J Bus Psychol(2010)25: 55-74 DOI10.1007/s10869-0099132-2 Determinants of Partner Opportunism in Strategic Alliances: A Conceptual Framework T K Das. Noushi rahman Published online: 16 September 2009 e Springer Science+Business Media, LLC 2009 Abstract Originality/value Although scholars in various disci- Purpose We present a comprehensive framework of the plines have studied the general topic of opportunistic key determinants of partner opportunism in strategic behavior, our understanding of partner opportunism in alliances strategic alliances appears to be fragmented and inade- Design/methodology/approach We propose an extended quate. As partner opportunism is acknowledged as a sig definition of partner opportunism and three categories of nificant threat to alliance survival and success,a the determinants of partner opportunism based on a review comprehensive framework of the key determinants of such of the literature. These categories comprise economic opportunism should improve our understanding of this actors(equity involvement, asymmetric alliance-specific phenomenon and to also provide an impetus for future investments, mutual hostages, and payoff inequity ), rela- research. The article also responds to the need of alliance ties), and temporal factors(alliance horizon and pressures sible for partner opportunism so that they may be able tional factors(cultural diversity and goal incompatibili- managers for a framework of key factors that are respo for quick results) deploy appropriate deterrence mechanisms to minimize Findings The framework of determinants makes clear opportunistic behaviors. how the various determinants of partner opportunism may be differentially salient in the three major alliance types, Keywords Strategic alliances. Partner opportunism namely, equity joint ventures, minority equity alliances, Determinants of opportunism Alliance horizon and nonequity alliances Opportunistic behavior. Equity joint ventures Implications Based on the framework, a number of Minority equity alliances. Nonequity alliances propositions are developed to facilitate empirical research on partner opportunism. Managerial implications flowing from the proposed framework are also discussed Introduction For large corporations as well as small entrepreneurial Received and reviewed by former editor, George Neuman. firms, strategic alliances are becoming more and more a necessity for ensuring a competitive edge in the market- T.K.Das(区) place. Strategic alliances are interfirm cooperative Department of Management, Zicklin School of Business, Baruch arrangements aimed at achieving the strategic objective College, City University of New York, One Bernard Baruch Way, Box B9-240, New York, NY 10010, USA the partners"(Das and Teng 1998, p. 491). A high per- e-mail: TK. Das baruchcuny.edr centage of alliances that are formed. he owever. end up failures(see Das and Teng 2000, for a discussion of pos- N. Rahman sible causes). Clearly, a member firm in an alliance faces Management and Management Science Department, Lubin School of Business, Pace University, One Pace Plaza, W-414 certain adversities that are unique because, unlike an New York. NY 10038. USA independent firm, it is subject to relational risk vis-a-vis its e-mail: rahman@ pace.edu partners in addition to the usual business risks. The 2 Springer
Determinants of Partner Opportunism in Strategic Alliances: A Conceptual Framework T. K. Das Æ Noushi Rahman Published online: 16 September 2009 Springer Science+Business Media, LLC 2009 Abstract Purpose We present a comprehensive framework of the key determinants of partner opportunism in strategic alliances. Design/methodology/approach We propose an extended definition of partner opportunism and three categories of the determinants of partner opportunism based on a review of the literature. These categories comprise economic factors (equity involvement, asymmetric alliance-specific investments, mutual hostages, and payoff inequity), relational factors (cultural diversity and goal incompatibilities), and temporal factors (alliance horizon and pressures for quick results). Findings The framework of determinants makes clear how the various determinants of partner opportunism may be differentially salient in the three major alliance types, namely, equity joint ventures, minority equity alliances, and nonequity alliances. Implications Based on the framework, a number of propositions are developed to facilitate empirical research on partner opportunism. Managerial implications flowing from the proposed framework are also discussed. Originality/value Although scholars in various disciplines have studied the general topic of opportunistic behavior, our understanding of partner opportunism in strategic alliances appears to be fragmented and inadequate. As partner opportunism is acknowledged as a significant threat to alliance survival and success, a comprehensive framework of the key determinants of such opportunism should improve our understanding of this phenomenon and to also provide an impetus for future research. The article also responds to the need of alliance managers for a framework of key factors that are responsible for partner opportunism so that they may be able to deploy appropriate deterrence mechanisms to minimize opportunistic behaviors. Keywords Strategic alliances Partner opportunism Determinants of opportunism Alliance horizon Opportunistic behavior Equity joint ventures Minority equity alliances Nonequity alliances Introduction For large corporations as well as small entrepreneurial firms, strategic alliances are becoming more and more a necessity for ensuring a competitive edge in the marketplace. Strategic alliances are ‘‘interfirm cooperative arrangements aimed at achieving the strategic objectives of the partners’’ (Das and Teng 1998, p. 491). A high percentage of alliances that are formed, however, end up as failures (see Das and Teng 2000, for a discussion of possible causes). Clearly, a member firm in an alliance faces certain adversities that are unique because, unlike an independent firm, it is subject to relational risk vis-a`-vis its partners in addition to the usual business risks. The Received and reviewed by former editor, George Neuman. T. K. Das (&) Department of Management, Zicklin School of Business, Baruch College, City University of New York, One Bernard Baruch Way, Box B9-240, New York, NY 10010, USA e-mail: TK.Das@baruch.cuny.edu N. Rahman Management and Management Science Department, Lubin School of Business, Pace University, One Pace Plaza, W-414, New York, NY 10038, USA e-mail: nrahman@pace.edu 123 J Bus Psychol (2010) 25:55–74 DOI 10.1007/s10869-009-9132-2
J Bus Psychol (2010)25: 55-74 literature recognizes the deleterious role that a partner mislead, distort, disguise, obfuscate, or otherwise confuse firms opportunistic behavior plays in alliances, often (1985, p. 47). We give below several examples of partner resulting in their unplanned termination. Thus, partner opportunism in alliances to indicate broadly its nature and opportunism is of paramount concern to an alliance firm variety engaged in collaborative activities. Consider, for example, the alliance between Red Dragon Researchers have studied the impact of opportunistic Enterprises of China and Batrionics, an Australian manu- behavior in business for decades. According to williamson facturer of industrial batteries(Rarick 2004). Batrionics (1975, p 9), opportunism"refers to a lack of candor or was interested in setting up an operation in China after honesty in transactions, to include self-interest seeking having established itself in Taiwan. Rex Adams, repre- with guile. " In the context of strategic alliances, opportu- senting the Australian company, located a potential Chi- nistic behavior includes"breaking promises, not sharing nese partner in Red Dragon Enterprises, a manufacturer of resources or facilities as per agreement, bluffing, lying, a variety of batteries. The quality of the Chinese products misleading, misrepresenting, distorting, cheating, misap- was not acceptable but Adams"felt that he could leverage propriating, stealing, etc. "(Das and Rahman 2001, p. 43). his companys knowledge and skill against a joint venture lowever, scholars in economics, management, marketing, partner"(Rarick 2004, p. 3). In due course, a joint venture and sociology have generally treated opportunism as an was formed, but a number of problems emerged, including undifferentiated phenomenon. It is only very recently that poor manufacturing quality, missing inventory, and lack some researchers have directed their attention to exploring finance. Adams accused Tsang, his Chinese counterpart, of the essence of