Business Intelligence

When The Social Structure Overshadows Competitive Incentives: The Effects Of Network Embeddedness On Joint Venture Dissolution

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Executive Summary

The embeddedness of interfirm relationships in the social structure can engender order in new tie formation, but competitive incentives may undermine the order that firms seek to achieve and lead to tie dissolution. The authors examine how relational embeddedness (history of interactions), positional embeddedness (network centrality), and structural embeddedness (common partners) influence tie stability, focusing on unplanned joint venture dissolution. Prior work suggests that relational embeddedness facilitates alliance stability. This paper finds that positional embeddedness does not promote stability, but structural embeddedness does help sustain alliances, particularly when partners have strong incentives to pursue self-interest at the expense of joint benefits.

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