Rent Creation Beyond Organizational Boundaries: The Role of Governance and Leadership for Capability Development at the Inter-Organizational Level

Abstract

This paper develops an integrated theory and provides an illustrative example to explain the effects of governance and leadership on the development of dynamic and operational capabilities in alliances and their resultant strategic performance. We use a dynamic capability perspective to explain alliance performance and embed our argument in stewardship theory and full-range leadership theory. According to our theoretical framework, co-existing stewardship governance and transformational leadership behaviors facilitate the creation of Schumpeterian rents through dynamic capabilities, while co-existing principal-agent governance and transactional leadership behaviors affect the creation of Ricardian rents through operational capabilities in alliances. Our integrated theory implies that it is critical for alliance partners to align their governance arrangements with the leadership practiced in the alliance team in order to realize improved alliance performance.