opportunism(e. g, Ghoshal and Moran 1996: behaving opportunistically. In his eagerness to set up an Wathne and Heide 2000). There is a need to understand operation in China, Adams was perhaps less than thorough more adequately as to what increases the potential for an in assessing the risks of opportunism alliance partner to act opportunistically in different sit Another illustrative case concerns Cameron Auto parts tions. We believe that a wide-ranging analysis of (B), a North American company, and its UK licensee determinants of partner opportunism would help in Crookell and Beamish 2006). Alex Cameron had gone understanding its complex nature and in gaining better the UK to meet his licensee and to France to meet an insights for managing such opportunism important customer, Michelard. The UK licensee was We divide the remainder of the article into four parts. interested in partnering with Cameron in establishing a First, we examine the origins and nature of partner manufacturing facility in Australia. Alex Cameron, how- opportunism. Second, we suggest an overarching frame- ever, went on to have a verbal agreement with his french work of determinants of partner opportunism comprising customer to invest 40% in a factory manufacturing flexible three distinct sets of factors: economic, relational, and couplings that was acquired by the latter. Angered at this temporal. We identify and examine a list of significant development, the UK licensee charged: " I thought you had determinants constituting the framework. Third, we discuss your head screwed on better than this, Alex. You realize the differential salience of these determinants in each of the this makes us competitors. Michelard of all people! They three major alliance types: equity joint ventures, minority run that business in their spare time. You ve made a damn equity alliances, and nonequity alliances. Lastly, we sug- fool of yourself over there"( Crookell and Beamish 2006, gest directions for further research and indicate some of the P. 7). To the UK licensee, Cameron had committed an more significant managerial implications of the proposed opportunistic act. To placate his UK licensee, Cameron framework of partner opportunism agreed to the original proposal to set up a joint venture in australia Yet another form of opportunism is evident in the The Nature of Partner Opportunism decision of the Spanish telecommunications company, Telefonica, to suddenly discontinue its participation in the this section, we briefly review the literature on the alliance with d Systems, a small U.S. firm that general concept of opportunism and then suggest, specific provided dynamic e-commerce. This is considered oppor- to the field of strategic alliances, a comprehensive defini- tunistic because Telefonica abandoned the alliance after it tion of partner opportunism as a prelude to proposing a had appropriated"Bidland,s proprietary business-to-busi- framework of its determinants in the next section ness auction and dynamic e-commerce business informa- In their efforts to delineate the character of opportunism, tion and technology through the promise of a lucrative joint scholars have mentioned various activities that reflect the venture and investment contract"(Business wire 2000 phenomenon. According to Williamson, for instance, this case, the contractual provisions were helpful to Bid- pportunism refers to the incomplete or distorted disclo- land to proceed against Telefonica"for breach of cont sure of information, especially to calculated efforts to breach of fiduciary duty, and violation of the Uni 2 Springer
literature recognizes the deleterious role that a partner firm’s opportunistic behavior plays in alliances, often resulting in their unplanned termination. Thus, partner opportunism is of paramount concern to an alliance firm engaged in collaborative activities. Researchers have studied the impact of opportunistic behavior in business for decades. According to Williamson (1975, p. 9), opportunism ‘‘refers to a lack of candor or honesty in transactions, to include self-interest seeking with guile.’’ In the context of strategic alliances, opportunistic behavior includes ‘‘breaking promises, not sharing resources or facilities as per agreement, bluffing, lying, misleading, misrepresenting, distorting, cheating, misappropriating, stealing, etc.’’ (Das and Rahman 2001, p. 43). However, scholars in economics, management, marketing, and sociology have generally treated opportunism as an undifferentiated phenomenon. It is only very recently that some researchers have directed their attention to exploring the essence of opportunism (e.g., Ghoshal and Moran 1996; Wathne and Heide 2000). There is a need to understand more adequately as to what increases the potential for an alliance partner to act opportunistically in different situations. We believe that a wide-ranging analysis of the determinants of partner opportunism would help in understanding its complex nature and in gaining better insights for managing such opportunism. We divide the remainder of the article into four parts. First, we examine the origins and nature of partner opportunism. Second, we suggest an overarching framework of determinants of partner opportunism comprising three distinct sets of factors: economic, relational, and temporal. We identify and examine a list of significant determinants constituting the framework. Third, we discuss the differential salience of these determinants in each of the three major alliance types: equity joint ventures, minority equity alliances, and nonequity alliances. Lastly, we suggest directions for further research and indicate some of the more significant managerial implications of the proposed framework of partner opportunism. The Nature of Partner Opportunism In this section, we briefly review the literature on the general concept of opportunism and then suggest, specific to the field of strategic alliances, a comprehensive definition of partner opportunism as a prelude to proposing a framework of its determinants in the next section. In their efforts to delineate the character of opportunism, scholars have mentioned various activities that reflect the phenomenon. According to Williamson, for instance, ‘‘opportunism refers to the incomplete or distorted disclosure of information, especially to calculated efforts to mislead, distort, disguise, obfuscate, or otherwise confuse’’ (1985, p. 47). We give below several examples of partner opportunism in alliances to indicate broadly its nature and variety. Consider, for example, the alliance between Red Dragon Enterprises of China and Batrionics, an Australian manufacturer of industrial batteries (Rarick 2004). Batrionics was interested in setting up an operation in China after having established itself in Taiwan. Rex Adams, representing the Australian company, located a potential Chinese partner in Red Dragon Enterprises, a manufacturer of a variety of batteries. The quality of the Chinese products was not acceptable but Adams ‘‘felt that he could leverage his company’s knowledge and skill against a joint venture partner’’ (Rarick 2004, p. 3). In due course, a joint venture was formed, but a number of problems emerged, including poor manufacturing quality, missing inventory, and lack of finance. Adams accused Tsang, his Chinese counterpart, of behaving opportunistically. In his eagerness to set up an operation in China, Adams was perhaps less than thorough in assessing the risks of opportunism. Another illustrative case concerns Cameron Auto Parts (B), a North American company, and its UK licensee (Crookell and Beamish 2006). Alex Cameron had gone to the UK to meet his licensee and to France to meet an important customer, Michelard. The UK licensee was interested in partnering with Cameron in establishing a manufacturing facility in Australia. Alex Cameron, however, went on to have a verbal agreement with his French customer to invest 40% in a factory manufacturing flexible couplings that was acquired by the latter. Angered at this development, the UK licensee charged: ‘‘I thought you had your head screwed on better than this, Alex. You realize this makes us competitors. Michelard of all people! They run that business in their spare time. You’ve made a damn fool of yourself over there’’ (Crookell and Beamish 2006, p. 7). To the UK licensee, Cameron had committed an opportunistic act. To placate his UK licensee, Cameron agreed to the original proposal to set up a joint venture in Australia. Yet another form of opportunism is evident in the decision of the Spanish telecommunications company, Telefonica, to suddenly discontinue its participation in the alliance with Bidland Systems, a small U.S. firm that provided dynamic e-commerce. This is considered opportunistic because Telefonica abandoned the alliance after it had appropriated ‘‘Bidland’s proprietary business-to-business auction and dynamic e-commerce business information and technology through the promise of a lucrative joint venture and investment contract’’ (Business Wire 2000). In this case, the contractual provisions were helpful to Bidland to proceed against Telefonica ‘‘for breach of contract, breach of fiduciary duty, and violation of the Uniform 56 J Bus Psychol (2010) 25:55–74 123
