Relational Rents Meet Social Rigidity: Barriers to Pooling Network Resources in Alliances

Mimeo, 2009We study how relational rents and social rigidities create barriers to exploiting network resources in horizontal alliances.While the alliance literature has focused on challenges to combining partners' internal resources, we examine alliances in which firms attempt to pool network resources that arise from the partners' relationships with third parties. We compare two mechanisms, protection of relational rents and rigidities of social ties, that can limit allied firms' ability to rationalize their network resources. The empirical setting of our study is a worldwide purchasing alliance formed by two global players in a manufacturing industry. By analyzing the fate of 752 ties between the two allied firms and their suppliers, we show that each client firm systematically favours embedded ties with its own suppliers when it allocates business, while discounting the embeddedness of the other partners' ties. Such preferences occur in all purchasing categories, even in those for which lack relational rents that might be an economically-based motive for the choices. The findings support the view that the coexistence of relational rent protection incentives and inertia resulting in tie rigidities create barriers to pooling network resources