Research Digest Should I stay or should I go? Exit dynamics in interfirm alliances
In “Firm exit from open multiparty alliances: The role of social influence, uncertainty, and interfirm imitation in collective technology development” published in Research Policy, Rand Gerges-Yammine and co-author Anne L. J. Ter Wal examine exit dynamics in open multiparty alliances, an important form of interfirm collaboration, based on a case study of the nine most influential open multiparty alliances that shaped the global mobile phone sector between 2000 and 2012.
Why study this
Open multiparty alliances are open-membership collectives of diverse organizations (private companies, research centres, governmental agencies...) that work towards common technological goals. By pooling resources and influencing the direction of technological advances, they play a central role in the growth of technology-intensive sectors such as that of mobile phones. It is important to understand the unique dynamics of such alliances, in particular the exit mechanisms, because the exit of a large number of participants can have a detrimental effect on the success of the collaborative endeavour, or even lead to the abandonment of an alliance-supported technology, irrespective of its intrinsic potential.
- In light of the uncertainty surrounding the potential of emerging technology and the difficulty of assessing the trustworthiness of other group members, firms are likely to imitate their industry peers when it comes to exiting an alliance.
- There are two main reasons for this bandwagon effect: firstly, given the context of uncertainty, the behaviour of peer firms becomes an important source of information and secondly, rivalry-based imitation serves to maintain the status quo in the industry.
- The imitation effect is weaker for firms that hold positions of high betweenness centrality in the wider networks of collaborative relations.
- Prominent firms have access to superior information on sector developments and to key resources that render them less dependent on signals sent by their industry peers, which explains why they are shielded from social influence effects.
Firms are sensitive to the actions of their industry peers and tend to mimic them in leaving open multiparty alliances.
These findings carry implications for other forms of open collaboration such as open-source software communities and digital platforms, since similar mechanisms might operate as a result of open membership policies.
To maintain momentum and avoid negative feedback loops, the architects of open membership alliances need to closely monitor whether prominent members are considering abandoning the alliance, because such exit actions could have significant repercussions for the value other members then perceive in remaining members.