by constructing an integrated framework, to provide a comprehensive and clear overview of current research situation in this field. Second, we evaluate existing literature from both theoretical and empirical perspectives, and propose future research directions through identifying limitations of current literature.