Skip to Content Skip to Footer
Effect of Alliance Network Asymmetry on Firm Performance and Risk

Effect of Alliance Network Asymmetry on Firm Performance and Risk

Anindita Chakravarty, Chen Zhou and Ashish Sharma

JM Insights in the Classroom

Teaching Insights

Persistent high failure rates of new product alliances call for identification of factors that might improve alliance outcomes. We studied how asymmetries in prealliance network ties between a firm and its alliance partner affect the focal firm’s financial performance and financial performance uncertainty. We discovered that direct tie asymmetry has an inverted U-shaped effect on the focal firm’s abnormal returns and a U-shaped effect on its risk. Indirect tie asymmetry also has a U-shaped effect on the focal firm’s risk. However, the focal firm’s innovation quality and preexisting ties with its partner flatten these curvilinear effects. This study highlights the need to assess a potential alliance partner’s direct ties and indirect ties. We alert managers that indirect ties of alliance partners are important to assess, and that direct and indirect ties assessed relative to an alliance partner directly affect the focal firm’s market capitalization.

More specifically, firms should definitely avoid selecting a partner with whom it has high direct tie asymmetry and low total interdependence. Further, it is best to avoid selecting a partner with whom it has high indirect tie asymmetry and low total interdependence

Access Classroom Lecture Slides

Related Marketing Courses: ​
Business-to-Business Marketing, Innovation/New Product Development; Marketing Strategy; Technology Marketing

Full Citation: ​
Chakravarty, Anindita, Chen Zhou, and Ashish Sharma (2020), “Effect of Alliance Network Asymmetry on Firm Performance and Risk” Journal of Marketing.

Advertisement

Article Abstract
Persistent high failure rates of new product alliances call for identification of factors that might improve alliance outcomes. In this research, the authors identify two attributes of alliance network asymmetry that affect alliance performance and performance uncertainty: differences in the number of prealliance direct ties, which can create asymmetry in the volume of resources of the two firms, and differences in the interconnectivity among prealliance indirect ties, which leads the firms to possess different types of resources. The authors theorize that absolute levels of such asymmetries have curvilinear effects on alliance performance and performance uncertainty, which materialize as a focal firm’s abnormal returns and risk, respectively. They demonstrate that direct tie asymmetry has an inverted U-shaped effect on the focal firm’s abnormal returns and a U-shaped effect on its risk. Indirect tie asymmetry also has a U-shaped effect on the focal firm’s risk. However, the focal firm’s innovation quality and preexisting ties with its partner flatten these curvilinear effects. The findings have implications for partner selection in new product alliances.

Demi Oba and Holly Howe, Ph.D. candidates at Duke University along with Adam Mills, Assistant Professor of Marketing, Loyola University supported the authors teams with submissions to this program. 

Search other Insights in the Classroom​

More from the Journal of Marketing​​​​​​​

Anindita Chakravarty is Associate Professor of Marketing, Terry College of Business, University of Georgia, USA.

Chen Zhou is Assistant Professor of Marketing, Darla Moore School of Business, University of South Carolina, USA.

Ashish Sharma is Assistant Professor of Marketing, Walton College of Business, University of Arkansas, USA.