J Bus Psychol(2010)25: 55-74 Trade Secrets Act, among other charges"(Business wire Our own review of the research points to two key 2000 deficiencies in the extant literature. first. most of the e Clearly, since strategic alliances are between two or research seems to be based on the classic definition offered re firms, they create the circumstances where oppor- by Williamson(1975), mentioned earlier, with no partic- tunism is possible. Thus, given especially its ubiquitous ular exploration of its implicit assumptions. Thus, we have presence, opportunism in strategic alliances deserves much yet to adequately capture the complex nature of partner more study than it has garnered so far. In that research opportunism in alliances. Second, the extant research on enterprise, we believe that both a careful analysis of the the determinants of partner opportunism points to the need definition of partner opportunism and then an inquiry into for an integrated approach. We will now propose a defi nition of partner opportunism and then present, in the next Opportunism involves activities generally characterized section, an overarching framework of its determinants fraudulent, deceitful, and obfuscating. It is easy to see As we stated earlier, opportunism has been aptly defined that partner opportunism conflicts with partner cooperation by Williamson as"self-interest seeking with guile"(1975 (Das and Teng 1998, p. 492). Indeed, partner opportunism p. 9). While this definition is parsimonious in scope, it goes against the development of mutual trust and the highlights only two attributes of opportunism: self-interest cooperative spirit, accentuating the perception of risk andand guile. It leaves certain attributes of opportunism jeopardizing the interfirm relationship(Das and Teng 2001, implicit, allowing researchers to interpret variously what 2004). Masten (1988, p. 183)considers moral hazard and constitutes opportunism. In the following paragraphs we haggling as opportunism. make explicit the significant attributes of opportunism, As a further refinement, Ghoshal and Moran (1996) supplementing the definition of williamson. distinguish opportunistic attitude from opportunistic Based on a recognition of the assumptions implicit in behavior, arguing that the latter is the behavioral mani- Williamsons definition, we define partner opportunism in festation of the former, and offer a set of psychologically a somewhat more extended form as behavior by a partner oriented factors that influence opportunistic attitude(pp. firm that is motivated to pursue its self-interest with deceit 18, 21). Scholars have also pointed out certain kinds of to achieve gains at the expense of the other alliance behaviors that should not be characterized as opportunism. members. This elaborated form of the Williamson defini- According to John (1984, p. 278),"hard bargaining, tion of opportunism, as applied to alliances, has five major intense and frequent disagreements, and similar conflictual components: behavior, motives, self-interest seeking behaviors do not constitute opportunism " Wathne and deceit, and gains at the expense of others. First, we Heide(2000)further clarify that"situations in which (1) examine opportunism as a behavior, so that opportunism he parties jointly agree to modify an agreement or(2)one refers to specific actions by an opportunistic alliance party receives compensation in some form"and"situations partner. This is consistent with the extant literature(e. g in which parties adjust contract terms ex ante in anticipa- Joshi and Stump 1999; Luo 2007a: Wathne and Heide tion of shirking"should not be considered opportunism 2000). For instance, Wathne and Heide(2000, p. 36) observe that"the concept of opportunism, as currently used Some attempts have been made to devise a classification in the literature, includes a broad range of potentially dif- for the extensive inventory of activities that pertain to ferent behaviors. "Our definition is not concerned with the opportunism. Griesinger (1990, pp. 486487) categorizes opportunistic attitude or propensity of the partner because opportunism into three groups--dishonesty, infidelity, and our focus is on actual opportunistic behavior shirking. In a more systematic approach, Wathne and Second, the definition suggests that conscious motives Heide(2000, p. 41)categorize opportunism into four are involved in opportunism. In other words, opportunis groups: evasion, refusal to adapt, violation, and forced is deliberate, not accidental. If the partner firm inadver renegotiation. These studies, however, do not attempt to tently brings harm to the focal firm in pursuing its self- understand the roots of opportunism interest, it is quite likely to make amends for it. It is only c It would appear that most scholars accept Williamson's when such harmful behavior has been consciously engaged compact definition of opportunism, " self-interest seeking in that the partner will be unlikely to compensate for with guile, "in their research on related topics. The liter- damages. The motives of the opportunistic partner even- ature on the subject of opportunism is devoted to research tually lead to opportunistic action. Prior research on stra- questions that can be considered peripheral to the actual tegic alliances has not explicitly considered motives as an phenomenon of opportunism. There is a dearth of studies essential element in understanding partner opportunism on the basic concept of opportunism and, consequently, our Third, partner opportunism takes place to gratify self- understanding of the complexities of partner opportunism interest. There is a general consensus among scholars that in strategic alliances remains inadequate. opportunism involves some form of self-interest seeking 2 Springer
Trade Secrets Act, among other charges’’ (Business Wire 2000). Clearly, since strategic alliances are between two or more firms, they create the circumstances where opportunism is possible. Thus, given especially its ubiquitous presence, opportunism in strategic alliances deserves much more study than it has garnered so far. In that research enterprise, we believe that both a careful analysis of the definition of partner opportunism and then an inquiry into its origins are necessary. Opportunism involves activities generally characterized as fraudulent, deceitful, and obfuscating. It is easy to see that partner opportunism conflicts with partner cooperation (Das and Teng 1998, p. 492). Indeed, partner opportunism goes against the development of mutual trust and the cooperative spirit, accentuating the perception of risk and jeopardizing the interfirm relationship (Das and Teng 2001, 2004). Masten (1988, p. 183) considers moral hazard and haggling as opportunism. As a further refinement, Ghoshal and Moran (1996) distinguish opportunistic attitude from opportunistic behavior, arguing that the latter is the behavioral manifestation of the former, and offer a set of psychologically oriented factors that influence opportunistic attitude (pp. 18, 21). Scholars have also pointed out certain kinds of behaviors that should not be characterized as opportunism. According to John (1984, p. 278), ‘‘hard bargaining, intense and frequent disagreements, and similar conflictual behaviors do not constitute opportunism.’’ Wathne and Heide (2000) further clarify that ‘‘situations in which (1) the parties jointly agree to modify an agreement or (2) one party receives compensation in some form’’ and ‘‘situations in which parties adjust contract terms ex ante in anticipation of shirking’’ should not be considered opportunism (p. 38). Some attempts have been made to devise a classification for the extensive inventory of activities that pertain to opportunism. Griesinger (1990, pp. 486–487) categorizes opportunism into three groups—dishonesty, infidelity, and shirking. In a more systematic approach, Wathne and Heide (2000, p. 41) categorize opportunism into four groups: evasion, refusal to adapt, violation, and forced renegotiation. These studies, however, do not attempt to understand the roots of opportunism. It would appear that most scholars accept Williamson’s compact definition of opportunism, ‘‘self-interest seeking with guile,’’ in their research on related topics. The literature on the subject of opportunism is devoted to research questions that can be considered peripheral to the actual phenomenon of opportunism. There is a dearth of studies on the basic concept of opportunism and, consequently, our understanding of the complexities of partner opportunism in strategic alliances remains inadequate. Our own review of the research points to two key deficiencies in the extant literature. First, most of the research seems to be based on the classic definition offered by Williamson (1975), mentioned earlier, with no particular exploration of its implicit assumptions. Thus, we have yet to adequately capture the complex nature of partner opportunism in alliances. Second, the extant research on the determinants of partner opportunism points to the need for an integrated approach. We will now propose a defi- nition of partner opportunism and then present, in the next section, an overarching framework of its determinants. As we stated earlier, opportunism has been aptly defined by Williamson as ‘‘self-interest seeking with guile’’ (1975, p. 9). While this definition is parsimonious in scope, it highlights only two attributes of opportunism: self-interest and guile. It leaves certain attributes of opportunism implicit, allowing researchers to interpret variously what constitutes opportunism. In the following paragraphs we make explicit the significant attributes of opportunism, supplementing the definition of Williamson. Based on a recognition of the assumptions implicit in Williamson’s definition, we define partner opportunism in a somewhat more extended form as behavior by a partner firm that is motivated to pursue its self-interest with deceit to achieve gains at the expense of the other alliance members. This elaborated form of the Williamson definition of opportunism, as applied to alliances, has five major components: behavior, motives, self-interest seeking, deceit, and gains at the expense of others. First, we examine opportunism as a behavior, so that opportunism refers to specific actions by an opportunistic alliance partner. This is consistent with the extant literature (e.g., Joshi and Stump 1999; Luo 2007a; Wathne and Heide 2000). For instance, Wathne and Heide (2000, p. 36) observe that ‘‘the concept of opportunism, as currently used in the literature, includes a broad range of potentially different behaviors.’’ Our definition is not concerned with the opportunistic attitude or propensity of the partner because our focus is on actual opportunistic behavior. Second, the definition suggests that conscious motives are involved in opportunism. In other words, opportunism is deliberate, not accidental. If the partner firm inadvertently brings harm to the focal firm in pursuing its selfinterest, it is quite likely to make amends for it. It is only when such harmful behavior has been consciously engaged in that the partner will be unlikely to compensate for damages. The motives of the opportunistic partner eventually lead to opportunistic action. Prior research on strategic alliances has not explicitly considered motives as an essential element in understanding partner opportunism. Third, partner opportunism takes place to gratify selfinterest. There is a general consensus among scholars that opportunism involves some form of self-interest seeking J Bus Psychol (2010) 25:55–74 57 123
J Bus Psychol (2010)25: 55-74 ( Ghoshal and Moran 1996: Wathne and Heide 2000: Wil- other words, individuals may not always behave opportu- lamson 1975, 1993). We note that the nature of the pursuit nistically even if conditions permit such behavior. of this self-interest by an alliance partner can take two Scholars in economics, management, and marketing have alternate paths. First, the opportunistic partner could seek proposed a number of factors that influence the incidence to acquire the focal firms rightful share of the alliance- of opportunism in alliances. We examined the nature of specific gains. Second, the opportunistic partner could shirk these factors and concluded that they can be usefully its own alliance-specific obligations, foisting the relevant grouped according to the nature of the process through costs onto the focal firm. Both these approaches would which they influence partner opportunism. serve the self-interest of the partner, even as they also Recently, Lee(1998, pp 337-338)tested a set of three adversely affect the focal firm. antecedents of opportunism--decision-making uncertainty, Fourth, we should note that simple self-interest seeking cultural distance, and economic ethnocentrism-and found is not tantamount to opportunism. It is critical for an empirical evidence in support of them. Sako and Helper opportunistic partner to keep its actual motives deliberately 98, pp 393-394)used customer-specific assets, lack of hidden from other alliance members. Thus, a partner firm reciprocity, and uncertain market and technology envi- must use deceit to conceal and mask its actual motives. ronments as antecedents of the supplier's perception of Whereas illiamson(1975)uses the term"guile"in dis- customer opportunism, while Joshi and Stump(1999, cussing opportunism, we prefer the more accessible term p. 346)used only technological unpredictability as a ¨ deceit” to convey the same notion(Das2005) determinant of opportunism. Fifth, we must recognize that seeking self-interested Provan and Skinner(1989, p 205) find dependence and gains by a partner firm that does not affect the focal firm in control of decision making to be predictors of opportunism any adverse way does not fall within the ambit of partner Nooteboom(1996, p. 999)lists different external events that opportunism. This would be so even if the partner's actions may trigger opportunistic behavior. Also, Wathne and Heide were not entirely above board. Such partner behavior must (2000, P. 42)note that the focal firm would be vulnerable to also, somehow, result in gains that are at the expense of the opportunism under conditions of information asymmetry other members of the alliance. Note that the two paths of and lock-ins. Finally, according to John(1984, p. 281),an self-interest seeking that we mentioned above also leave alliance member would be more likely to act opportunist- the other alliance members worse off ally if it felt coerced by another alliance member. We suggest that the observations of various authors in here that explicit cooperation-building the literature on what constitutes partner opportunism in mechanisms are likely to impact upon the determinants alliances can be subsumed within the contours of our of opportunism. For example, Gulati(1995) shows that proposed definition. By adopting this expanded definition, familiarity breeds trust, a fundamental requirement for e provide a general basis for the further study of partner cooperation. Hence, familiarity between alliance members pportunism in a rigorous manner, recognizing the multi- may temper opportunistic tendencies. faceted nature of the phenomenon. Clearly, not all firms behave opportunistically all the me. Following williamsons reasoning, firms refrain from opportunism when the resultant losses (i.e, loss of image, Framework of Determinants goodwill, legal retribution, etc. are expected to be greater than the potential economic gains. The problematic feature To facilitate a better understanding of the nature of partner of this conceptualization is that it renders opportunism to opportunism and advance empirical research, we believe an be a monolithic phenomenon. Because a partner may act analysis of the determinants of opportunism is essential. opportunistically for a variety of reasons, the focal firm We list in Table I some illustrative observations from the needs to be wary of all such possibilities. It would thus literature on the determinants of both the general topic of seem useful to formulate an appropriately sophisticated opportunistic behavior and the particular issue of partner view of the concept of partner opportunism opportunism in strategic alliances. Our review of the lit- Our analysis yielded three distinct groups of determi- erature indicates-and the table reflects this-that the nants, each group influencing the potential for partner research on the determinants of partner opportunism thus opportunism in its distinctive way. Accordingly, we pro- far has been largely fragmented, so that it seems desirable pose in this section three sets of key determinants that to attempt an integrated approach significantly impact upon the potential for partner oppor- According to John(1984, P. 287),"opportunism can be tunism: economic, relational, and temporal. We should viewed usefully as an endogenous variable that is evoked note that most of these determinants have been empirically by certain determinants within a long-run relationship. In supported(see Table 2) 2 Springer
