Partner Selection and Alliance Portfolio Performance in Emerging Markets

Abstract

Repeatedly allying with previous partners or following peers’ decisions are two strategies of firms to reduce uncertainty in their alliance partner selection decisions. However, whether or not these two strategies lead to superior alliance portfolio performance is open to question. Leveraging data collected from 566 fund product distribution alliances initiated by 62 fund companies in a five-year period (2007-2011), we found adopting these two strategies does not benefit alliance portfolio performance. Partner repeatedness, which reflects to what extent that a firm relies on its previous alliance experience, cannot improve alliance portfolio performance significantly. Social value of current partners, which reflects the extent that a firm relies on peers’ choices in partner selection, even imposes a negative effect. The study also examines how firms’ linkages to governments change performance consequence of the two partner selection strategies. As a category of formal government-firm linkage, state ownership enhances the positive effect of partner repeatedness on alliance portfolio performance, while it strengthens the negative effect of partner social value. As a category of informal linkage, CEOs’ political ties weaken the positive effect of partner repeatedness on alliance portfolio performance but cannot significantly alleviate the negative effect of social value of current partners.