Effect of network organization on alliance formation: A study of the Japanese automobile ancillary industry

Abstract

Abstract Competition in global industries is shifting increasingly from interfirm rivalry to rivalry between networks of firms. Strategies of individual firms are thus contingent on the degree of interdependence that exists between them and the core firm in the network. The present study examines the effect of network affiliation on a member firm's decision to enter a foreign market and international strategic alliance formation. Affiliate firms have two options available to them: (1) enter into competitive strategic alliance with a competitor or (2) enter into a symbiotic strategic alliance with the core firm of the network organization. We tested this assertion using archival sources data on sixty-five Japanese automobile suppliers that had set up strategic alliances in the United States and that belonged to various interorganizational networks known throughout the Japanese automobile industry as keiretsu . Results indicate that when affiliate firms are dependent on the core firm, they prefer to form symbiotic strategic alliances. Conversely, affiliate firms prefer competitive strategic alliances with competitors when they are dependent on the core firm.