Strategic Management Journal

Strat. Mgmt. J., 32: 229–253 (2011)

Published online EarlyView in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/smj.873
Received 27 February 2009; Final revision received 3 June 2010

MUTUAL DEPENDENCE, PARTNER

SUBSTITUTABILITY, AND REPEATED PARTNERSHIP:
THE SURVIVAL OF CROSS-BORDER ALLIANCES
JUN XIA*
College of Business and Economics, West Virginia University, Morgantown, West
Virginia, U.S.A.

Drawing on the resource dependence perspective, this study suggests that alliance survival is an
adaptive response to both environmental dependence and partner dependence independently and
jointly. Based on a sample of cross-border alliances formed and terminated by local and foreign
firms in a longitudinal setting, the results suggest that the mutual trade dependence between a
home country and a host country is positively related to the survival of cross-border alliances
in the host country. Whereas partner substitutability reduces the probability of alliance survival,
repeated partnership increases the probability. Moreover, mutual trade dependence reduces the
negative effect of partner substitutability on alliance survival. The findings support the idea
that resource dependence theory provides an important framework for the study of cross-border
alliances. Copyright  2010 John Wiley & Sons, Ltd.

INTRODUCTION the influence of national differences, such as cul-

Cross-border alliances provide multinational firms
with opportunities to stabilize resource exchange,
smooth global operations, gain more market power,
and achieve faster market entry. They also help
maintain a higher level of corporate flexibility as
compared to other entry modes such as merg-
ers and acquisitions (M&As). Because alliances
are relatively short-term arrangements with spe-
cific objectives, their survival has been a cen-
tral topic of research among international and
organizational scholars (Hennart and Zeng, 2002;
Inkpen and Beamish, 1997; Park and Russo, 1996;
Park and Ungson, 1997; Parkhe, 1991; Yan and
Gray, 1994). Previous studies have emphasized
Keywords: alliance survival; mutual trade dependence;
partner substitutability; repeated partnership
∗
Correspondence to: Jun Xia, Division of Business Administra-
tion, College of Business and Economics, West Virginia Univer-
sity, Morgantown, WV 26506-6025, U.S.A.
E-mail: junxia88@gmail.com
tural distance (Barkema and Vermeulen, 1997)
and economic distance (Tsang and Yip, 2007), on
alliance survival. The literature, however, neglects
another important construct, mutual trade depen-
dence, which, as our study shows, may advance
this stream of study by adding new theoretical
insights into the important issue of cross-border
alliance survival.
We draw on resource dependence theory that
explains firms’ constraint absorption activities such
as acquisition or alliance activities in a resource
dependent environment (Pfeffer and Salancik,
1978). In the context of cross-border constraint
absorption, mutual trade dependence refers to a
resource dependent environment in which firms
based in different countries mutually depend on
each other for critical resources through inter-
national trade (imports and exports) involving
sales, exchanges, and distributions of raw materi-
als, intermediate products, or finished goods. Trade
dependence creates constraints and uncertainties

Copyright  2010 John Wiley & Sons, Ltd.

