Partnering With Outsiders: The Alliance Strategy Of Business Group Member Firms

Abstract

We investigate how business group member firms (BGMs) strategically choose external alliance partners. Although BGMs mainly exchange resources with same-group peers, they would form alliances with external partners to complement their network. We propose that those firms consider environmental uncertainty, collaborative uncertainty and inter-business-group competition in their external partnering. Our analysis on Japanese horizontal Keiretsu members shows that BGMs tend to ally with external partners to reduce environmental uncertainty. This preference will be reinforced as they gain experience in the alliances with external partners. The embeddedness in their original Keiretsu networks motivates them to ally with standalone firms rather than the firms affiliated with other Keiretsu.