A Tale of Two Signals: Partner CSR, CSiR and Alliance Formation

Abstract

This study examines how a potential partner’s socially responsible performance (CSR) and socially irresponsible performance (CSiR) play distinct signaling roles in influencing the likelihood of alliance formation. We argue that a firm will interpret the positive signal of partner CSR as an indication of partner trustworthiness, increasing its willingness to collaborate. In contrast, the negative signal of partner CSiR will raise a firm’s fear of potential contaminant costs, which motivates it to refrain from alliance formation. We also identify three key boundary conditions that shape the role of partner CSR and partner CSiR. Using alliance and CSR data from U.S. high-tech industries from 1995 to 2016, we find that either a high-CSR or low-CSiR partner has a higher likelihood of alliance formation. Furthermore, when the prior alliance is present or when alliance partners operate in the same industry or location, the relationship between partner CSR and alliance formation is weaker but the relationship between partner CSiR and alliance formation becomes stronger.