Do ongoing networks block out new friends? Reconciling the embeddedness constraint dilemma on new alliance partner addition

• Author: Jun Xia,Albert A. Cannella,Ting Xiao,Han Jiang
• Date: 01 January 2018
• Published date: 01 January 2018
• DOI: http://doi.org/10.1002/smj.2695

RESEARCH ARTICLE

Do ongoing networks block out new friends?

Reconciling the embeddedness constraint

dilemma on new alliance partner addition

Han Jiang

1

| Jun Xia

2

| Albert A. Cannella

3

| Ting Xiao

4

1

Department of Management & Organizations,

Eller College of Management, The University of

Arizona, Tucson, Arizona

2

Department of Organization, Strategy, and

International Management, Jindal School of

Management, University of Texas at Dallas,

Richardson, Texas

3

Department of Management, Mays School of

Business, Texas A&M University, College

Station, Texas

4

Department of Organization and Strategic

Management, Guanghua School of Management,

Peking University, Beijing, China

Correspondence

Han Jiang, Department of Management &

Organizations, Eller College of Management, The

University of Arizona, 1130 E Helen St., Tucson,

AZ 85721.

Email: hjiang2@email.arizona.edu

Research Summary: This study addresses a theoretical

dilemma regarding how alliance network constraint (reflected

by network cohesion) affects a firm’s alliance formation with

new partners. Using a network pluralism approach, we sepa-

rateafirm’s ego alliance network into two activity-based

networks—an exploratory network and an exploitative

network—based on the primary value chain activity involved

in each alliance. We argue that the cohesion of exploratory

or exploitative networks has aninvertedU-shapedeffecton

the addition of new partners in the same activity-based net-

work, and a positive effect on the addition of new partners in

the other network. Results based on data from the biotech-

nology industry largely support our predictions with one

exception. Our study contributes to both scholarly under-

standing of network embeddedness and alliance practice.

Managerial Summary: The structure of firms’ongoing

alliance networks may have paradoxical implications for

their efforts to search for and form alliance with new part-

ners. That is, when a firm’s alliance partners are tightly

connected with each other, the cohesive network tends to

both encourage and impede the focal firm to add new

partners. We resolve this dilemma by showing that when

a firm is deeply entrenched in a cohesive alliance network

conducting a certain type of activities (e.g., R&D activi-

ties), it may not easily add new R&D alliance partners.

However, it may still be able to escape from the cohesive

R&D alliance network by seeking new partners conduct-

ing other activities (e.g., manufacturing activities).

KEYWORDS

addition of new alliance partners, alliance network,

network cohesion, network embeddedness, network

pluralism

Received: 11 July 2014 Revised: 17 August 2017 Accepted: 24 August 2017 Published on: 20 October 2017

DOI: 10.1002/smj.2695

Strat Mgmt J. 2018;39:217–241. wileyonlinelibrary.com/journal/smj Copyright © 2017 John Wiley & Sons, Ltd. 217

1|INTRODUCTION

Firms are often embedded in and constrained by their alliance networks (Carpenter, Li, & Jiang,

2012; Provan, Fish, & Sydow, 2007). This embeddedness provides a dilemma for firms that seek to

add new partners, which refers to partners that have neither had a direct prior alliance with the focal

firm nor a prior alliance with the focal firm’s existing partners. On the one hand, adding new part-

ners can redefine the composition and pattern of interconnection in a firm’s alliance portfolio and

introduce alternative external support (Beckman, Haunschild, & Phillips, 2004), thus helping coun-

teract the constraints exerted by an ongoing alliance network (Gargiulo, 1993; Walker, Kogut, &

Shan, 1997). On the other hand, the effort to add new partners per se may also be constrained by

the embeddedness in ongoing alliance networks. For example, the structural path dependence on

existing alliances may compel firms to form new alliances with existing partners or the partners of

partners (Gulati & Gargiulo, 1999; Snijders, van de Bunt, & Steglich, 2010), impeding the firms

from seeking new partners (Gargiulo & Benassi, 2000; Lin, Yang, & Demirkan, 2007). Taken

together, the embeddedness constraints from an alliance network can both encourage and hamper

the addition of new partners.

This dilemma leads to the following question: To what extent can firms offset alliance network

constraints by adding new partners given that doing so is also confined by network constraints?In

this study, we capture network constraints with network cohesion, which refers to the intensity of

mutual commitment and interdependencies between a firm and its alliance partners (Ahuja, 2000a;

Burt, 1992), and depicts the firm’s embeddedness in its current alliance network (Bae & Gargiulo,

2004). Reflecting the dilemma above, a cohesive alliance network can both motivate the focal firm

to seek new partners as it strives to reduce constraints and increase autonomy, and at the same time,

impede it from doing so.

We reconcile this dilemma by adopting a network pluralism approach. Network pluralism high-

lights the fact that actors are simultaneously embedded in multiple networks consisting of relation-

ships that are defined by different activities (Gould, 1991; Laumann, 1973). These parallel activity-

based networks may respectively exert embeddedness constraints on the focal actors. In addition,

actors who simultaneously participate in multiple networks can manage the embeddedness con-

straints from one network by altering the same network or by shaping another parallel network

(Benson, 1975; Lomi & Pattison, 2006). As such, the network pluralism approach allows us to bet-

ter understand the embeddedness constraints from different networks and the distinct strategies

through which actors can manage these constraints.

Following the logic of network pluralism, we specify different alliance networks based on their

primary activities. Prior research has classified alliances into two categories in terms of the primary

value chain activities involved (Koza & Lewin, 1999; Rothaermel & Deeds, 2004): exploratory alli-

ances aiming at discovering new knowledge through research activities, and exploitative alliances

aiming at leveraging existing knowledge through manufacturing- or market-related activities. Using

this activity-based categorization, we separate a firm’s alliance portfolio into two networks, that is,

an exploratory network involving knowledge discovering activities (e.g., fundamental research,

R&D), and an exploitative network involving commercialization activities (e.g., logistics, produc-

tion, marketing, etc.).

We argue that simultaneously participating in these two activity-based networks, firms can coun-

teract constraints arising from a cohesive exploratory (exploitative) network by adding new partners

in that network or in the other network. However, when the constraints from either network become

very strong, they will hamper the addition of new partners to that network—a phenomenon that we

218 JIANG ET AL.