To Ally or Not to Ally with Firms Having Lower Environmental Reputations

Abstract

Strategic alliance partner selection is a complex process, where trade-off decisions on prospective partners’ attributes must be made. This paper uses the context of environmental reputation asymmetry to explore trade-off dynamics, scarcely dealt with in the literature. More specifically, I examine how CEOs (the main decision makers) reason on whether to decide to ally with a lower-reputation partner, and facilitating factors. Through a multiple-case approach, I find that initiating firms to alliances anticipate changes in partner firms’ reputations. The prospective partner’s propensity to improve is introduced as a core construct; it is proposed to significantly affect the focal firm’s trade-off willingness in the alliance formation situation. My data also reveal some determinants and dynamics in contrast with the ‘learning race’ perspective, suggesting that firms underutilize alliances as a means to enhance their environmental performance at lower cost.