Partner Selection in Horizontal Alliance Formation : A Competitive Dynamics Perspective

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This article theorizes the effects of interfirm rivalry on partner selection in horizontal alliance formation from a competitive dynamics perspective. Although horizontal alliances are formed between competing firms, previous studies have paid limited attention to the relationship between interfirm rivalry and partner selection. The article proposes two types of interfirm rivalries in horizontal alliances: inside-alliance rivalry and outside-alliance rivalry. The suggested model predicts that firms select partners that result in lesser inside-alliance rivalry. However, when firms face threatening common rivals, they tend to choose partners that reduce outside-alliance rivalry despite a high inside-alliance rivalry. The diversity of competitive repertoires of common rivals determines the type of interfirm rivalry that firms would consider more important in selecting partners. Additionally, when the level of intensity of outside-alliance rivalry for two firms is equal, they are more likely to form an alliance. This article contributes significantly to the alliance formation and competitive dynamics literature in three ways. First, this study utilizes the competitive dynamics perspective to explain partner selection in horizontal alliances, which is unprecedented. Second, and in continuity to the first contribution, this article clearly distinguishes between the effects of market commonality and resource similarity on partner selection. Finally, in the field of competitive dynamics, this study presents theoretical explanations for inter-firm rivalry related to allied firms.

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