230 J. Xia
(e.g., price, quality, and delivery time) for firms
to streamline operations associated with foreign
markets. According to Pfeffer and Nowak (1976),
when constrained by such exchange or trade envi-
ronments, firms may form alliances to absorb the
dependence uncertainties.
Given that resource dependence scholars have
focused on alliance formation and not on sur-
vival, this study is motivated to examine whether
the resource dependence perspective consistently
explains alliance survival. Using alliances to
absorb constraints, firms subsequently have to
manage partner dependence as they depend on
alliance partners to manage the environmental
dependence (Pfeffer and Nowak, 1976; for a
review, see Gulati, 1998: 299). We raise the first
question: do mutual trade dependence and partner
dependence (partner substitutability and repeated
partnership) have any simultaneous impact on
alliance survival? Given that existing studies do
not examine their joint effects, we raise a sec-
ond question: do mutual trade dependence and
partner dependence interact in affecting alliance
survival?
To address these research questions, this study
makes two contributions to the resource depen-
dence literature. First, it extends previous studies
in single country (i.e., domestic) settings (Cas-
ciaro and Piskorski, 2005; Pfeffer and Nowak,
1976) to an international setting by introducing
the concept of mutual trade dependence as a
new construct of resource dependence to explain
cross-border alliance survival. Second, this study
highlights the interplay between environmental
dependence and partner dependence, each reinforc-
ing the other to provide a richer understanding
of alliance survival. These two contributions are
important because resource dependence theorists
have largely focused on environmental dependence
(Pfeffer and Nowak, 1976; Pfeffer and Salan-
cik, 1978), not on partner dependence. Few stud-
ies have conceptualized environmental dependence
across countries in terms of trade as a predictor
of alliance survival and, as a result, its simulta-
neous and joint effects with partner dependence
on alliance survival have attracted little attention.
Since the research questions are important to test
the applicability of the theory, our study begins to
address the gap by introducing and examining the
resource dependence perspective to the study of
alliance survival.
Copyright  2010 John Wiley & Sons, Ltd.
This study also makes two contributions to
the cross-border alliance literature by integrat-
ing insights from the emerging alliance portfo-
lio perspective (Gulati, 1998; Hoffmann, 2007;
Lavie, 2007; Parise and Casher, 2003), which sug-
gests that individual alliances are interdependent
in a firm’s portfolio. First, we argue that once an
alliance between partners A and B is formed, the
addition of other alliances to A’s or B’s portfo-
lio may shape the post-formation dynamics in the
power relations between A and B and thus may
affect the A-B alliance survival. In this sense, our
study goes beyond the traditional approach that
predicts alliance survival in terms of the initial
conditions surrounding alliance formation. With a
few exceptions (Inkpen and Beamish, 1997; Yan
and Gray, 1994), the dominant view suggests that
alliance termination is the inverse of formation.
However, as Broschak argued, we cannot sim-
ply extrapolate alliance termination from their for-
mation because ‘exchange relationships are also
subject to the push and pull of stabilizing and
disruptive forces’ (Broschak, 2004: 608). Second,
resource dependence approaches have traditionally
focused on minimizing partner dependencies (Gray
and Wood, 1991; Yan and Gray, 1994). We make
a distinction between disruptive and stabilizing
forces and argue that they may have opposite influ-
ences on shifts in post-formation partner depen-
dence and thus on alliance survival. For example,
when other partners are better suited for resource
exchange, switching partners may be a disruptive
force (Broschak, 2004; Elg, 2000). In contrast,
partners with repeated partnerships (a stabilizing
force) (Beckman, Haunschild, and Phillips, 2004;
Gulati, 1995) can reinforce the mutual partner
dependence, making termination less likely.
Empirically, we used a sample of 587 cross-
border alliances formed and terminated by firms in
49 countries to test a set of hypotheses in a longi-
tudinal setting. This contribution can be viewed in
the context of the inadequate empirical testing in
previous studies of the effect of resource depen-
dence on the outcome of cross-border constraint
absorption activities.
RESOURCE DEPENDENCE
AND ALLIANCE SURVIVAL
An alliance is a voluntary arrangement in the
combination and exchange of resources between
Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
 Mutual Dependence and Alliance Survival
firms (Inkpen and Beamish, 1997: 177; Lavie,
2007) with shared control and risk over the use
and fruits of the combined resources (Kogut and
Singh, 1988). As compared to a formal organi-
zation, alliances are an ‘intentionally temporary’
structure that does not last indefinitely (Inkpen
and Li, 1999: 35). However, firms usually do not
specify their alliance durations so as to maintain
greater flexibility due to the inadequate informa-
tion regarding internal and external changes rel-
evant to evaluate their resource needs. Previous
studies have focused on unplanned termination
(Inkpen and Beamish, 1997; Kogut, 1989; Park
and Ungson, 1997) because termination planned
from the outset cannot be considered an adaptive
response to dynamic changes during the alliance
life cycle (Das and Teng, 2000). We thus limit our
interpretations to the survival of alliances that have
no anticipated duration by the involved partners.
In the cross-border alliance literature, scholars
have drawn different inferences from alliance ter-
mination, viewing it alternatively as an indication
of failure owing to irresolvable problems aris-
ing from cultural differences (Barkema and Ver-
meulen, 1997; Park and Ungson, 1997), or as an
indication of success if the specific objectives of
the partners have been achieved (Gomes-Casseres,
1989; Reuer, 2000; Reuer and Koza, 2000). In
contrast, our study tests a more dynamic view of
survival. Scholars have argued that alliance ter-
mination can be a result of shifts in the bargain-
ing power between partners (Inkpen and Beamish,
1997; Yan and Gray, 1994). From a resource
dependence perspective (Pfeffer and Nowak,
1976), we argue that alliance survival or termina-
tion is a logical consequence of a firm’s adaptive
responses to the dynamics of both environmental
and partner dependencies.
A fundamental premise of resource dependence
theory is that dependent firms tend to use con-
straint absorption activities (e.g., acquisitions or
alliances) to alter interdependence by control-
ling the context of resource control (Pfeffer and
Salancik, 1978: 46–51). Firms can absorb con-
straints permanently through acquisitions or tem-
porarily through long-term contracts such as equity
alliances (joint ventures) or cooperative contracts
(Casciaro and Piskorski, 2005; Pfeffer and Nowak,
1976). Mutual dependence, the core concept of
resource dependence theory, has been used to
explain alliance survival (for a review, see Das
Copyright  2010 John Wiley & Sons, Ltd.
231
and Teng, 2000). According to Emerson’s defini-
tion of exchange theory: ‘The dependence of actor
A upon actor B is (1) directly proportional to A’s
motivational investment in goals mediated by B,
and (2) inversely proportional to the availability
of those goals to A outside of the A-B relation’
(Emerson, 1962: 32, italics in original). The notion
of resource dependence has been generalized to
study environmental dependence between firms in
different environments (Burt, 1983; Casciaro and
Piskorski, 2005; Finkelstein, 1997; Pfeffer, 1972;
Pfeffer and Nowak, 1976). We thus first argue that
alliance survival is a response to a high level of
environmental dependence.
Unlike an acquisition, an alliance is a partner-
ship-based approach whereby a firm depends on
partner firms to stabilize the flow of resources
(Gulati, 1998; Pfeffer and Nowak, 1976). Using
alliances to reduce the level of environmental con-
straints, firms have to subsequently manage their
partner dependence. Applying Emerson’s (1962)
definition, partner dependence is inversely propor-
tional to the number of sources of comparable
resources available to partner A outside of its
partnership with partner B. We then argue that
alliance survival also responds to how A manages
its dependence on B by restructuring its alliance
portfolio.
Finally, given that the simultaneous and joint
effects of environmental and partner dependencies
on alliance survival are not considered in previous
studies due to their different levels of analysis,
we propose an integrative perspective to combine
insights from these different lines of study to
extend the resource dependence perspective.
Environmental dependence
Resource dependence theorists argue that con-
straint absorption activities can be ‘used by
organizations to restructure their environmental
interdependence in order to stabilize critical ex-
changes’ (Pfeffer and Salancik, 1978: 115). Pfeffer
and Nowak (1976) define environmental interde-
pendence as the proportion of firms in environment
A’s total sales to and purchases from firms in envi-
ronment B. They found evidence that the degree
of the dependence of A upon B was the key driver
of firms in A forming joint ventures with other
firms in B. Resource dependence, however, is fun-
damentally reciprocal. Given the arguments and
findings above, it is also true that the degree of
Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
232 J. Xia
dependence of B upon A drives firms in B to
ally with other firms in A. Building on Emer-
son’s (1962) exchange theory, scholars (Casciaro
and Piskorski, 2005; Gulati and Sytch, 2007) have
recently decomposed the concept of environmen-
tal interdependence into mutual dependence (the
sum of the dependencies of A upon B and B upon
A) and power imbalance (the differential between
the dependencies of A upon B and B upon A).
Casciaro and Piskorski (2005) found that mutual
dependence, rather than interdependence, was a
key driver for U.S. firms during the 1985–2000
period to engage in constraint absorption activ-
ities (acquisitions) in each other’s environment.
However, the power imbalance acted as an obsta-
cle preventing them from doing so. To examine
alliance survival, we adopt the mutual dependence
approach.
Although this stream of study has advanced our
understanding of how environmental dependence
drives constraint absorption activities, empirical
evidence has been limited to a few studies (Pfef-
fer and Salancik, 2003: xvi). In this paper, we
seek to advance the resource dependence per-
spective in three distinct ways. First, previous
studies are restricted to a single country setting
(i.e., the United States), resulting in a lack of
mutual dependence measures between countries
in global settings to explain cross-border con-
straint absorption activities. As such, cross-border
alliances are usually excluded from this stream
of study. The extent to which alliance survival
can be predicted by mutual trade dependence in
a buyer-seller relationship beyond national bound-
aries remains to be conceptualized and empirically
tested. Our study makes a contribution by intro-
ducing the concept of mutual trade dependence
using bilateral trade as a measure of resource
dependence. Second, resource dependence theo-
rists have focused on alliance formation (Pfeffer
and Nowak, 1976; Pfeffer and Salancik, 1978),
not on alliance termination. Given the high inci-
dence of alliance termination, it is important to
investigate whether the resource dependence per-
spective consistently explains alliance survival. We
thus examine whether the mutual dependence that
drives two firms to form alliances will also keep
them together after the formation. Finally, previous
studies have studied constraint absorption activities
at the industry level of analysis and consequently
have ignored the post-formation dynamics of part-
ner dependence in terms of partner substitutability
Copyright  2010 John Wiley & Sons, Ltd.
and repeated partnership in the alliance. As we dis-
cuss below, this study focuses on the firm level of
analysis to examine the effects of environmental
and partner dependencies both simultaneously and
jointly.
Partner dependence, partner substitutability,
and repeated partnership
Firms have to sacrifice a certain degree of auton-
omy when forming alliances to manage the envi-
ronmental dependence in a foreign country. Pfef-
fer and Nowak (1976) argued that joint ventures
enable a firm to manage some of its environmen-
tal constraints, but this approach creates a dilemma
because a dependence on joint venture partners
also entails a loss of some autonomy or indepen-
dence. As Das and Teng (2000: 80) noted, ‘forging
an alliance usually increases a firm’s dependence
on its partner firm.’ The formation of an alliance
is often based on a relatively balanced situation of
mutual dependence between the partners, which
has been documented in the alliance literature
in several ways. For example, Williamson (1991:
271) defines alliances as ‘contracts in which the
parties to the transaction maintain autonomy but
are bilaterally dependent to a nontrivial degree.’
If A depends on B but B does not depend on A
at all, then no alliance will be formed (Das and
Teng, 2002: 732). Thus, asymmetrical dependence
(Gulati and Sytch, 2007) or power imbalance (Cas-
ciaro and Piskorski, 2005) is not sufficient for
alliance formation. The empirical evidence also
suggests that mutual partner dependence is a nec-
essary condition for alliance formation, but power
imbalance actually acts as an obstacle to the for-
mation of an interorganizational relationship (Cas-
ciaro and Piskorski, 2005; Gulati, 1998).
Over time, however, the initial balance will shift
to a power imbalance or dependence asymmetry.
Applying Emerson’s (1962) formulation to alliance
partners, the power of partner B over partner A is
equal to the dependence of A upon B. Becom-
ing overly dependent on a partner is vulnerable
and risky, because it creates a situation providing
incentives to act opportunistically, as demonstrated
in the relationship between a hub firm and smaller
firms in a network (Atler and Hage, 1993; Bar-
ringer and Harrison, 2000). Integrating insights
from the obsolescing bargain (Vernon, 1977), inter-
partner learning (Hamel, 1991; Parkhe, 1991), and
partner dependence (Pfeffer and Salancik, 1978)
Strat. Mgmt. J., 32: 229–253 (2011)
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 Mutual Dependence and Alliance Survival
perspectives, scholars have demonstrated that the
survival of cross-border alliances is associated with
shifts in the bargaining power between the for-
eign and local partners resulting from learning
that allows a firm to eliminate partner dependency
(Inkpen and Beamish, 1997; Yan and Gray, 1994).
From a transaction cost perspective, Park and Ung-
son (1997) argued that a highly dependent partner
may be inclined to exit in order to protect itself
from opportunism. From a resource dependence
perspective, scholars (Das and Teng, 2000; 2002;
Parkhe, 1993) also argued that when the mutual
partner dependencies at the time of an alliance
formation erode or vanish, the alliance may be ter-
minated as the strong partner tends to exit from the
alliance. Therefore, shifts in partner dependence,
which lead to a power imbalance, reduce the like-
lihood of survival.
A more difficult and more interesting issue is
how firms manage their partner dependencies. One
way a dependent partner alleviates its dependency
is by cultivating alternative sources of comparable
resources (Provan, Beyer, and Kruytbosch, 1980:
201; Pfeffer and Leong, 1977). In other words,
firms can rely on multiple sources by incorpo-
rating new actors (Burt, 1983; Pfeffer and Salan-
cik, 1978). In this study, we combine and extend
insights from the emerging alliance portfolio per-
spective to explain partner dependence. The per-
spective suggests that individual alliances affect
each other as they are interdependent in a firm’s
portfolio (Gulati, 1998; Parise and Casher, 2003).
Thus, a firm’s alliance decision (formation or ter-
mination) relies not only on individual alliances
but also on its alliance portfolio.
In the alliance portfolio literature on partner
dependence, a firm can reduce its dependence on
any given partner by engaging in alliances with
that partner’s competitors in the same industry
(Lavie, 2007: 1207). Many firms tend to maintain
alliance portfolios with multiple exchange part-
ners (Baker, Faulkner, and Fisher, 1998; Broschak,
2004; Hoffmann, 2007). As a consequence, partner
B is substitutable if partner A engages in third-
party interorganizational relationships. According
to Bae and Gargiulo’s (2004: 845) definition of
‘partner substitutability,’ for partner A, partner B
is substitutable insofar as there are other partners C
