Disentangling Reputational Effects in Alliances

Afonso Almeida Costa (), Luís Almeida Costa () and Luís Vasconcelos ()
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Afonso Almeida Costa: Nova School of Business and Economics, Universidade Nova de Lisboa, Campus de Carcavelos, 2775-405 Carcavelos, Portugal
Luís Almeida Costa: Nova School of Business and Economics, Universidade Nova de Lisboa, Campus de Carcavelos, 2775-405 Carcavelos, Portugal
Luís Vasconcelos: Nova School of Business and Economics, Universidade Nova de Lisboa, Campus de Carcavelos, 2775-405 Carcavelos, Portugal; University of Technology Sydney, Business School, Economics Discipline Group, 14-28 Ultimo Road, Ultimo NSW 2007, Australia

Strategy Science, 2023, vol. 8, issue 3, 349-367

Abstract: An important consequence of an alliance is that partnering firms combine their reputations by associating them to jointly implemented projects. However, an often-overlooked aspect is that those reputations may themselves change due to both the announcement of the firms’ decision to form the alliance and the performance of joint projects. We develop a formal model that provides an integrated perspective of these reputational effects, while allowing us to isolate and characterize each of them. We find that the way in which the firms’ competence levels affect their decision to form an alliance determines how the firms’ reputations evolve following the announcement of the alliance and the performance of joint projects. This indicates that the analysis of the reputational effects of an alliance requires understanding the firms’ alliance formation decision in the first place. We show, for instance, that a firm’s reputation may decrease following the decision to form an alliance, and that the impact of project performance on the reputations of alliance partners can be very asymmetric. Among other things, our analysis implies that a firm’s desirability as an alliance partner does not necessarily increase with its reputation and level of competence.

Keywords: reputation; resource-based approaches; alliances; game theory (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:inm:orstsc:v:8:y:2023:i:3:p:349-367

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