Alliance or Acquisition? A Mechanisms‐Based, Policy‐Capturing Analysis

• DOI: http://doi.org/10.1002/smj.2664
• Author: Adeline Thomas,Edward J. Zajac,Thomas Mellewigt,Ingo Weller
• Date: 01 December 2017
• Published date: 01 December 2017

Strategic Management Journal

Strat. Mgmt. J.,38: 2353–2369 (2017)

Published online EarlyView 23 June 2017 in WileyOnline Library (wileyonlinelibrary.com) DOI: 10.1002/smj.2664

Received 26 October 2014;Final revision received2 March 2017

Alliance or Acquisition? A Mechanisms-Based,

Policy-Capturing Analysis

Thomas Mellewigt,1*Adeline Thomas,1Ingo Weller,2and Edward J. Zajac3

1Department of Management, Freie Universität Berlin, Berlin, Germany

2Munich School of Management and OrganizationsResearch Group, LMU Munich,

Munich, Germany

3Kellogg School of Management, Northwestern University, Evanston, Illinois

Research summary: While alliance researchers view prior partner-specic alliance experience

as inuencing rms’ subsequent alliance or acquisition decisions, empirical evidence on the

alliance versus acquisition decision is surprisingly mixed. We offer a reconciliation by proposing

and testing an analytical framework that recognizes prior partner-specic experiences as

heterogeneous along three fundamental dimensions: partner-specic trust, routines, and value

certainty. This allows us to use a policy-capturing methodology to rigorously operationalizeand

test our mechanism-level predictions.We nd that all three mechanisms can increasethe likelihood

of a subsequent alliance or acquisition, and in terms of the comparative choice between alliances

versus acquisitions, partner-specic trust pulls towards alliances, and value certainty pulls

towards acquisitions. Weconclude with a discussion of the theoretical and empirical implications

of our approach and method.

Managerial summary: This study focuses on an important corporate decision: When a rm has

had an alliance with another rm, how would that experience affect the likelihood of a future

alliance or acquisition with that same rm? We rst suggest that it will depend on three factors:

the level of trust that existed in that prior alliance, the extent to which specic work routineswere

developed, and the degreeto which the rm was able to condently assess the value of the partner

rm’s resources.We then nd that trust is a particularly strong predictor of futurealliances, while

condence regardingvalue more strongly predicts futureacquisitions. In this way, we demonstrate

more precisely how past corporate choices can affect(consciously or unconsciously) future ones.

© 2017 The Authors. Strategic Management Journal published by John Wiley & Sons Ltd.

The corporate decision to engage in alliances and/or

acquisitions has received signicant research atten-

tion in the strategy literature (e.g., Vanhaverbeke,

Duysters, & Noorderhaven, 2002; Villalonga &

McGahan, 2005; Yin & Shanley, 2008), with

partner-specic alliance experience emerging

as an important predictor of both. Specically,

Keywords: strategic alliances; acquisitions; prior ties;

alliance experience; policy-capturing; scenario experiment

*Correspondence to: Thomas Mellewigt, Freie Univer-

sität Berlin, Garystr. 21, 14195 Berlin, Germany. E-mail:

thomas.mellewigt@fu-berlin.de

© 2017 The Authors. Strategic Management Journal published by John Wiley & Sons Ltd.

This is an open access article under the terms of the Creative Commons Attribution License, which permits use,

distribution and reproduction in any medium, provided the original work is properly cited.

researchers have shown that rms with a history

of prior cooperation will be more likely to enter

into new alliances with each other (Chung, Singh,

& Lee, 2000; Gulati, 1995b); other researchers,

using real options reasoning, have shown that a

rm having prior alliances with a partner is more

likely to subsequently acquire that partner (Dalziel,

2009; Folta, 1998; Hagedoorn & Sadowski, 1999).

Similarly, researchers focusing on the comparative

governance choice (i.e., to ally vs. acquire) have

shown that partner-specic alliance experience

has a greater effect on subsequent alliance versus

2354 T. Mellewigt et al.

subsequent acquisition (Villalonga & McGahan,

2005; Wang & Zajac, 2007), while other compar-

ative choice researchers nd that partner-specic

alliance experience exerts a stronger inuence on

subsequent acquisition of the partner rather than a

subsequent alliance (Vanhaverbeke et al., 2002).

