Abstract
We assume the real options perspective and threat-rigidity model to explain firms' different responses to environmental changes. Treating firms' alliance portfolios as bundles of real options, we argue firms would expand both the size and diversity of their alliance portfolios when environmental change is perceived to be creating opportunities; but both the size and diversity of their alliance portfolios shrink when an environmental change is perceived as posing threats. We tested our hypotheses by tracing the evolution of telecom industry firms' alliance portfolio strategy during and after the 1996 Telecommunications Act and the 2000 market crash.
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