(Ghoshal and Moran 1996; Wathne and Heide 2000; Williamson 1975, 1993). We note that the nature of the pursuit of this self-interest by an alliance partner can take two alternate paths. First, the opportunistic partner could seek to acquire the focal firm’s rightful share of the alliancespecific gains. Second, the opportunistic partner could shirk its own alliance-specific obligations, foisting the relevant costs onto the focal firm. Both these approaches would serve the self-interest of the partner, even as they also adversely affect the focal firm. Fourth, we should note that simple self-interest seeking is not tantamount to opportunism. It is critical for an opportunistic partner to keep its actual motives deliberately hidden from other alliance members. Thus, a partner firm must use deceit to conceal and mask its actual motives. Whereas Williamson (1975) uses the term ‘‘guile’’ in discussing opportunism, we prefer the more accessible term ‘‘deceit’’ to convey the same notion (Das 2005). Fifth, we must recognize that seeking self-interested gains by a partner firm that does not affect the focal firm in any adverse way does not fall within the ambit of partner opportunism. This would be so even if the partner’s actions were not entirely above board. Such partner behavior must also, somehow, result in gains that are at the expense of the other members of the alliance. Note that the two paths of self-interest seeking that we mentioned above also leave the other alliance members worse off. We suggest that the observations of various authors in the literature on what constitutes partner opportunism in alliances can be subsumed within the contours of our proposed definition. By adopting this expanded definition, we provide a general basis for the further study of partner opportunism in a rigorous manner, recognizing the multifaceted nature of the phenomenon. Framework of Determinants To facilitate a better understanding of the nature of partner opportunism and advance empirical research, we believe an analysis of the determinants of opportunism is essential. We list in Table 1 some illustrative observations from the literature on the determinants of both the general topic of opportunistic behavior and the particular issue of partner opportunism in strategic alliances. Our review of the literature indicates—and the table reflects this—that the research on the determinants of partner opportunism thus far has been largely fragmented, so that it seems desirable to attempt an integrated approach. According to John (1984, p. 287), ‘‘opportunism can be viewed usefully as an endogenous variable that is evoked by certain determinants within a long-run relationship. In other words, individuals may not always behave opportunistically even if conditions permit such behavior.’’ Scholars in economics, management, and marketing have proposed a number of factors that influence the incidence of opportunism in alliances. We examined the nature of these factors and concluded that they can be usefully grouped according to the nature of the process through which they influence partner opportunism. Recently, Lee (1998, pp. 337–338) tested a set of three antecedents of opportunism—decision-making uncertainty, cultural distance, and economic ethnocentrism—and found empirical evidence in support of them. Sako and Helper (1998, pp. 393–394) used customer-specific assets, lack of reciprocity, and uncertain market and technology environments as antecedents of the supplier’s perception of customer opportunism, while Joshi and Stump (1999, p. 346) used only technological unpredictability as a determinant of opportunism. Provan and Skinner (1989, p. 205) find dependence and control of decision making to be predictors of opportunism. Nooteboom (1996, p. 999) lists different external events that may trigger opportunistic behavior. Also, Wathne and Heide (2000, p. 42) note that the focal firm would be vulnerable to opportunism under conditions of information asymmetry and lock-ins. Finally, according to John (1984, p. 281), an alliance member would be more likely to act opportunistically if it felt coerced by another alliance member. We may note here that explicit cooperation-building mechanisms are likely to impact upon the determinants of opportunism. For example, Gulati (1995) shows that familiarity breeds trust, a fundamental requirement for cooperation. Hence, familiarity between alliance members may temper opportunistic tendencies. Clearly, not all firms behave opportunistically all the time. Following Williamson’s reasoning, firms refrain from opportunism when the resultant losses (i.e., loss of image, goodwill, legal retribution, etc.) are expected to be greater than the potential economic gains. The problematic feature of this conceptualization is that it renders opportunism to be a monolithic phenomenon. Because a partner may act opportunistically for a variety of reasons, the focal firm needs to be wary of all such possibilities. It would thus seem useful to formulate an appropriately sophisticated view of the concept of partner opportunism. Our analysis yielded three distinct groups of determinants, each group influencing the potential for partner opportunism in its distinctive way. Accordingly, we propose in this section three sets of key determinants that significantly impact upon the potential for partner opportunism: economic, relational, and temporal. We should note that most of these determinants have been empirically supported (see Table 2). 58 J Bus Psychol (2010) 25:55–74 123
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Table 1 Types of determinants of opportunism Authors Conceptual/empirical Illustrative observations Type of determinant Doney et al. (1998) Conceptual ‘‘Norms supporting power differentials also provide evidence that targets will act for personal gain. … To the extent that such self-serving behaviors are sanctioned, one might infer that targets in high power distance societies will act opportunistically and fail to associate high costs with opportunistic behavior.’’ (p. 613) Relational ‘‘Targets in low uncertainty avoidance cultures may engage in opportunistic behavior, even if doing so risks damaging the relationship. This follows from the fact that people in low uncertainty avoidance cultures do not fear the future and tolerate risk easily …’’ (p. 614) Relational Ghoshal and Moran (1996) Conceptual ‘‘Opportunism is influenced by three factors. The first is ‘‘prior conditioning’’ (relationship ‘‘i’’) that includes all the attitudes and values formed through exposure to conscious as well as subliminal stimuli … Second, opportunism is influenced by what we describe as the ‘‘feeling for the entity,’’ which represents the individuals’ favorable or unfavorable assessment of the specific transaction partner, the group or the organization… The third influencer of opportunism is opportunistic behavior.’’ (p. 2) Relational Griesinger (1990) Conceptual ‘‘The extent of the risk [of dishonesty] depends on the magnitude of the possible deception, the norms of disclosure surrounding the transaction, the possibility of detection, and the conscience of the potential offender. If the transaction is nonrecurrent, the information inherently asymmetric, and the parties strangers to each other (i.e., the moral character is not known), then the risk will be high and safeguards are warranted.’’ (p. 486) Relational ‘‘Parties who make idiosyncratic contributions to an exchange are particularly vulnerable to the termination of the relationship because their investments have substantially less value apart from it.’’ (p. 486) Economic Heide and Miner (1992) Empirical (155 purchasing agents; 60 suppliers) ‘‘The analysis of games implies that although anticipated open-ended interaction does not require cooperation, it does make it possible – even when neither party has altruism or concern about the other party’s well-being.’’ (p. 269) Temporal ‘‘Players may cooperate in the present because they anticipate possible reciprocal future responses. Or they may cooperate in the present because they know that they can retaliate for a defection by defecting later themselves.’’ (p. 269) Temporal John (1984) Empirical (147 dealers of major oil company; dealer–company relationships) ‘‘Bureaucratic structuring is related positively to opportunism and negatively to the attitudinal orientation of involvement with another channel member’’ (p. 280). ‘‘When perceptions of increased formalization, centralization, and controls (rule enforcement and surveillance) are present they lead to an erosion of positive attitudes and consequently more opportunism.’’ (p. 287) Relational ‘‘Perceptions of coercive power attribution lead to a less favorable attitudinal orientation and a greater degree of opportunism. Reward power usage leads to similar effects, but to a much lesser degree’’ (p. 281). ‘‘When attributions of influence are made to rewards and coercion, more opportunistic behavior is induced. The coercive attributions also have a deleterious effect on attitudinal orientation which in turn leads to more opportunism.’’ (p. 287) Relational Johnson et al. (1996) Empirical (155 IJVs) ‘‘In general, cross-cultural interaction, often replete with misunderstandings and miscommunication, can foster opportunistic tendencies.’’ (p. 83) Relational Joshi and Stump (1999) Empirical (168 purchasing managers; buyer–supplier relationships) ‘‘A manufacturer’s investment of specific assets in a supplier is positively related to the manufacturer’s dependence on the supplier’’ [and] ‘‘A manufacturer’s dependence on a supplier is negatively related to that manufacturer’s opportunism against the supplier.’’ (pp. 338, 340) Economic ‘‘Technological unpredictability is negatively related to a manufacturer’s dependence on a supplier’’ [and] ‘‘A manufacturer’s dependence on a supplier is negatively related to that manufacturer’s opportunism against the supplier.’’ (pp. 338, 340) Economic J Bus Psychol (2010) 25:55–74 59 123
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Table 1 continued Authors Conceptual/empirical Illustrative observations Type of determinant Kanter (1994) Conceptual ‘‘Many relationships die an early death when they are scrutinized for quick returns. COMCO’s alliance with Martech for environmental cleanup services in Eastern Europe dissolved in less than two years because of disputes over slower-than-expected results and the need for new investment, even though the market potential was still great.’’ (p. 102) Temporal Lee (1998) Empirical (105 Australian exporters; alliances with Korean importers) ‘‘Exporters’ perceptions of decision making uncertainty will be positive related to their degree of opportunism.’’ (p. 337) Economic ‘‘Exporters’ cultural distance towards the importing country will be positively related to their degree of opportunism.’’ (p. 337) Relational ‘‘Exporters’ economic ethnocentrism will be positively related to their degree of opportunism.’’ (p. 338) Relational Provan and Skinner (1989) Empirical (226 farm and power equipment dealers) ‘‘A low level of dependence on a supplier may well lead to high levels of opportunism among dealers; if caught, these dealers can more easily shift to other suppliers or provide critical services on their own than can their highly dependent counterparts.’’ (p. 205) Economic ‘‘Opportunistic behavior by dealers in relations with their primary supplier will be positively related to supplier control over dealer decisions.’’ (p. 205) Economic Sako and Helper (1998) Empirical (675 U.S. and 472 Japanese first-tier automotive suppliers) ‘‘The more a supplier is asked to provide information to its customer without the customer reciprocating by giving information to the supplier, the greater the supplier’s perception of customer opportunism.’’ (p. 393) Economic ‘‘The more uncertain the market and technology environments, and the higher the degree of asset specificity, the greater the level of customer opportunism.’’ (p. 394) Economic Wathne and Heide (2000) Conceptual ‘‘In general, information asymmetry means that one party’s ability to detect opportunism is limited … [which] gives the exchange partner the opportunity to pursue opportunistic actions without being caught.’’ (p. 42) Economic ‘‘Lock-in, in contrast, represents vulnerability because a party cannot leave a given relationship without incurring economic losses. As a consequence, a lock-in situation may require a party to tolerate opportunistic behavior.’’ (p. 42) Economic Williamson (1975) Conceptual ‘‘Opportunism refers to a lack of candor or honesty in transactions, to include self-interest seeking with guile.’’ (p. 9) Economic ‘‘Responsible parties who would otherwise be prepared to self-enforce promises to take efficient loss-mitigating actions may find that such behavior is not competitively viable and will consequently be induced to imitate opportunistic types by underinvesting in loss mitigation.’’ (p. 15) Economic 60 J Bus Psychol (2010) 25:55–74 123
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Table 2 Selected studies of the determinants of opportunism Authors Hypotheses Study sample Findings Remarks Equity involvement Deeds and Hill (1999) ‘‘An equity investment by the partner firm will decrease perceived opportunism.’’ (p. 145) 52 biotechnology firms b = -0.126 (ns) While partner’s equity involvement leads to focal firm perceiving less partner opportunism, the effect is not substantial. Nevertheless, it is possible that equity involvement has a substantial effect on decreasing the likelihood of actual partner opportunism. Gulati (1995) ‘‘Alliances are more likely to be equity based if they have a shared R&D component.’’ (p. 91) 2,417 alliances b = 0.90 It is assumed that alliances with a shared R&D component will have a higher likelihood of partner opportunism. Findings suggest that a firm apprehending partner opportunism will prefer equity structure for its alliance. (p \.01) Asymmetric alliance-specific investments Brown et al. (2000) ‘‘The hotel’s opportunism will be reduced the more the hotel has invested in TSAs of its own.’’ (p. 53) 395 general managers of hotels t = 2.29 Results are significant in the opposite direction from the hypothesized relationship. The findings suggest that more alliance-specific investments can lead to higher potential for opportunism as well. This supports the notion of paranoid concerns about making asymmetric resource commitments, which increases the potential for opportunism. (p \.05) Joshi and Stump (1999) ‘‘A manufacturer’s investment of specific assets in a supplier is positively related to the manufacturer’s dependence on the supplier.’’ (p. 338) 168 purchasing managers t = 12.16 Alliance-specific investments directly affect asymmetry in resource commitment. It increases dependence, which in effect reduces the dependent firm’s potential for opportunism. Conversely, the less dependent partner has a higher potential for opportunism. (p \.001) ‘‘A manufacturer’s dependence on a supplier is negatively related to that manufacturer’s opportunism against the supplier.’’ (p. 340) t = -2.10 (p \.05) Ross et al. (1997) ‘‘Perceived asymmetry of commitment rises as actual asymmetry of commitment rises.’’ (p. 683) 510 focal actors from 255 dyads (insurer and agent) b = 0.116 Resource commitment is the most objective form of commitment. Actual asymmetry in resource commitment will increase the perceived asymmetry in resource commitment. (p \.01) b = 0.279 (p \.01) ‘‘The greater the commitment a focal party attributes to its counterpart, relative to its own, P1a: The less conflict the focal party will perceive in the relationship [and] P1b: The more profit (current and expected) the focal party will derive from the relationship.’’ (p. 684) Perceived asymmetry in commitment increases perceived conflict. It is argued that perceived conflict leads to fears of opportunism. Mutual hostages Dyer and Singh (1998) ‘‘hostages may be financial (e.g., equity) or symmetric investments in specialized or cospecialized assets, which constitute a visible collateral bond that aligns the economic incentives of exchange partners.’’ (p. 669) – – Mutual hostages pave the way for credible commitments, strengthening interfirm relational bonds. Also, by acting opportunistically a partner would lose the assets that are held hostage by the focal firm. Hence, mutual hostages decrease the potential for partner opportunism. Luo (2007b) ‘‘A minority party’s opportunism is negatively associated with equity captiveness, ceteris paribus.’’ (p. 861) 192 international joint ventures (163 IJVs used to test this hypothesis) b = -0.29 Equity captiveness in this paper is akin to a mutual hostage situation. Whereas a local party is more opportunistic when equity captiveness is less, a foreign party is consistently less opportunistic regardless of its equity captiveness. (p \ 0.001 when minority party is local; not significant when minority party is foreign) J Bus Psychol (2010) 25:55–74 61 123
