Greener Pastures: Outside Options and Strategic Alliance Withdrawal

48 Pages Posted: 23 Nov 2011

See all articles by Henrich R. Greve

Henrich R. Greve

INSEAD

Hitoshi Mitsuhashi

Keio University - Faculty of Business and Commerce

Joel A. C. Baum

University of Toronto - Joseph L. Rotman School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: November 22, 2011

Abstract

Departing from prior work that demonstrates the stickiness and stability of alliance networks resulting from embeddedness, we extend matching theory to study firms’ withdrawal from alliances. Viewing alliance withdrawal as a result of firms’ pursuit of more promising alternative partners – outside options – rather than failures in collaboration, we predict that a firm is more likely to withdraw from an alliance when there is a higher density of outside options that have better match quality than the current partners.

We also propose that, because matching is two-sided, outside options have a greater impact on a firm’s withdrawal when they are more likely to initiate new alliances. Using data on alliances in the global liner shipping industry, we show that, controlling for internal tensions in the alliance, outside options predict alliance withdrawals. Thus, despite the alliance stickiness and stability, firms alter their alliances in response to the availability of promising outside options, even leaving alliances that appear successful.

Suggested Citation

Greve, Henrich R. and Mitsuhashi, Hitoshi and Baum, Joel A.C., Greener Pastures: Outside Options and Strategic Alliance Withdrawal (November 22, 2011). INSEAD Working Paper No. 2011/120/EFE, Available at SSRN: https://ssrn.com/abstract=1963215 or http://dx.doi.org/10.2139/ssrn.1963215

Henrich R. Greve (Contact Author)

INSEAD ( email )

F-77305 Fontainebleau Cedex
France

Hitoshi Mitsuhashi

Keio University - Faculty of Business and Commerce ( email )

2-15-45 Mita
Minato-ku
Tokyo 108-8345
Japan

Joel A.C. Baum

University of Toronto - Joseph L. Rotman School of Management ( email )

University of Toronto
105 St. George Street
Toronto, ON, M5S 3E6
Canada
416-978-4914 (Phone)
416-978-4629 (Fax)

HOME PAGE: http://www.rotman.utoronto.ca/~baum

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