that have resources comparable to those of B. The
existence of C mitigate the dependence A has on
B. Elg (2000: 170) defines the interaction between
Copyright  2010 John Wiley & Sons, Ltd.
233
A and C as a ‘liberating relationship’ because part-
ners C are able to provide resources that are similar
to or more attractive than those provided earlier
by B and thus C liberate A from the its earlier
dependence on B.
We argue that partner substitutability increases
the probability of a power imbalance and thus
reduces the likelihood of alliance survival. In the
case of cross-border alliances, we investigate the
effect of partner substitutability from a multina-
tional firm’s point of view rather than from a local
firm’s point of view. This approach is consistent
with previous studies on cross-border alliance sur-
vival (Dhanaraj and Beamish, 2004; Inkpen and
Beamish, 1997). In a given alliance, the resource-
rich partner will be relatively unaffected by the
threat of exclusion because it is more capable
of selecting another partner (Bae and Gargiulo,
2004). A foreign partner and a local partner mutu-
ally depend on each other but for different pur-
poses. The foreign partner often depends on the
local partner to acquire country-specific knowl-
edge, whereas the local partner depends on the for-
eign partner to obtain technology-based knowledge
(Inkpen and Beamish, 1997; Yan and Gray, 1994).
The idiosyncratic incentives have different impacts
on alliance survival. Inkpen and Beamish (1997:
180) argued that ‘the acquisition of technology-
based knowledge by the local partner, although
possible, is less likely to be a factor in creating
instability than is the foreign partner’s acquisition
of [host country] knowledge.’
However, there is another way to manage the
mutual partner dependence: repeated partnerships.
In studying the selection of alliance partners, Beck-
man et al. (2004) identified two categories of
repeated partnerships in the alliance literature: a
firm may form additional alliances (1) with dif-
ferent partners by forming new ties or (2) with
preexisting partners through repeated ties. This cat-
egorization is critical to our study. Whereas new
ties provide additional ways to obtain compara-
ble resources that make an existing partner substi-
tutable, repeated partnerships reinforce the mutual
dependence of the partners.
As the focus of resource dependence theory tra-
ditionally has been ‘on minimizing interorganiza-
tional dependencies and preserving the organiza-
tion’s autonomy’ (Gray and Wood 1991: 7), few
studies have investigated the effect of enhanced
mutual partner dependence on the survival of
alliances in the resource dependence literature. In
Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
234 J. Xia
the alliance literature, however, various studies
have shown that firms may engage in repeated
ties (Gulati, 1995; Beckman et al., 2004; Podolny,
1994), repeated exchange relationships (Broschak,
2004), moderating relationships (Elg, 2000), or tie
multiplexity (Kim, Oh, and Swaminathan, 2006;
Park and Russo, 1996), which are all potential
forces to enhance the existing mutual partner
dependence. Hence, one of our purposes is to
contrast the influences of partner substitutability
and repeated partnership on cross-border alliance
survival.
An integrative perspective
Previous theoretical approaches on managing envi-
ronmental dependence and on managing partner
dependence through alliances have evolved almost
completely independently of each other. One pos-
sible explanation is that most studies stemming
from the resource dependence discussion of con-
straint absorption activities were at the indus-
try level of analysis (Casciaro and Piskorski,
2005; Finkelstein, 1997; Pfeffer, 1972; Pfeffer and
Nowak, 1976). One theme that cuts across the
empirical studies at the industry level of analy-
sis is the difficulty of conceptualizing and analyz-
ing the dynamic change in partner dependencies
simultaneously. Hence, we do not replicate the
industry-level approach because our study focuses
on alliance survival, not formation. Instead, our
approach is at the firm level of analysis in an effort
to incorporate and integrate the two theoretical
approaches (environment and partner dependen-
cies). Finkelstein (1997: 791) noted that resource
dependence theory is about firms’ dependence
on their environments; organizational activities
‘hence, should ideally be studied at the firm
level of analysis.’ Palmer et al. (1995) empirically
demonstrated that the resource dependence argu-
ment can be extended to the firm level of analysis.
In the resource dependence and cross-border
alliance literatures, although previous studies have
raised the issue of environmental and partner
dependencies, the survival of alliances has not
been simultaneously and jointly examined in global
settings. Hence, another purpose of this study
is to provide a more systematic investigation
of how alliance survival responds to the bal-
ance between environmental and partner depen-
dencies. Accordingly, we develop hypotheses to
examine how mutual trade dependence, partner
Copyright  2010 John Wiley & Sons, Ltd.
substitutability, and repeated partnership indepen-
dently and interactively affect the survival of cross-
border alliances.
HYPOTHESES
Mutual trade dependence
Resource dependence theorists (Pfeffer and Salan-
cik, 1978) argue that in order to survive, firms
depend on resource exchanges (or trade) with mul-
tiple environmental actors such as suppliers, buy-
ers, or competitors who control critical resources.
In an era of global market interdependence, multi-
nationals depend not only on other firms in the
home country but also increasingly on other firms
in foreign countries for raw materials, intermediate
products, or downstream markets. As noted, previ-
ous studies on constraint absorption are restricted
to single country settings. It is important to intro-
duce new constructs of mutual dependence to
explain the various constraint absorption activities
in global settings. Following Pfeffer and Nowak
(1976) and Casciaro and Piskorski (2005), we first
define the trade dependence of country A on coun-
try B as A’s total exports to and imports from B,
and then we define the mutual trade dependence as
the sum of the dependencies of A upon B and B
upon A. Given this definition, mutual trade depen-
dence constitutes a unique type of environmental
dependence (Pfeffer and Salancik, 1978), which
represents an international extension of mutual
dependence (Casciaro and Piskorski, 2005; Gulati
and Sytch, 2007) resulting from bilateral trade.
Mutual trade dependence is likely to push firms
out of the home country to absorb constraints
through foreign direct investment (FDI) in various
forms. FDI activities can open up a new marketing
and distribution channel or transfer production to
a new location that facilitates imports and exports
(Feinberg and Gupta, 2009; Grosse and Trevino,
1996). In the resource dependence perspective,
cross-border alliances, as an FDI mode, provide a
noteworthy vehicle for multinationals to absorb the
constraints associated with the flow of resources
between countries. Pfeffer and Nowak (1976: 403)
argued that a given firm in environment A does
not have to form a joint venture with a given
other firm in environment B with which it has a
major proportion of its transactions, but, rather, it
is more likely to form a joint venture with any
Strat. Mgmt. J., 32: 229–253 (2011)
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 Mutual Dependence and Alliance Survival
firm in environment B to reduce the level of the
environmental dependence.
Although partner choice is voluntary, once a
cross-border alliance is formed, its survival may
respond to the level of mutual trade dependence
between countries for three reasons. First, no
firm can be self-sufficient. Maintaining long-term
interorganizational relationships can ensure the
continued flow of resources if the dependence on
the environment is strategically important (Pfef-
fer and Nowak, 1976; Pfeffer and Salancik, 1978).
Under the pressure of high levels of mutual trade
dependence, maintaining a relatively long-lived
alliance with the local firm can be attractive for the
multinational firm to access raw materials or inter-
mediate products used as inputs and end markets
for outputs in the host country (Buchanan, 1992;
Grosse and Trevino, 1996). Local partners usually
possess some resources such as customers, chan-
nel controls, key supply sources, and relationships
with regulators ‘that cannot easily be replicated in
the short term’ (Adarkar et al., 1997: 130). Given
that dependence is essentially mutual and recip-
rocal (Casciaro and Piskorski, 2005), alliance sur-
vival can be motivated, to some extent, to stabilize
the flow of resources not only for the foreign part-
ner but also for the local partner. For example, a
long-lived alliance may help ensure that the local
partner will sell its products abroad through the
foreign partner’s internal and external distribution
networks.
Second, when the level of mutual dependence
is high, multinationals may rely on cross-border
alliances in foreign countries to a nontrivial degree.
Delios and Henisz (2000) noted that multination-
als tend to make the host country unit dependent
on the home country parent for intermediate prod-
ucts or downstream markets. By cultivating long-
lived partnerships with local firms, a multinational
firm may secure the flow of resources among geo-
graphically dispersed but mutually dependent units
within its internal and external networks, including
its portfolios of alliances, company divisions, and
wholly owned subsidiaries. As revealed by Fein-
berg and Gupta (2009), to create an end product,
multinationals may internalize international trade
through various FDI forms in different countries to
sell goods and services that consist of intermedi-
ate components between the home and host coun-
try units to immunize themselves against resource
flow uncertainties in the host country.
Copyright  2010 John Wiley & Sons, Ltd.
235
Finally, the level of mutual trade dependence
between a firm’s home and host countries also
reflects the strategic importance of the resource
dependent environment. A high level of mutual
trade dependence is likely to stimulate other firms,
especially competitors, to take actions in the host
country to control the resource flow (sourcing,
production, and distribution) channels. In an effort
to exclude rivals, multinationals cultivating long-
lived alliances with local partners who control
limited but critical resources can gain more market
power through the erection of entry barriers to
block or restrict the entry of competitors (Barringer
and Harrison, 2000; Child and Faulkner, 1998; Li,
Karakowsky, and Lam, 2002). In this sense, a long-
lived alliance may reduce the partners’ dependence
on others and increase the dependence of others
on them in a resource dependent environment.
Therefore, alliance survival is likely to respond to
a high level of mutual trade dependence between
countries.
Hypothesis 1: The mutual trade dependence
between a firm’s home and host countries is pos-
itively associated with the survival of its cross-
border alliances formed in the host country.
Partner substitutability
Finkelstein (1997) argued that if a constraint
absorption activity (merger and acquisition) adop-
ted by a firm is successful, its dependence on a
given industry can be attenuated because of the
saturation effect. In contrast, if a firm fails in the
expectation of reducing uncertainty in the industry,
the constraint absorption activity can be seen as
less valuable. In either case, the strength and incen-
tive of the environmental interdependence effect
on additional adoption of the same strategy in the
same industry will decline over time. However,
Finkelstein’s (1997) empirical results rejected the
time-bounded hypothesis.
One possible explanation is that a firm that
repeatedly uses the same constraint absorption
activity in the same destination industry can be
motivated by other reasons. For example, schol-
ars using a strategic momentum perspective have
argued that firms tend to additionally adopt a
given interorganizational strategy (M&A) in simi-
lar situations due to established organizational rou-
tines, momentum, or inertia (Amburgey and Miner,
1992). Hoffmann (2007) argued that although
Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
236 J. Xia
redundant partnerships in a firm’s alliance port-
folio may reduce its efficiency, they may also
reduce its dependency on individual partners. From
a resource dependence perspective, we argue that a
firm that engages in subsequent constraint absorp-
tion activities in the same industry with different
firms may simultaneously manage both environ-
mental and partner uncertainties and dependencies.
As discussed earlier, relying on multiple sources
for compatible resources that can substitute for
each other may reduce a firm’s dependence on
any given partner. A straightforward application
of Emerson’s (1962: 32) exchange theory to the
partner dependence argument suggests that when a
firm additionally engages in alliance and/or acqui-
sition activities in the same industry after an
alliance is established, the firm will proportion-
ally reduce its dependence on the focal alliance
partner. Our general proposition is that partner sub-
stitutability (embodied in additional alliance and
acquisition activities) will reduce the likelihood of
alliance survival. The flip side is that, to the extent
that additional sources of comparable resources are
not in place, shifts in partner dependence may not
easily take place as firms need to secure a stable
flow of resources, making termination less likely.
Additional alliance activities
Previous studies have focused on shifts in power
between partners due to competitive learning
(Hamel, 1991; Parkhe, 1993) to explain alliance
survival. Drawing on the obsolescing bargain and
learning perspectives, Yan and Gray (1994) argued
that a foreign partner’s relative bargaining power
will erode over time as the local partner may
internalize its skills quickly. However, Inkpen and
Beamish (1997) argued that the foreign partner
may also internalize its local partner’s knowledge
as rapidly as possible, leading to shifts in its bar-
gaining power. When competitive learning results
in gaining more power relative to the other, the
stronger partner is likely to threaten to walk away
from the existing partnership, reducing the like-
lihood of alliance survival (Parkhe, 1993; Yan,
1998).
Since relative power can also derive from a
firm’s availability of alternatives outside the exist-
ing partnership (Emerson, 1962), we use insights
from the alliance portfolio perspective (Gulati,
1998; Hoffmann, 2007; Parise and Casher, 2003)
to explain alliance survival in terms of the
Copyright  2010 John Wiley & Sons, Ltd.
post-formation dynamics of partner dependence. In
this perspective, one way for a firm to replenish its
power is to form additional alliances in the same
industry. As Lavie (2007: 1195) noted, ‘when the
firm allies with multiple partners in the same indus-
try, the competition among these partners increases
their dependence on their alliances with the focal
firm.’ This view has important implications for
alliance survival given that competitive alliances
in a firm’s portfolio can enhance its power derived
from the reduced dependence on any given part-
ner. Whereas previous studies on alliance portfo-
lios have primarily focused on firm performance
or value creation (Anand and Khanna, 2000; Bae
and Gargiulo, 2004; Lavie, 2007; Stuart, 2000), our
study examines alliance survival as another impor-
tant outcome of alliance portfolios.
Since market rules allow for polygamous ex-
change relationships (Baker et al., 1998; Broschak,
2004), a firm can engage in multiple additional
alliances to manage its environmental and part-
ner dependencies. It stands to reason that once an
alliance is established, its likelihood of survival
will be low if a partner subsequently adds com-
peting alliances to its portfolio. For example, once
alliance A is formed by a foreign partner and a
local partner in a given country, the additional for-
mation of alliances B (a set of alliances) by the
foreign partner with other firms in the same indus-
try increases the foreign partner’s power because it
has proportionally reduced its dependence on the
local partner in A. Since multinationals are able to
engage in additional alliance activities in many dif-
ferent countries, alliances B and alliance A are not
necessarily located in the same country. In other
words, the foreign partner can form B in the home
country, the host country, or a third country, but
in the same industry as A (Lavie and Miller, 2008;
Parkhe, 1993; Reuer and Ragozzino, 2006).
As additional alliances enable the foreign partner
to achieve relatively more autonomy and freedom,
this move can substantially reduce its dependence
on any given partner and enhance its relative power
in the focal alliance. An increased number of com-
