Abstract
In many industries, firms with asymmetric status form alliances in order to gain new resources. We use a unique setting of equity alliances in the Thoroughbred Horse Industry to study the effects of two underlying dimensions of status, resource quality and network position. We find that firms select each other based on the quality of their resources and on the network closure higher status firm. Once the selection is controlled for, the performance outcome of the alliance is affected by the quality of the resources and the network closure of both partners. Our results indicate that firms seek overlapping assurance (from the equity alliance and the high-status partner’s network closure) to prevent opportunism in their alliance for the high-status partner and to promote reputational benefits for the low-status partner. The paper uses a two-sided matching model with Bayesian estimation to account for endogeneity of the mutual selection in the alliance.
Published Version
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