Centrality Asymmetry and Partner Complementarity as Influences on Alliance Dissolution

AuthorAndrew Delios, Amit Jain, Tianyou Hu
DOIhttp://doi.org/10.1111/1467-8551.12440
Publication Date01 Jan 2021
British Journal of Management, Vol. 32, 59–79 (2021)
DOI: 10.1111/1467-8551.12440
Centrality Asymmetry and Partner
Complementarity as Inuences on Alliance
Dissolution
Tianyou Hu ,1Amit Jain2and Andrew Delios3
1Department of Management and Marketing, KFUPM Business School, King Fahd University of Petroleum &
Minerals, Dhahran 31261, Saudi Arabia, 2Industrial Systems and Engineering Management, Faculty of
Engineering, Department of Strategy & Policy, NUS Business School, National Universityof Singapore, 1
Engineering Drive 2, Singapore, 117576, Singapore, and 3Department of Strategy & Policy, NUS Business
School, National University of Singapore, Mochtar Riady Building, 15 Kent Ridge Drive, Singapore, 119245,
Singapore
Corresponding author email: hutianyou@kfupm.edu.sa
Research on interrm alliances indicates that partner rms’ asymmetry in network cen-
trality increases the likelihood of alliance dissolution because it gives rise to a power
imbalance and opportunism in the partnership. We contend that this view of centrality
asymmetry does not consider the binding force that network resource complementarity
can provide in an alliance, which motivatespartners to ally for the long term. We propose
that centrality asymmetry can haveboth divisive and cohesive forcesin an alliance, which –
when considered together – lead to a prediction that centralityasymmetry has a U-shaped
relationship with alliance dissolution. Moderate levels of asymmetry lead to lower rates
of dissolution than high and low levels of asymmetry. The degree of cooperation between
partners and the degree of external competition reduce the effects of centrality asym-
metry on alliance dissolution because they mitigate power imbalances while encouraging
partners to strengthen the alliance to withstand competitive challenges.
Introduction
Firms cooperating in an alliance expect that their
partnership could result in synergy and resource
exchange (Dyer and Singh, 1998; Gulati, 1998;
Lavie, 2006). The relationships between alliance
partners, however, may contain a power imbal-
ance arising from an asymmetry in their endow-
ment of network resources (Gulati, 1995). Alliance
partners may possess different levels of network
centrality (hereafter asymmetric centrality) when
linked to an interrm network, whichentitles them
to access various information sources and network
Research reported in this publication was supported by
King Fahd University of Petroleum & Minerals under
Start-up Research Grant (SR161011). The authors are
grateful to JamesLincoln and Heeyon Kim for comments
and suggestions on developing this paper.
resources (Borgatti and Halgin, 2011; Podolny,
1994). The high-centrality rm of an alliance has
more network resources and wouldbe advantaged
in attracting potential partners. Meanwhile, the
low-centrality rm has relatively limited partner-
ing opportunities and its network resources are
dependent on its high-centrality partner (Ahuja,
Polidoro and Mitchell, 2009; Gulatiand Gargiulo,
1999). Such a power imbalance arising from asym-
metric centrality gives rise to problems of part-
ner compatibility, coordination and opportunism
(Greve et al., 2010; Ma, Rhee and Yang, 2012),
which could ruin the foundation of cooperation
and increase the likelihood of alliance dissolution
(Polidoro, Ahuja and Mitchell, 2011).
Although prior studies point to the hazards of
centrality asymmetry for alliance longevity, they
forego a discussion of its potential benets. In-
deed, partners’ asymmetry in network centrality
© 2020 British Academy of Management and Wiley Periodicals LLC. Published by JohnWiley & Sons Ltd, 9600 Gars-
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60 T. Hu, A. Jain and A. Delios
could also lead to complementarity in network re-
sources. Low-centrality rms can access the net-
work resources possessed by high-centrality rms
(Gulati and Gargiulo, 1999; Stuart, Hoang and
Hybels, 1999), and high-centrality rms would
need low-centrality partners to diversify alliance
portfolio and strengthen network power (Lavie,
2007; Rothaermel, 2001). As these benets of cen-
trality asymmetry to interpartner cooperation are
under-researched, we contend that current knowl-
edge about the effect of centrality asymmetry on
alliance longevity is incomplete.