petitive alliances in the foreign partner’s portfolio
allow it to minimize its dependence on the local
partner in A by switching its dependence to B.
As a consequence, the liberating relationship (Elg,
2000) with other partners in B has the potential to
become a significant disruptive force, making the
local partner in A substitutable. Thus, more addi-
tional alliances are formed by the foreign partner in
Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
 Mutual Dependence and Alliance Survival
the same industry, regardless of their geographic
locations, making the local partner more substi-
tutable and reducing the likelihood of survival of
the alliance in question.
Hypothesis 2: When a cross-border alliance
is formed between a foreign firm and a local
firm, additional alliance activities by the for-
eign firm with other firms in the same industry
are negatively associated with the survival of the
alliance.
Additional acquisition activities
As noted, alternatives reduce dependence on one
source of resources in comparable situations. In
addition to alliance activities, firms may engage in
alternative constraint absorption activities such as
M&As to manage their environmental and partner
dependencies. Firms can absorb constraints par-
tially through alliances and completely through
acquisitions to achieve the objective of dependence
absorption (Pfeffer and Salancik, 1978). Beginning
with Pfeffer’s (1972) seminal study, the resource
dependence literature has amply documented that
M&As are one of the most important constraint
absorption activities in managing environmental
dependence (Burt, 1983; Casciaro and Piskorski,
2005; Finkelstein, 1997; Pfeffer, 1972). Although
a few empirical studies have investigated both
alliance and acquisition activities simultaneously,
scholars have repeatedly noted that firms can use
both types of activities alternatively to reduce the
level of environmental dependency (Casciaro and
Piskorski, 2005; Child and Faulkner, 1998; Finkel-
stein, 1997; Pfeffer and Nowak, 1976; Pfeffer and
Salancik, 1978).
We argue that firms may also use acquisitions
to reduce partner dependency. Unlike alliances,
acquisitions can be initiated to internalize a busi-
ness to reduce or avoid uncertainties associated
with negotiating, monitoring, and enforcing the
resource exchange (Casciaro and Piskorski, 2005;
Shimizu et al., 2004). Following the partner substi-
tutability argument, if a firm is able to replace the
role of a given partner by acquiring other sources
of comparable resources, the firm can increase its
power (thereby reducing its dependence) relative to
any given partner. Therefore, once an alliance is
formed, additional acquisitions in the same indus-
try may reduce or erase a firm’s dependence on an
Copyright  2010 John Wiley & Sons, Ltd.
237
existing partner, regardless of the geographic loca-
tion of the acquired firm. As individual alliances
are embedded in a firm’s alliance portfolio, addi-
tional acquisitions allow the firm to restructure its
portfolio by using the acquired units to replace
an existing alliance. As a consequence, additional
acquisitions in the same industry make the focal
partner more substitutable and thus reduce the like-
lihood of survival of the alliance.
Hypothesis 3: When a cross-border alliance is
formed between a foreign firm and a local firm,
additional acquisition activities by the foreign
firm in the same industry are negatively associ-
ated with the survival of the alliance.
Repeated partnership
Firms may seek another alternative solution, such
as repeated partnerships, to enhance rather than to
diminish mutual partner dependence. Drawing on
a trust-based perspective (Gulati, 1995; Ring and
Van de Ven, 1994), scholars argued that repeated
alliances, as an indication of the partner’s trust
acting as a deterrent against opportunistic behav-
ior, are likely to increase the likelihood of sur-
vival (Inkpen and Beamish, 1997; Reuer and Koza,
2000). However, research reveals mixed findings.
Some studies have reported positive impacts sup-
porting the argument (Park and Ungsen, 1997),
whereas others have found no significant effects
(Dussauge, Garrette, and Mitchell, 2000; Park and
Russo, 1996). One possible reason is that these
studies have used different ways to conceptual-
ize and operationalize the construct of repeated
alliances.
From a resource dependence perspective, we
argue that a higher level of mutual dependence
between partners is likely to facilitate their repeated
partnerships with more resource exchanges. Re-
peated partnerships, in turn, indicate enhanced
mutual partner dependence, increasing the likeli-
hood of alliance survival. Das and Teng (2000)
argued that the inherent instabilities of alliances
usually result from internal tensions and uncer-
tainties between partners associated with differ-
ent strategic goals. Different needs in managing
the flow of resources are likely to breed tensions,
which reduce the likelihood of alliance survival.
In contrast, if mutual dependence is enhanced by
multiple partnerships, the partners will be more
deeply embedded in multiple resource exchanges
Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
238 J. Xia
and seek alliance stability and survival (Das and
Teng, 2002; Inkpen and Beamish, 1997) by reduc-
ing the internal tensions and inter-partner conflicts
through better balancing each other’s resources and
strategic needs.
Moreover, Elg (2000: 170) has conceptualized a
‘moderating relationship’ between a foreign part-
ner and a local partner. From a foreign partner’s
perspective, if its collaboration with a local partner
can be potentially undermined by other firms (e.g.,
other foreign competitors), the foreign partner may
adopt a defensive strategy through repeated part-
nerships to enhance the mutual dependence with
the local partner, thus moderating the threat of
exclusion. Repeated partnerships, which are nur-
tured by multiple resource commitments, may also
discourage the local partner in question from jeop-
ardizing its multiple exchange relationships with
the foreign partner and hence will make the foreign
partner less substitutable or replaceable (Bae and
Gargiulo, 2004; Elg, 2000; Kogut, 1989). These
arguments suggest that repeated partnerships are
stabilizing forces. When a foreign partner and a
local partner engage in more repeated partnerships,
their mutual dependence is more likely enhanced.
The enhanced mutual dependence, in turn, is less
likely to reduce the likelihood of survival of the
alliance in question.
Hypothesis 4: When a cross-border alliance is
formed between a foreign firm and a local firm,
the repeated partnerships formed between them
are positively associated with the survival of the
alliance.
Moderating effects of mutual trade dependence
So far, we have looked at the independent effects
of environmental and partner dependencies on
alliance survival without worrying about their
interactive effects. We further argue that a high
level of mutual trade dependence may reduce
the negative impact of partner substitutability on
alliance survival (per Hypotheses 2 and 3). Multi-
nationals usually operate in many countries, but
disproportionately depend on other firms in dif-
ferent countries to ensure the flow of resources.
When an existing alliance is substitutable due to
the saturation effect (Finkelstein, 1997; Hoffmann,
2007), constraining interdependency (Parise and
Casher, 2003), or partner substitutability (Bae and
Gargiulo, 2004; Elg, 2000), the foreign partner
Copyright  2010 John Wiley & Sons, Ltd.
has to evaluate whether abandoning the exist-
ing alliance in a given country will offset the
expected benefits from reducing the environmental
dependence. Therefore, alliance survival may also
respond to the balance between environmental and
partner dependencies.
The balance is more likely to be weighted in
favor of managing environmental dependence over
managing partner dependence, because what mat-
ters most is the stability of the exchange and
flow of resources, which has been viewed as the
primary force driving the adoption or the aban-
donment of a given constraint absorption activity
(Finkelstein, 1997; Pfeffer and Salancik, 1978).
Moreover, replacing current partners may be an
option only if the benefits offset the costs of exit-
ing an old partnership under comparable conditions
(Bae and Gargiulo, 2004). Mutual trade depen-
dence conveys what is more strategically important
in country selections and where to maintain estab-
lished alliances to stabilize the flow of resources.
The strategic importance of managing environmen-
tal dependency may negate the destabilizing influ-
ences of the foreign partner’s additional alliance
and acquisition activities in all other places. As a
result, the foreign partner is more likely to exit
from an alliance in a country where it has less
resource dependence than from an alliance in a
country where it has greater resource dependence.
Hypothesis 5: The negative relationship between
the additional alliance activities of the foreign
firm and the survival of the cross-border alliance
will be weakened by the mutual trade depen-
dence between the foreign partner’s home and
host countries.
Hypothesis 6: The negative relationship between
the additional acquisition activities of the for-
eign firm and the survival of the cross-border
alliance will be weakened by the mutual trade
dependence between the foreign partner’s home
and host countries.
From our integrated perspective, we further
argue that mutual trade dependence may enhance
the positive effect of repeated partnerships on
alliance survival. On the one hand, environmental
dependence may not only drive firms to form a sin-
gle exchange relationship, but may also encourage
them to establish multiple simultaneous exchange
Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
 Mutual Dependence and Alliance Survival
relationships. Because of the fear of possible
failure or exclusion in managing environmental
dependence that is mutually important, the pres-
sure for mutual trade dependence may drive part-
ners toward multiple partnerships in anticipation of
a mutually reinforcing dependence. From a multi-
national firm’s perspective, for example, to mit-
igate potential switching and learning costs, the
foreign partner is likely to enhance the mutual
dependency with the local partner in a host country
in which it depends more heavily on other firms
for resource exchanges.
On the other hand, firms tend to repeat exchange
relationships in response to high levels of environ-
mental uncertainties since repeated alliances can
be more efficient to deal with external uncertain-
ties, as demonstrated by Beckman et al. (2004)
and Podolny (1994). Furthermore, the increased
number of multiple concurrent exchange relation-
ships reflects the partners’ strategies and capa-
bilities for managing environmental uncertainties
(Baker et al., 1998; Broschak, 2004) and their
mutually perceived importance of the environ-
mental dependence. Given these arguments, the
effect of repeated partnerships as stabilizing forces
of sustained dependence and mutual gains (per
Hypothesis 4) will be enhanced by a high level of
mutual trade dependence between two countries.
Hypothesis 7: The positive relationship between
repeated partnerships and the survival of a
cross-border alliance will be enhanced by the
mutual trade dependence between the foreign
partner’s home and host countries.
METHODS
Sample
Following the sampling procedure described by
Anand and Khanna (2000), Dussauge et al.,
(2000), Lavie (2007), Park and Ungson (1997),
and Park and Russo (1996), we first relied on
the Securities Data Corporation’s (SDC) Alliances
Database to generate a list of cross-border alliances
meeting our criteria and then conducted searches
for original articles in Factiva and Lexis-Nexis to
track the termination date and type (e.g., partner
buyout or dissolution) for each sampled alliance.
SDC collects information from public sources,
including newspapers, SEC filings, press releases,
Copyright  2010 John Wiley & Sons, Ltd.
239
trade publications, proprietary surveys, and law
firms (SDC, 1999). The initial sample comprised
all cross-border alliances in the database. How-
ever, SDC does not track all termination announce-
ments; therefore, its termination coverage is
incomplete. We took three steps to track the
alliance status. First, following our conceptualiza-
tions and the lead of previous studies on alliance
survival (Hennart and Zeng, 2002; Park and Ung-
son, 1997; Park and Russo, 1996; Parkhe, 1991),
we excluded alliances that had a specified dura-
tion, multiple-party alliances, and alliances formed
by partners based in countries where the trade
data were unavailable in the United Nations Com-
modity Trade (UN Comtrade) Statistics Database.
Unlike previous studies, we included alliances
formed in various host countries by multination-
als based in different home countries in an effort
to mitigate the single country-centered bias, as
suggested by Park and Ungson (1997) and Tsang
and Yip (2007). Second, given that most firms do
not announce alliance termination (Lavie, 2007;
Singh, 1997), we focused on alliances formed by
publicly traded firms since their alliance activi-
ties are more likely to be reported. We further
restricted our sample to equity alliances (i.e., joint
ventures) since non-equity alliances may affect
alliance survival differently due to their different
governance structures (Gulati, 1995; Kogut, 1988;
Park and Russo, 1996). We collected alliance data
from 1990 onward as SDC did not systematically
track alliance activities for the 1985–1989 period
(Anand and Khanna, 2000). We excluded cases in
which alliances were announced but not realized
(Sampson, 2007), and cases in which the termina-
tion could not be tracked in Factiva or Lexis-Nexis
because the alliance or firm name was not dis-
closed. Using these criteria, a list of 5,746 alliances
formed by 7,820 firms was obtained.
Finally, using the initial list of alliances, we
searched the alliance termination reports in press
releases using Factiva and Lexis-Nexis (searchable
full-text databases of newswires, newspapers, busi-
ness periodicals, and trade journals), which made
it possible to trace alliance termination in many
countries during our sample period (1990–2007).
We searched by alliance or partner name to identify
the termination date and termination type (Lavie,
2007; Park and Ungson, 1997; Singh, 1997). The
observation window was between 1990 and 2002
the period during which the alliances were formed
and we observed them through 2007, which is
Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
240 J. Xia
comparable to the work of Park and Ungson
(1997). In a sensitivity analysis, when alliances
formed in 2001 and 2002 were excluded, the
results were qualitatively the same.
This screening procedure produced a sample of
587 cross-border equity alliances, of which 234
(approximately 40 percent) were reported by the
SDC Alliances Database. Given the richness of the
news articles in Factiva and Lexis-Nexis (Anand
and Khanna, 2000; Lavie, 2007), we expect that
the collected sample provides reasonable coverage
of alliance terminations. When information on ter-
mination type was unavailable in these sources,
we complemented the data with Google searches,
company Web sites, SDC synopses (textual sum-
maries of the alliance), and SEC filings so as to
minimize loss in sample size. The 587 alliances
were formed in 49 host countries by 525 multi-
national corporations based in 41 home countries
(the Appendix reports summary statistics of these
alliances, broken down by countries).
Dependent variable and analytical technique
Using event history techniques, we split the time
between a formation date and a termination date
for each alliance into annual spells, resulting in
3,304 alliance-year observations. The event was
the termination of the alliance. The dependent
variable was a dichotomous variable, coded 1 if
the alliance was terminated in a given year t
and 0 otherwise. In estimating the hazard rate of
alliance termination, we used the stratified Cox
proportional hazards model (Cox, 1972), which
is a fixed-effect model that allows for a stratified
analysis to each multinational firm. The advantage
of the Cox model is that it does not rely on
assumptions about the form of the baseline hazard.
It also allows time-varying covariates. We let t be
the termination time. The survival of each alliance
is assumed to follow its own hazard function, ht (t),
expressed as:
hi (t) = h0 (t) exp(βX[t])
where h0 (t) is an unspecified baseline hazard func-
tion, X[t] is the vector of specified covariates at
time t, and β is the vector of coefficients associ-
ated with the covariates. The intercept is absorbed
in the baseline rate. We estimated the termina-
tion hazards utilizing the SAS PHREG procedure
with the STRATA statement for each multinational
Copyright  2010 John Wiley & Sons, Ltd.
firm (Allison, 1999). Alliance survival was inter-
preted by the hazard rate of alliance termination.
