Divisive Faultlines and the Unplanned Dissolutions of Multi-partner Alliances


Organization Science

September-October 2014, vol. 25, n°5, pp.1351-1371

Departments: Strategy & Business Policy

Keywords: Interorganizational relations, Multipartner alliance, Embeddedness, Faultlines

Received wisdom suggests that multi-partner alliances are relatively unstable because of their complexity and the increased potential for free-riding. Nonetheless, multi-partner alliances do benefit from built-in stabilizing third party ties that mitigate opportunism and conflict between partner pairs. Previous empirical research on multi-partner alliance stability has been inconclusive. We shed some light on these inconsistencies by recognizing that within multi-partner alliances, schisms can occur not only between a pair of partners, but also between subgroups of partners that are divided by faultlines. We suggest that divisive faultlines can form between subgroups of partners within a multi-partner alliance as a function of their prior experience with one another. When a subgroup of alliance partners have relatively strong ties to each other and weak ties to other partners, destabilizing factions can develop that hamper reciprocity among the partners. Using a longitudinal analysis of 59 multi-partner alliances, we found that in general faultlines (as modeled by the dispersion of tie strength within multi-partner alliances) increase the hazard of unplanned dissolutions. We also found that multi-partner alliances comprising a mix of centrally and peripherally positioned partners within the industry network were less apt to suffer the effects of divisive faultlines. We suggest that this is due to the greater opportunity costs of dissolution and the presence of relatively high status partners who can act as peacekeepers and coordinators of their lower status partners.