Partner selection for international strategic alliances in emerging economies

SummaryRepeated partnerships in international strategic alliances (ISAs) should mitigate the effects of an under-established institutional framework, lower transaction costs, and create the conditions for the exploitation of firm-specific capabilities by multinational corporations (MNCs). However, to the best of our knowledge, no research has investigated MNCs’ preference about prior partners for ISA projects in emerging economies. This is surprising, given the high risks characterizing ISAs and the potential for reducing transactional hazards by engaging repeatedly with the same partner. Our analyses of 286 ISAs between a US MNC and a local firm in emerging economies reveal that US MNCs forming ISAs requiring higher extent of technological commitments are more likely to select their prior partners. Equity-based governance structure is a substitutive mechanism of alliancing with prior partners for MNCs to address potential opportunisms in ISAs. We also find that US MNCs are more likely to select prior partners for ISAs when there is a larger institutional distance between the partners’ countries of origin.