A positive coefficient indicates that the covariate
decreases the probability of the survival of the
alliance and a negative coefficient indicates that
the covariate increases the probability.
Independent variables
In line with established research on resource depen-
dence in terms of the relative magnitude of re-
source exchange (Casciaro and Piskorski, 2005;
Finkelstein, 1997; Pfeffer, 1972), we define mutual
trade dependence between two countries in terms
of their bilateral trade. We collected the bilat-
eral trade data from the UN Comtrade Database,
which is the most comprehensive trade database
available, containing imports and exports statis-
tics reported by statistical authorities in more than
100 countries. The trade data are standardized by
the UN Statistics Division for each country and
year. To operationalize the concept of mutual trade
dependence, we adopted a network-based mea-
sure, a proportion of resource exchange (Emer-
son, 1962; Pfeffer, 1972) weighted by concen-
tration ratio index, provided by previous studies
(Burt, 1983; Casciaro and Piskorski, 2005). We
first defined the trade dependence of firms in coun-
try i on other firms in country j as T Dij :
T Dij = pij2 Cpj + sij2 Csj
where pij is the proportion of the total dollar value
of goods imported by country i from country j;
sij is the proportion of the total dollar value of
goods exported from country i to country j. Cpj
and Csj are the import and export concentration
ratios of the host country j, measured by Herfind-
ahl indices, respectively. We measured the import
concentration ratio (the sum of the squared import
shares held by all other countries in the host coun-
try) and the export concentration ratio (the sum of
the squared export shares held by all other coun-
tries in the host country) separately because each
captures different types of resource exchange. We
then defined trade dependence of firms in country
j on other firms in country i as T Dj i :
T Dj i = pj2i Cpi + sj2i Csi
where pj i is the proportion of the total dollar value
of goods imported by country j from country i;
Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
 Mutual Dependence and Alliance Survival
sj i is the proportion of the total dollar value of
goods exported from country j to country i. Cpi
and Csi are the import and export concentration
ratios of country i, also measured by Herfindahl
indices, respectively. Finally, we defined mutual
trade dependence between a firm’s home country
and host country as:
MT D = T Dij + T Dj i
We note that mutual trade dependence was
a time-varying variable for each home country-
host country-year segment. Following Casciaro
and Piskorski (2005), the variable was normalized
by subtracting the mean and then dividing by the
sample standard deviation.
Given that our sample involved firms and alli-
ances in different countries and industries, a com-
mon industry coding system is critical to ensure
internal consistency. Anand and Khanna (2000:
301) found that SDC provides accurate information
on standard industrial classification (SIC) codes.
Meanwhile, SDC uses the common industry cod-
ing procedure between its alliances database and its
M&A database (SDC, 1999). Previous studies have
used the SDC databases to track a firm’s alliance
experience (Tong, Reuer, and Peng, 2008) and
acquisition experience (Haleblian and Finkelstein,
1999). Similarly, we searched for firms’ addi-
tional alliance and acquisition activities in the SDC
Alliances Database and the SDC M&As Database,
respectively. The additional alliance activities of
the foreign partner were measured by the total
number of alliances formed by the foreign firm
with other firms in the same industry after the
focal alliance had been established in a given host
country, regardless of the geographical locations
where the additional alliances were formed. Con-
sistently, the additional acquisition activity of the
foreign partner was measured by the total number
of acquisitions completed by the foreign firm in
the same industry after it had established a cross-
border alliance in a given host country, regard-
less of the geographical locations where the target
firms or businesses were acquired. Following Cas-
ciaro and Piskorski (2005), we excluded minority
acquisitions and corporate restructuring activities,
such as self-tenders, repurchases, and acquisitions
among a firm’s business units, from the analysis.
As noted, previous studies use different mea-
sures of repeated alliances or ties through dummy
variables and provide mixed findings (Park and
Copyright  2010 John Wiley & Sons, Ltd.
241
Ungsen, 1997; Dussauge et al., 2000). According
to our conceptualization, we define an alterna-
tive measure of repeated partnership: the number
of other alliances established between the same
foreign and local partners for each alliance-year
observation before the focal alliance was termi-
nated, regardless of their industries or geographical
locations. To construct the variable, we searched
extensively in the SDC Alliances Database for all
repeated alliances formed by the sampled firms.
This approach is consistent with the coding scheme
for repeated ties as described by Gulati (1995). All
three count variables above were logarithmically
transformed to accommodate their skewed distri-
butions.
Control variables
We included several variables in the analysis
to control for alternative explanations. Various
national differences such as cultural, geographical,
institutional, and economic distances may affect
alliance survival (Barkema and Vermeulen, 1997;
Parkhe, 1991). We controlled for these variables.
Cultural distance has been viewed as negatively
related to alliance survival, but the empirical evi-
dence has been mixed (Hennart and Zeng, 2002;
Park and Ungson, 1997). To be consistent with past
research, we adopted the composite index intro-
duced by Kogut and Singh (1988) to control for the
cultural distance. Geographic distance was mea-
sured as the logarithm of the number of kilometers
between the capital cities of the two partners’ home
countries. The two variables may not necessarily
be highly correlated.
We also controlled for time-varying distance
measures. Institutional distance, which increases
the level of uncertainty, is likely to affect alliance
survival as multinationals may rely on local part-
ners to deal with a higher level of uncertainty.
Following Dow and Larimo (2009), we used four
items to measure the institutional distance between
countries. The first two items are the democ-
racy and autocracy indicators collected from the
POLITY IV Database for each country and year.
The third and fourth items are the indicators of
political rights and civil liberties published by
Freedom House for each country and year. We
computed the distance for each item as the absolute
value of the difference between the two partners’
home countries. Since they are highly correlated,
we used factor analysis to create a single composite
Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
242 J. Xia
measure. The four distance measures were loaded
on one common factor with eigenvalues greater
than 3.6, which together accounted for 90 percent
of the variance in the data. For the same reason,
we controlled the relative country risk, measured
as the ratio of a foreign firm’s host country risk to
its home country risk. We collected the risk data
from the Institutional Investor magazine. Its Coun-
try Credit Ratings were reverse-scored so that 100
represented the highest country risk and 0 repre-
sented the lowest.
Recently, Tsang and Yip (2007) found that eco-
nomic distance reduced the hazard rates of FDIs
because economic distance encourages firms to
explore or exploit in the host country. We con-
trolled for economic distance, measured as the
absolute logarithmic difference in the gross domes-
tic product (GDP) per capita between the two part-
ners’ home countries. We also included FDI inflow
and FDI inflow as a percentage of GDP as proxies
for the openness to the presence of foreign busi-
ness in the host country. We controlled for the host
country’s GDP (logged) as a measure of its eco-
nomic size. We obtained the FDI and GDP data
from the World Bank’s World Development Indi-
cators Database.
A firm’s prior experience in the host country
may affect the likelihood of survival of its ven-
tures due to experiential learning (Barkema and
Vermeulen, 1997). We controlled for the host coun-
try experience by using the logged number of years
of a firm’s presence in the host country before
the establishment of the focal alliance. Local firms
may also engage in additional alliance and acquisi-
tion activities to increase their relative power. We
thus measured the additional alliance and acquisi-
tion activities of the local partner as we measured
the activities of the foreign partner, respectively. A
shift in the balance of power between the partners
may also lead to renegotiation (Blodgett, 1992;
Yan and Zeng, 1999) and successful renegotia-
tion may reduce the termination rate (Dussauge
et al., 2000). Hence, we controlled for renegotia-
tion, coded 1 for the year an alliance was renego-
tiated after its formation to the year of its termi-
nation, and 0 otherwise. We obtained measures for
these controls from the SDC Alliances Database.
Partner dependence is essentially reciprocal. An
alliance will be less stable when its partners con-
tribute technological resources inequitably to the
collaboration due to asymmetric dependency (Das
and Teng, 2002; Park and Ungson, 1997; Porter
Copyright  2010 John Wiley & Sons, Ltd.
and Fuller, 1986). In contrast, if two firms cre-
ate an alliance to exploit opportunities by trans-
ferring technologies to each other simultaneously,
the bilateral transfer of technologies may enhance
their mutual dependence, increasing the likelihood
of survival. We thus created a dummy variable
to control for cross-technology transfer. Learning
asymmetry is more likely to occur in an unrelated
alliance than in a related alliance because one part-
ner is more likely to acquire the other’s resources
in an unrelated alliance (Dussauge et al., 2000).
We controlled for business relatedness, coded 0 if
the two partners were in unrelated industries, 1 if
they were in the same one-digit SIC industry, 2 if
they were in the same two-digit SIC industry, 3 if
they were in the same three-digit SIC industry, and
4 if they were in the same four-digit SIC industry.
The ownership structure reflects resource control in
an alliance, which has been studied as a determi-
nant of alliance survival (Dhanaraj and Beamish,
2004; Park and Russo, 1996). We controlled for
foreign ownership by using the percentage of for-
eign equity in the alliance to capture the ownership
inequity.
Scholars have argued that termination through
acquisition versus dissolution reflects desirable
versus less desirable events, which may affect
alliance survival rates (Kogut, 1989; Hennart and
Zeng, 2002; Park and Russo, 1996; Park and Ung-
son, 1997). Since SDC does not track the termi-
nation type, we individually coded the termination
event variable by hand using Factiva and Lexis-
Nexis. Consistent with the coding scheme of pre-
vious studies (Kogut, 1989; Hennart and Zeng,
2002), we controlled for dissolution, coded 1 if an
alliance was terminated through a sale to a third
party or through liquidation, and 0 if an alliance
was terminated through acquisition by one of the
partners.
Finally, we fixed the alliance industry, local
partner’s industry, and year effects. Alliance ter-
mination rates vary systematically across indus-
tries (Harrigan, 1988) and the industry effects
may reflect unobserved size differences and uncer-
tainties (Anand and Khanna, 2000). Following
the procedure described by Amburgey and Miner
(1992: 340), we constructed two sets of indus-
try dummy variables based on the SIC codes of
the alliance and the local partner, respectively.
To guard against unobserved heterogeneity across
time, we included a set of year dummy variables
throughout the observation window. Because of
Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
 Mutual Dependence and Alliance Survival
space limitations, the fixed effects are not shown
in the tables, but these dummy variables were
included in all analyses.
RESULTS
Table 1 provides means, standard deviations, and
correlations. Variance inflation factor (VIF) val-
ues for each predictor variable were below 2.82,
suggesting that multicolinearity was not a prob-
lem in the regression analysis. To eliminate col-
inearity between the main effects and constituent
interaction effects in the model, we mean-centered
the four independent variables prior to estimat-
ing the interaction effects (Jaccard, Turrisi, and
Wan, 1990). However, for ease of interpretation,
Table 1 reports their untransformed measures. The
VIF analysis shows that none of the VIFs was
greater than 2.83 when all interaction terms were
included, also indicating a low probability of mul-
ticolinearity. We added hypothesized interactions
individually to examine the potential instability in
the coefficients.
Table 2 shows the results of the fixed Cox pro-
portional hazards models predicting the survival
of cross-border alliances. Model 1 includes only
the control variables to provide a baseline; Model
2 adds the main effect variables; Models 3, 4,
and 5 add the interaction terms separately, and
Model 6 (the full model) presents the saturated
model including all interactions. We interpreted
our results based on the full model since multicol-
inearity was not a problem. The likelihood-ratio
test shows that the addition of the independent
variables and interaction terms provides a much
better fit to the data than the baseline model of
controls.
Hypothesis 1 predicts that the survival of cross-
border alliances responds to a high level of mutual
trade dependence between a firm’s home and host
countries. Model 6 shows that the coefficient for
mutual trade dependence was negative and signifi-
cant (β = −1.46, p < 0.01). Hypothesis 1 was sup-
ported. Hypotheses 2 and 3 predict that additional
alliance and acquisition activities of the foreign
partner reduce the likelihood of alliance survival,
respectively. Model 6 shows that the coefficients
for additional alliance activities (β = 3.28, p <
0.001) and additional acquisition activities (β =
1.90, p < 0.001) were positive and highly signif-
icant. Thus, Hypotheses 3 and 4 were supported.
Copyright  2010 John Wiley & Sons, Ltd.
243
Hypothesis 4 predicts that a repeated partnership
between the same partners increases the survival
probability of the alliance in question. Model 6
illustrates that the impact of repeated partnerships
was negative and highly significant (β = −3.86, p
< 0.001). Hence, Hypothesis 4 was also supported.
Hypotheses 5 and 6 predict that mutual trade
dependence diminishes the negative (disruptive)
effects of additional alliance and acquisition activ-
ities by the foreign partner on the survival of the
earlier cross-border alliance, respectively. Model 6
shows that the moderating effect of mutual trade
dependence on additional alliance activities was
negative and significant (β = −1.54, p < 0.001).
To plot this interaction, we defined high and low
on a variable as one standard deviation above or
below the mean. As can be seen in Figure 1, both
lines have positive slopes, but the solid line is
steeper and the gap between the two lines becomes
wider, suggesting that when mutual trade depen-
dence is low (illustrated by the solid line), the
hazard rate of alliance termination tends to be
higher as a result of the foreign partner’s addi-
tional alliance activities; but when mutual trade
dependence is high (illustrated by the dotted line),
the hazard rate tends to be lower (becomes flat).
Hypothesis 5 was supported.
Model 6 shows that the moderating effect of
mutual trade dependence on additional acquisition
activities was insignificant (β = 1.00, n.s.). How-
ever, Model 4 shows that the interaction term was
negative and significant (β = −0.65, p < 0.05).
In a sensitivity analysis, we found that controlling
for the interaction between mutual trade depen-
dence and additional alliance activities is the pri-
mary reason. Thus, mutual trade dependence is
relatively more influential if the foreign firm sub-
sequently engages in other alliances activities in
the same industry. In contrast, if the firm tends
to internalize the business through acquisitions,
the moderating effect of mutual trade dependence
was relatively weakened in the full model. As can
be seen in Figure 2, which is based on Model
4, the dashed line is consistently below the solid
line, suggesting that mutual trade dependence sub-
stantially reduced the termination hazard. When
mutual trade dependence is low, the hazard rate
of termination tends to be higher as a result of
the foreign partner’s additional acquisition activi-
ties. In contrast, when mutual trade dependence is
high, the hazard rate tends to be lower, which is
consistent with Hypotheses 6.
Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
 Copyright  2010 John Wiley & Sons, Ltd.

