Alliance re-formation: uncertainty, inexperience, complexity and termination experience in the thoroughbred horse industry, 2005-2010

Abstract

My dissertation investigates the effects of alliance termination conditions on alliance re-formation by the former partners. While the existing literature assumes that an alliance forms after termination in the same way as it formed initially, I treat termination as the beginning of a process rather than as an independent event. I argue that alliance re-formation is distinct from alliance formation due to the attributions the former partners develop concerning their prior termination. Alliance terminations are often ambiguous and subject to multiple interpretations. I identify typical alliance termination antecedents, such as primary uncertainty, task inexperience and complexity, as important conditions under which the termination occurs that counter intuitively facilitate alliance re-formation. These factors frame the termination as a positive attribution, based upon incidents which are exogenous, uncontrollable and rare. Further, I find greater alliance termination experience enhances alliance re-formation, allowing firms to adjust expectations from alliance terminations. I test these ideas on a longitudinal sample of 2,256 terminated alliances that include alliance re-formations in the Thoroughbred horse industry, where alliance partners breed and co-own horses to sell at auction. Using this unique data set to account for the fit and the performance of the terminated alliances, I find support for my hypotheses for primary uncertainty and termination experience. My dissertation makes a number of important theoretical contributions by showing that alliance re-formation has a set of antecedents distinct from factors informing initial formation, and that termination experience is an important antecedent to the trust and the re-creation of trust. These findings have valuable practical implications for strategic management and organizational practitioners.