Disentangling the Effect of Uncertainty Types on Alliance Governance Choice

Abstract

The effect of uncertainty on governance choice remains a puzzle. In this paper we investigate the influence of behavioral uncertainty and ambiguity as determinants of alliance governance choice. We argue that different governance forms address different uncertainty problems: behavioral uncertainty resulting from appropriation hazards requires alignment of interests whereas ambiguity resulting from complex problems requires alignment of actions. With our model we are able to empirically distinguish the two logics and to match governance solutions to uncertainty adaptation problems. Based on a policy capturing approach and a 3-level HLM analysis, our results support a “discriminating alignment” logic of governance choice.

Keywords: alliances, governance choice, behavioral uncertainty, ambiguity, policy capturing method

JEL Classification: D20, D21, D23