244
Table 1. Descriptive statistics and correlations (N = 3,304)

J. Xia
Variable Mean S.d. 1 2 3 4 5 6 7 8 9 10

1 Mutual trade dependence 0.01 (1.04)

2 Additional alliance activities of the foreign partner 0.65 (0.89) −0.03
3 Additional acquisition activities of the foreign partner 0.44 (0.70) −0.03 0.45
4 Repeated partnership 0.18 (0.40) −0.01 0.33 0.20
5 Cultural distance 2.30 (1.55) −0.22 0.11 0.14 0.08
6 Geographical distance 8.59 (0.99) −0.39 0.08 0.06 −0.02 0.21
7 Institutional distance 0.05 (1.04) −0.12 0.06 0.02 −0.01 0.42 0.18
8 Economic distance 1.36 (1.52) −0.14 0.05 0.04 −0.05 0.25 0.22 0.55
9 Relative country risk 2.72 (2.41) −0.09 0.11 0.20 −0.05 0.26 0.24 0.36 0.70
10 FDI inflow in the host country 0.03 (0.05) 0.12 −0.02 −0.10 0.00 −0.19 −0.05 −0.05 −0.21 −0.28
11 FDI inflow as a percentage of GDP 2.45 (3.55) −0.05 −0.08 −0.01 −0.04 0.11 −0.15 0.20 −0.05 −0.02 0.15
12 Economic size (GDP) of the host country 27.54 (1.50) 0.16 0.00 −0.08 0.06 −0.26 0.06 −0.25 −0.41 −0.48 0.49
13 Host country experience 0.35 (0.79) 0.10 0.23 0.11 0.26 0.03 0.03 −0.01 −0.05 −0.10 0.18
14 Additional alliance activities of the local partner 0.41 (0.72) 0.01 0.38 0.18 0.42 0.07 0.07 −0.10 −0.14 −0.14 0.13
15 Additional acquisition activities of the local partner 0.18 (0.46) −0.04 0.18 0.09 0.12 −0.08 0.02 −0.14 −0.17 −0.15 0.29
16 Cross-technological transfer 0.07 (0.26) 0.01 0.06 0.04 0.04 0.01 0.03 −0.03 −0.08 −0.06 −0.05
17 Business relatedness 1.63 (1.60) −0.05 0.25 0.25 0.02 0.08 0.10 0.08 0.13 0.11 −0.06
18 Foreign ownership 0.49 (0.12) 0.01 0.04 0.05 −0.01 0.02 −0.03 0.04 0.08 0.08 0.01
19 Renegotiation 0.01 (0.11) −0.02 0.01 −0.02 0.03 0.01 0.01 0.00 −0.04 −0.03 0.06
20 Dissolution 0.36 (0.48) −0.03 0.01 −0.09 0.03 0.01 0.03 0.00 −0.10 −0.12 0.01
Variable Mean S.d. 11 12 13 14 15 16 17 18 19
12 Economic size (GDP) of the host country 27.54 (1.50) −0.36
13 Host country experience 0.35 (0.79) −0.08 0.24
14 Additional alliance activities of the local partner 0.41 (0.72) −0.08 0.22 0.24
15 Additional acquisition activities of the local partner 0.18 (0.46) 0.02 0.21 0.11 0.47
16 Cross-technological transfer 0.07 (0.26) −0.04 0.08 −0.02 0.09 −0.05
Strat. Mgmt. J., 32: 229–253 (2011)

17 Business relatedness 1.63 (1.60) −0.04 −0.08 0.00 0.07 0.06 −0.03
18 Foreign ownership 0.49 (0.12) −0.03 0.01 0.04 0.02 −0.02 −0.12 0.01
19 Renegotiation 0.01 (0.11) −0.01 0.03 0.01 0.00 −0.04 0.03 −0.03 −0.01
20 Dissolution 0.36 (0.48) −0.02 0.10 −0.01 0.03 −0.05 0.00 −0.04 −0.08 0.02
DOI: 10.1002/smj

