When Do Networks Matter? A Study of Tie Formation and Decay

Advances in Strategic Management, Vol. 23, June 2006

52 Pages Posted: 27 Sep 2007

See all articles by Andrew V. Shipilov

Andrew V. Shipilov

INSEAD

Tim Rowley

University of Toronto - Rotman School of Management

Aharonson Barak S.

Tel-Aviv University

Abstract

Interorganizational partner selection decisions are plagued with uncertainty. When making partnering decisions, firms strive to answer two questions: does the prospective partner have resources which can be used to generate value in the relationship; and whether the partner will be willing to actively share these resources and cooperate in good faith. Answers to these questions help reduce three types of uncertainty - partner capability uncertainty, partner competitiveness uncertainty and partner reliability uncertainty. For a relationship to benefit both partners, they have to possess complimentary resources of comparable quality, avoid explicit competition as well as be willing to engage in the cooperative behaviors within the confines of their relationship. In this paper we examine the importance of prospective partners' characteristics (differences in size, status and specialization) as well as their network characteristics (existence of a common partner and membership in the same clique) to the formation and longevity of their social relationships as these characteristics reduce firms' value generation and partner reliability uncertainty.

Keywords: Networks, alliances, formation of ties, dissolution of ties, investment banks

Suggested Citation

Shipilov, Andrew V. and Rowley, Tim and S., Aharonson Barak, When Do Networks Matter? A Study of Tie Formation and Decay. Advances in Strategic Management, Vol. 23, June 2006. Available at SSRN: https://ssrn.com/abstract=1017082

Andrew V. Shipilov (Contact Author)

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau
France

Tim Rowley

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Aharonson Barak S.

Tel-Aviv University ( email )

Tel Aviv
Israel

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