Discussion paper

DP12512 The Contingent Effect of Alliance Design on Alliance Dynamics and Performance: An Experimental Study

A core question in alliance research is how alliance design influences
alliance success. Two underexplored aspects of this question are whether
the effect of alliance design is contingent on the external competitive
environment and how alliance design affects the behavioral dynamics in an
alliance. We address these aspects by studying two core dimensions of
alliance design, the level of commitment in an alliance and the number of
alliance partners. We match two competitive environments, high and low
competition, with different alliance designs and vary the number of alliance
partners and the level of commitment and experimentally study the
aggregate performance and behavioral dynamics of the different alliance
designs. We find that with low competition, alliance design does not affect
performance much, while with high competition, alliance performance
depends heavily on alliance design. Regarding dynamics, we find that
aggregate performance is most strongly affected by first-period behavior,
while the willingness to forgive a partner's non-cooperative behavior has a
more muted effect on alliance performance.

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Citation

Kretschmer, T, A Banal-Estanol, J Seldeslachts and D Meloso (eds) (2017), “DP12512 The Contingent Effect of Alliance Design on Alliance Dynamics and Performance: An Experimental Study”, CEPR Press Discussion Paper No. 12512. https://cepr.org/publications/dp12512