Correlations with absolute value greater than or equal to 0.03 are significant at the 0.05 level.
 Mutual Dependence and Alliance Survival 245
Table 2. Results from fixed Cox proportional hazards regression (N = 3,304)

Variable Model 1 Model 2 Model 3

Cultural distance −1.51∗∗∗ (0.33) −0.71∗ (0.32) −0.33 (0.32)

Geographical distance 1.49∗ (0.63) −1.29† (0.70) −1.04 (0.71)
Institutional distance −0.16 (0.40) −1.26∗∗ (0.46) −1.51∗∗ (0.47)
Economic distance −0.52 (0.34) −1.16∗∗ (0.37) −1.42∗∗∗ (0.41)
Relative country risk −0.23 (0.18) −0.10 (0.18) −0.17 (0.19)
FDI inflow in the host country 3.91 (3.69) 4.78 (4.14) 6.20 (4.53)
FDI inflow as a percentage of GDP 0.02 (0.05) 0.02 (0.06) 0.01 (0.06)
Economic size (GDP) of the host −0.52 (0.40) −0.41 (0.45) −0.61 (0.44)
country
Host country experience 1.33∗∗ (0.42) 1.57∗∗∗ (0.39) 1.37∗∗ (0.42)
Additional alliance activities of the −0.17 (0.42) −0.40 (0.55) −1.12∗ (0.56)
local partner
Additional acquisition activities of −1.14∗ (0.51) −1.96∗∗∗ (0.52) −1.72∗∗ (0.55)
the local partner
Cross-technological transfer 2.19 (1.70) 2.14 (1.93) 1.06 (2.11)
Business relatedness 0.49 (0.32) 1.15∗∗ (0.35) 0.76∗ (0.36)
Foreign ownership −2.41 (2.09) −0.76 (2.13) −0.75 (2.24)
Renegotiation −0.02 (2.88) −0.02 (2.93) −0.02 (2.85)
Dissolution 2.82∗∗ (0.91) 2.65∗∗∗ (0.79) 1.76∗ (0.82)
Mutual trade dependence −2.06∗∗∗ (0.49) −1.20∗ (0.51)
Additional alliance activities of the 1.99∗∗∗ (0.59) 3.22∗∗∗ (0.68)
foreign partner
Additional acquisition activities of 1.50∗∗ (0.48) 1.75∗∗∗ (0.49)
the foreign partner
Repeated partnership −4.04∗∗∗ (0.82) −3.88∗∗∗ (0.86)
Mutual trade dependence × −1.06∗∗∗ (0.22)
additional alliance activities of the
foreign partner
Mutual trade dependence ×
additional acquisition activities of
the foreign partner
Mutual trade dependence × repeated
partnership
Fixed effect of joint venture industry Yes Yes Yes
Fixed effect of local firm industry Yes Yes Yes
Fixed year effect Yes Yes Yes
Log likelihood −235.67 −204.00 −192.46
χ 2 ratio test 63.35∗∗∗ 86.42∗∗∗

Standard errors are in parentheses.

† p < 0.10, ∗ p < 0.05, ∗∗ p < 0.01, ∗∗∗
p < 0.001.

Hypothesis 7 predicts that the stabilizing effect
of repeated partnerships on the survival of cross-
border alliances will be enhanced by mutual trade
dependence. Model 6 shows that the moderating
effect of mutual trade dependence on repeated part-
nership was insignificant (β = 1.30, n.s.). Thus,
Hypothesis 7 was not supported.
DISCUSSION AND CONCLUSION
This study was motivated by an effort to extend the
resource dependence perspective in order to enrich
Copyright  2010 John Wiley & Sons, Ltd.
our theoretical explanations of alliance survival in
a global setting. It explored the initial questions:
how do environmental and partner dependencies
independently and interactively affect the survival
of cross-border alliances, respectively? The rela-
tionships this study established between alliance
survival and resource dependence (mutual trade
dependence, partner substitutability, and repeated
partnership) contribute to realizing that resource
dependence theory provides a powerful explanation
of survival in the cross-border alliance literature.
The results of this study have some important
theoretical and empirical implications.
Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
246 J. Xia

Table 2. (Continued )

Variable Model 4 Model 5 Model 6

Cultural distance −0.61† (0.33) −0.86∗ (0.35) −0.36 (0.33)

Geographical distance −1.23† (0.70) −1.37∗ (0.69) −1.05 (0.73)
Institutional distance −1.32∗∗ (0.46) −1.11∗ (0.48) −1.53∗∗ (0.49)
Economic distance −1.19∗∗ (0.38) −1.24∗∗ (0.38) −1.52∗∗∗ (0.41)
Relative country risk −0.15 (0.18) −0.12 (0.18) −0.17 (0.19)
FDI inflow in the host country 5.34 (4.19) 4.71 (4.14) 6.84 (4.62)
FDI inflow as a percentage of GDP 0.02 (0.06) 0.02 (0.06) 0.01 (0.06)
Economic size (GDP) of the host −0.51 (0.45) −0.36 (0.47) −0.57 (0.44)
country
Host country experience 1.46∗∗∗ (0.40) 1.46∗∗∗ (0.41) 1.37∗∗ (0.43)
Additional alliance activities of the −0.63 (0.55) −0.44 (0.55) −1.18∗ (0.56)
local partner
Additional acquisition activities of −1.87∗∗∗ (0.53) −2.01∗∗∗ (0.53) −1.81∗∗ (0.55)
the local partner
Cross-technological transfer 1.94 (2.00) 2.52 (1.94) 1.05 (2.04)
Business relatedness 1.07∗∗ (0.35) 1.14∗∗ (0.36) 0.76∗ (0.36)
Foreign ownership −0.74 (2.15) −0.81 (2.14) −0.83 (2.27)
Renegotiation −0.02 (2.93) −0.02 (2.91) −0.02 (2.85)
Dissolution 2.47∗∗ (0.78) 2.66∗∗∗ (0.80) 1.65∗ (0.82)
Mutual trade dependence −1.50∗∗ (0.54) −1.91∗∗∗ (0.51) −1.46∗∗ (0.52)
Additional alliance activities of the 2.30∗∗∗ (0.61) 1.94∗∗ (0.59) 3.28∗∗∗ (0.69)
foreign partner
Additional acquisition activities of 1.63∗∗∗ (0.48) 1.52∗∗ (0.48) 1.90∗∗∗ (0.51)
the foreign partner
Repeated partnership −3.95∗∗∗ (0.83) −3.54∗∗∗ (0.97) −3.86∗∗∗ (0.87)
Mutual trade dependence × −1.54∗∗∗ (0.45)
additional alliance activities of the
foreign partner
Mutual trade dependence × −0.65∗ (0.27) 1.00 (0.85)
additional acquisition activities of
the foreign partner
Mutual trade dependence × repeated 2.27 (1.61) 1.30 (1.05)
partnership
Fixed effect of joint venture industry Yes Yes Yes
Fixed effect of local firm industry Yes Yes Yes
Fixed year effect Yes Yes Yes
Log likelihood −201.50 −202.34 −189.41
χ 2 ratio test 68.34∗∗∗ 66.67∗∗∗ 92.53∗∗∗

Standard errors are in parentheses.

† p < 0.10, ∗ p < 0.05, ∗∗ p < 0.01, ∗∗∗
p < 0.001.

This study extends the resource dependence
perspective on constraint absorption among firms
to a global setting, which has thus far been
restricted to single country settings (Burt, 1983;
Casciaro and Piskorski, 2005; Finkelstein, 1997;
Pfeffer, 1972; Pfeffer and Nowak, 1976). Previ-
ous studies operationalized environmental depen-
dence by predominantly using industry input-
output tables to quantify the pattern of resource
exchange and dependence. However, the imports
and exports of firms based in different countries,
as an important type of environmental depen-
dence, deserve specific conceptual attention. Our
Copyright  2010 John Wiley & Sons, Ltd.
study extends the scope of research dependence
by introducing the concept of mutual trade depen-
dence using bilateral trade between countries. As
noted by Pfeffer and Salancik (2003: xvi), ‘there
is a limited amount of empirical work explic-
itly extending and testing resource dependence
theory and its central tenets.’ In global settings,
empirical analyses that advance the theory are
extremely rare. One important reason is the lack
of cross-border measures of resource dependence,
which represents a remarkable omission in the
resource dependence and cross-border alliance lit-
eratures.
Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
 Mutual Dependence and Alliance Survival 247

6 Low mutual trade dependence

Log hazard rate of alliance termination

High mutual trade dependence
5

-1

-2

-3

-4
Low High
Additional alliance activities

Figure 1. Moderating effects of mutual trade dependence on additional alliance activities of the foreign partner

Low mutual trade dependence

3
High mutual trade dependence
Log hazardrate of alliance termination

-1

-2

-3
Low High
Additional acquisition activities

Figure 2. Moderating effects of mutual trade dependence on additional acquisition activities