In this study, we theoretically disentangle when

prior experiences are likely to lead to alliances

and/or acquisitions, and employ a policy-capturing

approach that is particularly well-suited for

empirically testing this discriminating logic.

Fundamentally, we move away from a reliance on

aggregating/counting prior alliance experiences and

move towarda disaggregated and mechanism-based

analysis that allows us to capture qualitative dif-

ferences in prior alliance experience.1In this way,

we can more precisely build upon a growing body

of prior research that has tended to operationalize

different theoretical mechanisms while relying

on similar measures. For example, Villalonga and

McGahan (2005) refer to partner-specic trust and

argue that trust explains alliance over acquisition

choices. Wang and Zajac (2007) emphasize the

importance of partner-specic routines for problem

solving and learning. Finally, Vanhaverbeke et al.

(2002) and Van de Vrande, Vanhaverbeke, and

Duysters (2009) refer to knowledge about the

partner/target rm’s operations and resources to

explain acquisition over alliance choices. Note

that these studies identify three different key

theoretical mechanisms, yet all use the number

of prior alliances with the partner/target rm to

operationalize their constructs.

Our intended contribution can therefore be sum-

marized as follows: We rst address explicitly the

heterogeneous nature of prior alliance experiences

by considering three fundamentally distinct mech-

anisms (as alluded to above) that are likely to

inuence governance choice: partner-specic (p-s)

trust, p-s routines, and p-s value certainty. We then

introduce a policy-capturing methodology to oper-

ationalize and test the effect of each of these three

mechanisms on governance choices. As we discuss

in detail in later sections, our choice of methodol-

ogy allows us to rigorously assess the differential

relevance of the three distinct mechanisms through

1As Anderson et al. (2006, p. 102) suggest, a mechanisms-based

approach analyzes the “theoretical cogs and wheels that explain

how and why one thing leads to another.” Such mechanisms are

typically left implicit in broader theorizing, and making them

explicit generates a deeper level of theorizing.

which partner-specic experiences inuence subse-

quent alliance and/or acquisition decisions.

What is Partner-Specic Alliance

Experience? Identifying Mechanisms

At rst glance, it may seem self-evident that if

a rm has had prior alliance experiences with a

prospective alliance partner or acquisition target,

it would be in a relatively advantageous situation

(relative to a rm without such prior experiences)

in evaluating the prospective opportunity. However,

more careful consideration suggests that “prior

alliance experience” is not a simple, unidimen-

sional construct Indeed, Uzzi’s (1997) widely-cited

work on cooperation in the New York garment

industry suggests three elements of social structure

as particularly relevant in this context: “trust, joint

problem-solving arrangements and ne-grained

information transfer” (Uzzi, 1997, p. 42). Turning

to the alliance literature, one nds reference to

one or more of these three mechanisms when

discussing the effect of partner-specic alliance

experience on the comparative choice between

alliances and acquisitions, i.e. partner-specic trust

(Villalonga & McGahan, 2005; Wang & Zajac,

2007), partner-specic routines (Wang & Zajac,

2007) and partner-specic value certainty (Van de

Vrande et al., 2009; Vanhaverbeke et al., 2002).

We discuss each of these three below.

The Effect of Partner-Specic Trust

Akin to Rousseau, Sitkin, Burt, and Camerer

(1998), Bradach and Eccles (1989), and also

Uzzi (1997), we view trust – or more precisely

“partner-specic trust” (p-s trust) – as the focal

rm’s belief that the former partner intends to

deliver on made promises and would not act in

self-interest at the focal rm’s expense. P-s trust has

repeatedly been connected to the performance of

bilateral interorganizational exchange relationships

(Das & Teng, 2001; Inkpen & Currall, 1998).

Substantial literature contends that p-s trust lowers

transaction costs and supports value creation,

complementing governance relationships such as

alliances and acquisitions (Gulati & Nickerson,

2008; Poppo & Zenger, 1998), where the ef-

cient coordination of activities is crucial to goal

fulllment. P-s trust increases the efciency of

coordination activities because it enables open

© 2017 The Authors. Strategic Management Journalpublished by John Wiley & Sons Ltd. Strat. Mgmt. J.,38: 2353–2369 (2017)

DOI: 10.1002/smj