In this study,we examine interrm relationships
in an alliance from a network perspective. We ex-
plore how centrality asymmetry creates both a
power imbalance and a network resource comple-
mentarity in the partnership. Our central premise
is that we need to consider both the hazards and
benets of centrality asymmetry to assess its over-
all effect on alliance longevity. Following this logic,
we depart from the extant view that greater cen-
trality asymmetry leads to a higher likelihood of
alliance dissolution (Greve et al., 2010; Polidoro,
Ahuja and Mitchell, 2011). Instead, we propose
that the relationship between centrality asymme-
try and alliance dissolution is non-monotonic.
Furthermore, prior research suggests that co-
operation between partners and competition in
the external environment enhance cohesion in al-
liances (Castellucci and Ertug, 2010; Das and
Teng, 2001; Kogut, 1989). We propose that inter-
partner cooperation and external competition also
modify the power contest and partner complemen-
tarity in the partnership, exerting a moderating ef-
fect on the inuences of centrality asymmetry on
alliance dissolution. We test these arguments with
a sample of 486 Japanese rms and their 693 over-
seas equity alliances operating in 39 foreign coun-
tries during the 1990–2009 period. Using event his-
tory analysis at the dyadlevel of alliances, we nd a
U-shaped relationship between partners’ centrality
asymmetry and the likelihood of alliance dissolu-
tion, as well as the negative moderating effects of
interpartner cooperation and external competition
on this relationship.
Designed in this manner, our study aligns well
with and expands the theme of this Special Is-
sue on understanding the processes underlying in-
terrm cooperation (Kundu, Munjal and Lahiri,
2019). We investigate the nuanced inuence of
partner asymmetry on alliance dissolution, which
is a core question of alliance management and
interrm cooperation. We study the dynamics in
the interplay between alliance partners based on
their complementarity and power arising fromnet-
work resources, thus providing insight into what
determines longevity in interrm cooperation. As
we also consider the connections of the external
competitive landscape as set in an international
context, our paper joins the other studies of this
Special Issue in uncovering the rm strategy of
using alliances for competition and international
expansion.
More generally, our study extends traditional
and ongoing discussions on partners’ asymmetries
in resources and the consequences of the same on
the stability and longevity of alliances (e.g. As-
gari et al., 2018; Cui, Calantone and Grifth, 2011;
Kogut,1989; Pangarkar and Klein, 2001; Park and
Ungson, 1997). Weadvance research in the domain
with a conceptual and empirical identication of
the non-monotonic effect of centrality asymmetry
on alliance dissolution (e.g. Ahuja, Polidoro and
Mitchell, 2009; Greve et al., 2010; Gulati, 1998;
Polidoro, Ahuja and Mitchell, 2011). By so do-
ing, we gain insight into the power contest between
partners and their considerations about contribu-
tion and gains in asymmetric alliances (e.g.Alvarez
and Barney, 2001; Diestre and Rajagopalan, 2012;
Katila, Rosenberger and Eisenhardt, 2008).
Background
Partners may terminate an alliance for multiple
reasons, including unresolvable disputes, inter-
partner competition or the emergence of new
options that exceed the benets of the current
cooperation (e.g. Asgari et al., 2018; Greve, Mit-
suhashi and Baum, 2013; Park and Russo, 1996).
Aside from these reasons, asymmetries between
partners have been identied as a major reason
for alliance dissolution. Studies on international
alliances focus on asymmetries in partners’ char-
acteristics such as company culture, management
styles and rm vision, all of which create fric-
tions and reduce alliance longevity (e.g. Inkpen
and Beamish, 1997; Makino et al., 2007). Stud-
ies looking at industry conditions highlight that
partner asymmetries in capabilities and strategies
increase the likelihood of alliance dissolution (e.g.
Alvarez and Barney, 2001; Cui, Calantone and
Grifth, 2011; Dussauge, Garrette and Mitchell,
2000; Kogut, 1989). This line of research adopts
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