The concept of mutual trade dependence high- that idea that resource dependence theory is ‘a
lighted in this study essentially captures the notion foundation for testable empirical research’ rather
of mutual dependence (Casciaro and Piskorski, than ‘an appealing metaphor’ (Casciaro and Pisko-
2005; Gulati and Sytch, 2007; Pfeffer and Salan- rski, 2005: 167). Alliances are a well-recognized
cik, 2003) by focusing on the resource-exchange mechanism for firms to establish a greater degree
relationships between countries through interna- of control over their environment (Pfeffer and
tional trade. The results of this study support Nowak, 1976; Pfeffer and Salancik, 1978), yet
Copyright  2010 John Wiley & Sons, Ltd. Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
248 J. Xia
little is known about their post-formation dynam-
ics in global settings from the resource dependence
perspective. Our study fills this research gap by
showing that alliance survival responds to mutual
trade dependence when such dependence pushes
firms out of the home country to absorb constraints
abroad.
Moreover, it is useful to draw attention to the
broader conclusion from using mutual trade depen-
dence as a theoretical construct to understand var-
ious cross-border activities and outcomes from
the resource dependence perspective. For exam-
ple, the resource dependence argument can be
extended to examine whether mutual trade depen-
dence will predict the entry mode choice of acqui-
sition over joint venture since greater dependence
is likely to lead to greater control. From a lon-
gitudinal perspective, it is interesting to examine
whether mutual resource dependence, as a modera-
tor, enhances the likelihood of an entry mode shift
from alliance to acquisition. Although many stud-
ies have focused on entry mode choice, few studies
have attempted to explore these issues. We believe
that trade dependence approaches may provide a
new avenue to extend resource dependence theory
to the study of various international activities.
In focusing on alliance survival at the firm
level rather than at the industry level, our study
contributes by examining the effects of envi-
ronmental and partner dependencies on alliance
survival simultaneously and jointly, given that
these effects are often discussed separately in
the resource dependence literature on alliances.
Our study integrates insights from the emerging
stream of research on alliance portfolios (Gulati,
1998; Hoffmann, 2007; Lavie, 2007) to capture
the shifts in partner dependence (i.e., power rela-
tions) as a result of subsequent alliance activi-
ties. Existing studies on alliance portfolios largely
focus on firm performance and value creation
(Bae and Gargiulo, 2004; Lavie, 2007; Lavie
and Miller, 2008; Stuart, 2000) and they call
for greater attention to the interdependency of
alliances in the firm’s portfolio beyond individ-
ual alliance decisions. In a departure from this
line of study, our findings show that additional
alliances formed in the same industry essentially
demonstrate a ‘constraining interdependency’ in
which ‘one alliance in the portfolio has a nega-
tive impact on another alliance in the portfolio’
(Parise and Casher, 2003: 30), reducing the sur-
vival likelihood of a given alliance. In this sense,
Copyright  2010 John Wiley & Sons, Ltd.
our study focuses on a different outcome, which
complements prior research on firm performance
associated with alliance portfolios.
Beyond focusing exclusively on the initial con-
ditions on which alliances are formed, this study
also calls for greater attention to the post-formation
dynamics of power shifts outside the existing part-
nership. Based on Emerson’s (1962) dyadic analy-
sis of two partners A and B, prior studies have
focused on shifts in bargaining power resulting
from competitive learning inside the A-B relation
(Inkpen and Beamish, 1997; Yan and Gray, 1994).
Given the asymmetries in the speed of learn-
ing between the partners (Hamel, 1991; Parkhe,
1991), the relative bargaining power of the part-
ners will shift when one partner outlearns the other,
rendering the original agreement obsolete. As a
result, shifts in bargaining power increase the like-
lihood of an unplanned termination. Integrating the
alliance portfolio perspective, our study provides
a complementary approach by showing that addi-
tional sources of resources available to A outside
of the A-B relation also lead to a power imbalance
and thus affect the survival of the A-B alliance.
Thus, we reach the complementary conclusion that
partner substitutability, as a consequence of the
foreign partner’s additional alliance and acquisi-
tion activities in the same industry, reduces the
survival likelihood of the alliance in question.
This study offers a more complete understanding
of the dynamic view of both stabilizing and dis-
ruptive forces. Previous conceptualizations based
on the learning and resource dependence perspec-
tives largely focus on how to reduce or eliminate
partner dependency, leading to alliance termina-
tion (Das and Teng, 2000; Parkhe, 1993; Inkpen
and Beamish, 1997; Yan and Gray, 1994). Using
a more balanced approach, we find clear evidence
that repeated partnerships increased the likelihood
of alliance survival due to reinforced mutual part-
ner dependence. Since mutual partner dependence
can be reinforced in different ways, the findings
of this study suggests that it is worthwhile to
identify other stabilizing forces that may eventu-
ally enhance the dependence in order to develop
a more complete understanding of the resource
dependence perspective on the dynamics of power
relations.
This study also explores the interactive effects
between environmental and partner dependencies
that have been neglected in the resource depen-
dence and alliance literatures. The results indicate
Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
 Mutual Dependence and Alliance Survival
that a higher level of mutual trade dependence
reduces the disruptive impact of alliance sub-
stitutability, especially additional alliance activi-
ties, on alliance survival. The evidence supports
the idea that since multinationals disproportion-
ately depend on other firms that control needed
resources in different countries, greater mutual
dependence makes the local partner in a given
host country less substitutable (replaceable) by
the foreign partner’s additional alliances activi-
ties. The moderating influences of environmen-
tal dependence on partner dependence, however,
vary between stabilizing and disruptive factors.
The results provide no evidence to suggest that
mutual trade dependence enhances the positive
impact of repeated partnerships on alliance sur-
vival. One possible explanation is that mutual trade
dependence and mutual partner dependence may
not always enhance each other’s effect. To some
degree, the effect of mutual partner dependence
may shift away from the logic of environmental
dependence.
From this study we can extrapolate implications
for multinationals in managing their cross-border
alliances. Although scholars have demonstrated
how national differences affect the survival of
FDI ventures, managers should also understand
the adaptive process of the resource dependence
approach whereby firms seek to manage both envi-
ronmental and partner dependencies. Mutual trade
dependence, a concept developed in this study,
may be a coercive force that compels firms to
take actions to absorb the environmental con-
straints in a foreign market. Alliances can be one
of the most important entry modes to stabilize
the flow of resources between countries. From
a resource dependence perspective, alliances can
help multinationals manage resource-flow uncer-
tainties, develop distribution channels, enhance
their competitive position, and modify local reg-
ulations (Li et al., 2002). Firms can also ben-
efit from long-term contracts to avoid repeated
exposure to problematic negotiated exchanges with
many different firms (Casciaro and Piskorski,
2005; Pfeffer and Leong, 1977). Our findings indi-
cate that multinationals may not quickly terminate
their established alliances in a host country in
which they have a higher level of resource depen-
dence, even though these alliances are substitutable
by additional sources of comparable resources.
Copyright  2010 John Wiley & Sons, Ltd.
249
Beyond the study that focuses on how to mini-
mize partner dependence from the resource depen-
dence perspective (Das and Teng, 2000; Gray and
Wood 1991), this study has conceptualized that a
repeated partnership may reinforce mutual partner
dependence, increasing the likelihood of alliance
survival.
This study has several limitations. First, although
we collected a relatively large sample of cross-
border alliances formed in 49 countries to test
alliance survival, we anticipate that our analysis
understates the total number of alliances termi-
nated, given the fact that firms rarely announce
alliance termination (Gulati, 1995; Lavie, 2007;
Park and Ungson, 1997; Singh, 1997). We have
taken steps to improve the reliability of the data
by focusing on equity alliances that were formed
by public firms. The collection of termination data
remains a major challenge for future research.
Although the SDC Alliances Database has been
widely used to study alliance formation, it is an
insufficient source for termination. Moreover, it
does not systematically report termination events.
Even though Factiva and Lexis-Nexis provide
more complete information, they still cannot over-
come the tendency of firms not to report alliance
termination as shown in Lavie’s (2007) study and
confirmed by our extensive search. Despite these
limitations, the alliances formed in a variety of
countries and industries in our study ensure that
the data represent a broad range of collabora-
tion quality (Singh, 1997) and reduce the sample
selection bias (Park and Ungson, 1997; Tsang and
Yip, 2007). Since more complete information is
important to reduce sampling biases, an avenue for
future research is to increase the alliance coverage
(both formation and termination) when testing the
resource dependence perspective and the alliance
portfolio perspective. Within the resource depen-
dence framework, previous studies have used com-
parative case data to overcome the data limitations
(Yan and Gray, 1994). Moreover, large-scale and
rigorously designed surveys and interviews may
also be useful to demonstrate theoretical relation-
ships in future research.
Second, this study is limited to one type of
constraint absorption activity, international equity
joint ventures. Future research might explore
whether our findings hold for the termination of
non-equity alliances and the divestiture of acquired
firms. Cross-border acquisitions and alliances are
two primary constraint absorption activities for
Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj
250 J. Xia
multinationals to reduce their environmental con-
straints in the global market to stabilize the flow of
needed resources. For example, by acquiring local
firms a multinational firm may reduce or elimi-
nate its dependence on local partners. However,
many acquired foreign subsidiaries are divested
shortly after the acquisition (Shimizu et al., 2004).
Most studies focus on the adoption of acquisi-
tion activities, yet little is known about why many
acquired firms are subsequently divested within a
short period of time from the resource dependence
perspective.
Third, this study was based on the multina-
tionals’ perspective. We did not find evidence
that additional alliance or acquisition activities
engaged by the local partner in the same indus-
try (control variables) reduced the likelihood of
alliance survival in the host country, respectively.
One possible reason is that multinationals usually
have ownership or resource-based advantages to
expand abroad (Dunning, 1993). Our results are
consistent with Inkpen and Beamish’s (1997: 189)
argument that it is usually more difficult for a
local partner to eliminate a foreign dependency
than for a foreign partner to eliminate a local
dependency. From a local partner’s perspective,
the local firm may increase its power relative to
its competitors in the home country by forming
cross-border alliances with multinationals and by
gaining access to the foreign partners’ advanced
resources. Future studies might explore this pos-
sibility by examining whether the dependence of
local firms on multinationals for resource-based
advantages through alliances increases the likeli-
hood of alliance survival.
Finally, the conceptualization of this study is
primarily based on resource dependence theory to
predict alliance survival. It is likely that we over-
looked other factors identified in previous studies
on this topic. Future research might integrate dif-
ferent theoretical perspectives by focusing on their
interactive relationships to explain the alliance out-
comes, which will enhance our knowledge of these
strategic phenomena. Despite these limitations, our
study presents an understanding of alliance sur-
vival from a resource dependence perspective,
which, we hope, might be an interesting avenue for
future research to explore the impact of resource
dependence on various constraint absorption activ-
ities and outcomes.
Copyright  2010 John Wiley & Sons, Ltd.
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 Mutual Dependence and Alliance Survival 253
APPENDIX: DISTRIBUTION OF SAMPLED OBSERVATIONS BY COUNTRIES

Foreign firms’ Number Foreign firms’ Number Foreign firms’ Number Foreign firms’ Number
home country of firms home country of firms host country of alliances host country of alliances

Argentina 2 Mauritius 1 Argentina 3 Italy 12

Australia 11 Mexico 1 Australia 25 Japan 67
Austria 1 Netherlands 18 Austria 3 South Korea 14
Belgium 2 New Zealand 2 Belgium 1 Morocco 1
Brazil 1 Norway 3 Brazil 11 Mexico 10
Canada 32 Philippines 1 Canada 22 Malaysia 10
China 6 Poland 1 Switzerland 6 Netherlands 15
Czech Republic 1 Portugal 1 Chile 3 Norway 2
Denmark 6 Russian Fed 1 China 26 New Zealand 2
Finland 4 Saudi Arabia 1 Colombia 2 Philippines 5
France 32 Singapore 8 Czech Republic 1 Poland 3
Germany 34 Slovak Rep 1 Denmark 2 Portugal 1
Greece 1 South Korea 3 Ecuador 1 Romania 2
Hong Kong 3 Spain 1 Spain 9 Russian Fed 5
Hungary 1 Sweden 13 Finland 2 Singapore 14
India 5 Switzerland 14 France 20 Slovak Rep 1
Indonesia 1 Thailand 1 United Kingdom 56 Slovenia 1
Ireland-Rep 2 Turkey 1 Germany 23 Sweden 6
Israel 2 United Kingdom 59 Greece 2 Thailand 8
Italy 6 United States 196 Hong Kong 6 Turkey 1
Japan 45 Hungary 4 United States 95
Indonesia 5 Venezuela 2
India 67 Vietnam 3
Ireland-Rep 2 Zimbabwe 1
Israel 4
Total 41 525 49 587

Copyright  2010 John Wiley & Sons, Ltd. Strat. Mgmt. J., 32: 229–253 (2011)
DOI: 10.1002/smj