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 Springerthe 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 conse￾quence, 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 principal￾agent 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 oppor￾tunistic 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 entrepre￾neurial 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