Partner Selection Criteria in Strategic Alliances When to Ally with Weak Partners

to form a more context-depended resource-based perspective. Second, we link criteria for
partner selection to the industry life cycle and propose that such criteria are dynamic with
varying relative importance over time. By making this link, we also connect the choice of
strategic posture - i.e. first-mover versus late entrant - to the partner selection criteria,
claiming that these criteria may differ between firms with different entry strategies.
Third, by abandoning a unilateral focus on resource endowments in favor of a broader
focus encompassing aspiration levels we, on a practical level, derive more precise norma-
tive guidelines to managers regarding partner selection decisions. This may potentially
assist in alleviating the reported unsatisfactory performance of strategic alliances (Bleek
& Ernst, 1991; Kogut, 1988; Madhok & Tallman, 1998; Park & Ungson, 2001).¹

2. THEORETICAL APPROACHES TO STRATEGIC ALLIANCES

Research on strategic alliances has in broad terms departed from transaction cost
economics (e.g. Hennart, 1988, 1991; Williamson, 1991) and the resource-based view of
the firm (e.g. Das & Teng, 2000; Eisenhardt & Schoonhoven, 1996). Transaction cost
theory has successfully explained make-or-buy decision in relatively stable environments
(e.g. Balakrishnan & Wernerfelt, 1986; Joskow, 1985; Masten, Meehan, & Snyder, 1991;
Monteverde & Teece, 1982; Walker & Weber, 1984; Walker & Weber, 1987). However,
it has difficulties explaining the organization of innovative activities in strategic alliances
in rapidly changing environments, as engaging in small number bargaining in highly un-
certain settings runs counter to the transaction cost logic. Williamson (1994:85) acknowl-
edges that in transaction cost theory “network relations are given short shrift” and that
innovation causes problems for the theory, why “added apparatus is needed”
(Williamson, 1991: 293). Alternatively, the resource-based view suggests that firms seek
to obtain control over resources that can be sources of competitive advantage
(Wernerfelt, 1984). A firm’s propensity to engage in interfirm collaboration can be ex-

¹ Studies have included both objective failure measures such as survival, termination, duration, financial
gains and subjective or measures including goal attainment, satisfaction, learning, competence building
(Park and Ungson, 2001). Kale, Dyer and Singh (2002) find a positive correlation between objective and
subjective measures.

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