Integrated Information Systems, Risk Sharing and Alliance Risk

Abstract

We examine whether the implementation of formalized controls in strategic alliances is aligned with the extent to which firms integrate their information systems to share information with alliance partners and share risks in an alliance. We theoretically develop the effects of information system integration (ISI) and risk sharing on management’s perceptions of alliance risk (i.e., perceived performance and relational risks) and performance, and include moderating effects of alliance formalization. We find that ISI is associated with relational, but not with performance risk. As alliance formalization increases, however, this effect decreases. Risk sharing is negatively related to both relational and performance risks, while these risks increase when risk sharing is high and the alliance is formalized. Perceptions of alliance risk influence both alliance commitment and performance. Our findings provide insights of how controllable characteristics of alliance relationships (i.e., extent of ISI and risk sharing) affect perceptions of alliance risk and performance.