How do prior alliance experience & simultaneous commitments impact future alliance extension?

Abstract

This paper examines how the experience levels of partner firms impact alliance outcomes, specifically the likelihood of alliance extension. We use the organizational learning perspective and transaction costs theories to argue that prior alliance experience (gained prior to focal alliance formation), will increase the likelihood of extension. Conversely, using the transaction costs perspective, we argue that greater post-formation simultaneous alliance activity will reduce the likelihood of alliance extension. We also test for the interaction effect of these primary independent variables. We used the case-control methodology to select a sample of 185 alliances formed by 200 firms in the global biopharma industry. After applying a prior correction method to correct for sample selection bias, we conducted a relogit regression analysis to test the hypotheses in a multivariate setting.