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Table 2 continued Authors Hypotheses Study sample Findings Remarks Payoff inequity Ring and Van de Ven (1994) ‘‘We assume that an equally important criterion for assessing a cooperative IOR is equity, defined as ‘fair dealing’ (which does not require that inputs or outcomes always be divided equally between the parties).’’ (p. 93; emphasis in original) – – Ensuring equitable outcomes in alliances is considered just as important as attaining economic efficiency. Since alliance members are keen on preserving equity, partners perceiving payoff inequity will strive to bring back equity to the alliance. Subtle forms of opportunistic behavior (e.g., shirking) offers a quick way to resolve perceived inequity in the alliance. ‘‘We also assume that the parties to a cooperative IOR are motivated to seek both equity and efficiency outcomes because of a desire to preserve a reputation for fair dealing that will enable them to continue to exchange transaction-specific investments under conditions of high uncertainty (Helper and Levine 1992).’’ (p. 94; emphasis in original) Cultural diversity Barkema and Vermeulen (1997) ‘‘Differences in uncertainty avoidance between home and host country – rather than differences in power distance, individualism and masculinity – have a negative impact on IJV survival.’’ (p. 849) 228 international joint ventures t = 2.01 Differences in cultures, in general, are negatively related to alliance performance. More specifically, however, only select dimensions of uncertainty avoidance and long-term orientation negatively influences alliance outcome. It is implied by the authors that alliance survival is threatened due to relational difficulties (one specific form of which is partner opportunism). (p \.05) ‘‘Differences in long-term orientation between home and host country – rather differences in power distance, individualism and masculinity – have a negative impact on IJV survival.’’ (p. 850) t = 2.61 (p \.01) Goal incompatibilities Anderson and Weitz (1989) ‘‘A channel member’s trust in a manufacturer increases … the more congruent the manufacturer’s and channel member’s goals.’’ (p. 315) 690 dyadic relationships t = 14.46 If goal congruence increases interfirm trust, then goal incompatibility will increase the potential for partner opportunism in alliances (assuming trust and opportunism are inversely related). (p \.01) Ross et al. (1997) A focal firm’s ‘‘belief that the counterpart shares the focal party’s objectives’’ refers to goal congruence, which is negatively associated with the conflict the focal firm experiences in the relationship. (p. 691) 510 focal actors from 255 dyads (insurer and agent) b = 0.156 Reversing the logic, goal incompatibility will be positively associated with perceived conflicts in an alliance relationship, which undermines relational bonds and increases the potential for opportunism. (p \0.05) Alliance horizon Heide and Miner (1992) ‘‘Extendedness in a relationship will have a positive effect on the level of cooperation between two interacting firms in a Prisoner’s Dilemma context.’’ (p. 269) (Note: Four measures of cooperation for both purchasers and suppliers, creating eight regression coefficients) 155 purchasing agents and 60 suppliers p \.01 for 7 coefficients; p \ .10 for the other coefficient Evidently, firms expecting to continue in an alliance are likely to be more cooperative. In alliances with long horizons, firms will not only expect to continue in their alliances, but will also be less likely to act opportunistically. Joshi and Stump (1999) ‘‘A manufacturer’s long-term orientation toward a supplier is negatively related to that manufacturer’s opportunism against the supplier.’’ (p. 340) 168 purchasing managers t = -2.47 Long-term orientation of a manufacturer will be reflected in its preference for a long alliance horizon. Evidently, this condition is negatively related to the potential for a manufacturer’s opportunism. (p \.01) 62 J Bus Psychol (2010) 25:55–74 123
J Bus Psychol(2010)25: 55-74 We take the focal firm's perspective and analyze the potential for opportunistic behavior by its partner, so that an increase in the level of a particular determinant(as it relates to the partner firm) would be likely to increase/ decrease partner opportunism. In Fig. I we present our framework of determinants of partner opportunism. Economic determinants The economic determinants of opportunism are the most pledged in the literature, bu saction cost economics (Klein et al. 1978: Masten 学了 Williamson 1975, 1979, 1993). Scholars hat an alliance partners opportunism is shaped by eco- ner is driven by the need to procure economic benefits or to 点岩自 avert economic losses. When such needs are acute, an alliance partner may harm other alliance members in fur therance of its own economic self-interest. The larger the potential economic gains to be made, the more an alliance partner would be driven toward opportunism. Thus,"even among the less opportunistic, most have their price"to give in to opportunism(Williamson 1979, p. 234 ). The presence or absence of these factors can restrict or facilitate a partner in opportunistically pursuing its economic self- interest. As a group, we call these factors the economic determinants of partner opportunism. The set of economic determinants comprise equity involvement, alliance-spe- ific investments, mutual hostages, and payoff inequity Equity Involvement Broadly, alliance structural arrangements can be either 目冒 equity-based or nonequity-based Equity alliances are con- sidered more effective than nonequity alliances in curbing opportunistic behavior(Das and Teng 1996: Gulati 1995) because equity binds member firms to the alliance, making 自日飞 it difficult for them to withdraw easily. A partner firm will not jeopardize its alliance relationship by exploiting the focal firms alliance-specific investments if it has an equity take in that alliance. Similarly, if both firms contribute known shares of equity in their alliance, they would be more 且言多 accepting of asymmetric resource commitments Equity is generally expressed in monetary terms. The equity invested in the alliance would get tied up with ongoing operations for an indefinite period of time and hus, cannot be readily retrievable. In fact, a partner would have to depend on the focal firms cooperation to withdraw its equity stake from the alliance. Plainly, a partner behaving opportunistically with the focal firm cannot expect cooperation from the focal firm in the withdrawal process. Thus, opportunism creates problems for the partner in recovering its equity stake in the alliance. The value of 2 Springer
We take the focal firm’s perspective and analyze the potential for opportunistic behavior by its partner, so that an increase in the level of a particular determinant (as it relates to the partner firm) would be likely to increase/ decrease partner opportunism. In Fig. 1 we present our framework of determinants of partner opportunism. Economic Determinants The economic determinants of opportunism are the most widely acknowledged in the literature, but especially so in transaction cost economics (Klein et al. 1978; Masten 1988; Williamson 1975 , 1979 , 1993). Scholars maintain that an alliance partner’s opportunism is shaped by economic considerations (e.g., Klein 1996). An alliance partner is driven by the need to procure economic benefits or to avert economic losses. When such needs are acute, an alliance partner may harm other alliance members in furtherance of its own economic self-interest. The larger the potential economic gains to be made, the more an alliance partner would be driven toward opportunism. Thus, ‘‘even among the less opportunistic, most have their price’’ to give in to opportunism (Williamson 1979, p. 234). The presence or absence of these factors can restrict or facilitate a partner in opportunistically pursuing its economic selfinterest. As a group, we call these factors the economic determinants of partner opportunism. The set of economic determinants comprise equity involvement, alliance-specific investments, mutual hostages, and payoff inequity. Equity Involvement Broadly, alliance structural arrangements can be either equity-based or nonequity-based. Equity alliances are considered more effective than nonequity alliances in curbing opportunistic behavior (Das and Teng 1996; Gulati 1995 ) because equity binds member firms to the alliance, making it difficult for them to withdraw easily. A partner firm will not jeopardize its alliance relationship by exploiting the focal firm’s alliance-specific investments if it has an equity stake in that alliance. Similarly, if both firms contribute known shares of equity in their alliance, they would be more accepting of asymmetric resource commitments. Equity is generally expressed in monetary terms. The equity invested in the alliance would get tied up with ongoing operations for an indefinite period of time and, thus, cannot be readily retrievable. In fact, a partner would have to depend on the focal firm’s cooperation to withdraw its equity stake from the alliance. Plainly, a partner behaving opportunistically with the focal firm cannot expect cooperation from the focal firm in the withdrawal process. Thus, opportunism creates problems for the partner Table 2 in recovering its equity stake in the alliance. The value of continued Authors Hypotheses Study sample Findings Remarks Pressures for quick results Das and Teng (1999) ‘‘Partners demand quick results in the short run and tend to be less patient with long-term investment and commitment. Consequently, alliance performance evaluation will rely heavily on financial and marketbased indicators.’’ (p. 59) – – Pressures for quick results are very real in most alliances. Many firms are unable to cope with such pressures for various reasons. Since opportunism offers a clear-cut and quick way to reap substantial benefits (albeit through unfair means), these firms have a higher potential to act opportunistically to respond to the pressures for quick results. Kanter (1994) ‘‘Many relationships die an early death when they are scrutinized for quick returns.’’ (p. 102) – – An alliance partner that evaluates alliance performance without allowing sufficient time is not going to be satisfied with the results. A dissatisfied partner will be disinclined to continue in the joint project, perhaps causing premature termination of the alliance. J Bus Psychol (2010) 25:55–74 63 123
J Bus Psychol (2010)25: 55-74 eterminants of partner CONOMIC ortunism. Note:(+)and() ndicate that an increase in the symmetric Alliance-specific Investments (+ level of the particular Mutual Hostages ( determinant (as it relates to the Payoff Inequity(+) partner firm)would be likely to increase/decrease potential RELATIONAL PARTNER Cultural Diversity (+ Goal Incompatibilities (+) OPPORTUNISM TEMPORAL Pressures for Quick Results(+) the tied-up equity that an opportunistic partner risks losing Generally speaking, a focal firm becomes vulnerable to would raise the required threshold of economic gains from partner opportunism when it invests in alliance-specific opportunism assets. This is because there would be sufficient scope for Proposition 1 The extent of equity involvement wau the opportunist to misappropriate the quasi-rents generated be negatively associated with potential for partner from such investments. As Klein et al.(1978, p. 298) emphasize: " After a specific investment is made and such quasi rents are created, the possibility of opportunistic behavior is very real. "If the opportunistic partner were to Asymmetric Alliance-Specific Investments leave the alliance, the focal firm would likely lose the alliance-specific value of its assets. Hence, as long as In alliances, members often have to develop facilities or loss of abandoning the alliance is greater than the acquire assets that are useful and valuable only within the incurred due to partner opportunism, the focal firm specific alliance context. The rationale for investing in have to continue to be a part of the alliance. The oppor- liance-specific assets is to achieve higher efficiency in tunistic partner, in turn, would try to ensure just enough alliance operations. However, as an unintended conse- reward for the focal firm to dissuade it from severing ties. quence, a focal firm investing in these alliance-specific If a focal firm believes its commitment to the alliance to assets becomes dependent on its partner's cooperation in be greater than that of the partner firm, it might perceive a the alliance. If there is a low level of dependence on the higher potential for partner opportunism, but especially so if focal firm, the partner will be more likely to behave the focal firm happens to be a small firm or an entrepre opportunistically, since it"can more easily shift to other neurial firm(Das and He 2006). A firm's apprehension of suppliers or provide critical services on their own than can opportunistic behavior by the partner may be exacerbated their highly dependent counterpart"(Provan and Skinner when it has"paranoid concerns and fantasies about the 1989, p 205). Asymmetry in actual resource commitments long-term lack of equity in the transfer of knowledge and may affect the perceived asymmetry in commitment. capability"( Gould et al. 1999, p 697). By a similar logic,a Indeed, as Ross et al. (1997)observe, " in the principal- partner firm will also be apprehensive about possible agent context it may be discomfiting or disadvantageous opportunistic behavior by the focal firm if it believes that its for the perceiver to believe that it is overcommitted relative own resource commitments are greater than that of the to its counterpart because this belief may create fear of focal firm. This heightened apprehension will, in turn, lead (p. 683; emphasis to an increase in the partner's potential for opportur 2 Springer
the tied-up equity that an opportunistic partner risks losing would raise the required threshold of economic gains from opportunism. Proposition 1 The extent of equity involvement will be negatively associated with potential for partner opportunism. Asymmetric Alliance-Specific Investments In alliances, members often have to develop facilities or acquire assets that are useful and valuable only within the specific alliance context. The rationale for investing in alliance-specific assets is to achieve higher efficiency in alliance operations. However, as an unintended consequence, a focal firm investing in these alliance-specific assets becomes dependent on its partner’s cooperation in the alliance. If there is a low level of dependence on the focal firm, the partner will be more likely to behave opportunistically, since it ‘‘can more easily shift to other suppliers or provide critical services on their own than can their highly dependent counterpart’’ (Provan and Skinner 1989, p. 205). Asymmetry in actual resource commitments may affect the perceived asymmetry in commitment. Indeed, as Ross et al. (1997) observe, ‘‘in the principalagent context it may be discomfiting or disadvantageous for the perceiver to believe that it is overcommitted relative to its counterpart because this belief may create fear of opportunism’’ (p. 683; emphasis in original). Generally speaking, a focal firm becomes vulnerable to partner opportunism when it invests in alliance-specific assets. This is because there would be sufficient scope for the opportunist to misappropriate the quasi-rents generated from such investments. As Klein et al. (1978, p. 298) emphasize: ‘‘After a specific investment is made and such quasi rents are created, the possibility of opportunistic behavior is very real.’’ If the opportunistic partner were to leave the alliance, the focal firm would likely lose the alliance-specific value of its assets. Hence, as long as the loss of abandoning the alliance is greater than the loss incurred due to partner opportunism, the focal firm will have to continue to be a part of the alliance. The opportunistic partner, in turn, would try to ensure just enough reward for the focal firm to dissuade it from severing ties. If a focal firm believes its commitment to the alliance to be greater than that of the partner firm, it might perceive a higher potential for partner opportunism, but especially so if the focal firm happens to be a small firm or an entrepreneurial firm (Das and He 2006). A firm’s apprehension of opportunistic behavior by the partner may be exacerbated when it has ‘‘paranoid concerns and fantasies about the long-term lack of equity in the transfer of knowledge and capability’’ (Gould et al. 1999, p. 697). By a similar logic, a partner firm will also be apprehensive about possible opportunistic behavior by the focal firm if it believes that its own resource commitments are greater than that of the focal firm. This heightened apprehension will, in turn, lead to an increase in the partner’s potential for opportunistic ECONOMIC Equity Involvement (–) Asymmetric Alliance-specific Investments (+) Mutual Hostages (–) Payoff Inequity (+) RELATIONAL Cultural Diversity (+) Goal Incompatibilities (+) TEMPORAL Alliance Horizon (–) Pressures for Quick Results (+) PARTNER OPPORTUNISM Fig. 1 Framework of determinants of partner opportunism. Note: (?) and (-) indicate that an increase in the level of the particular determinant (as it relates to the partner firm) would be likely to increase/decrease potential partner opportunism 64 J Bus Psychol (2010) 25:55–74 123
