A substitute for poor institutions? Interorganizational affiliations in the alliance formation process

Purpose - This study aims to investigate how the home country institutional development influences the alliance formation process. Design/methodology/approach - A network of strategic alliances between 95 airlines over a 5-year period is analyzed with stochastic actor-oriented models [i.e. Simulation investigation for empirical network analysis (SIENA)]. Robustness analyses use a subsample of these airlines over a period of 10 years. Findings - The results demonstrate that the membership in a firm group and a high share of state ownership are more beneficial for the number of alliances if the firm originates from a country with low institutional development. Practical implications - Firms from less developed countries can use affiliations (e.g. to firm groups or the government) as signals to attract international alliance partners. Social implications - Policymakers from less developed countries should support the development of (local) firm groups to stimulate interorganizational cooperation. Originality/value - Firms form alliances based on two aspects: preferences for alliance partners and attractiveness to potential partners. Prior studies outlined that institutional development affects the preferences of firms for alliance partners. This study demonstrates how the institutional development influences the attractiveness to potential partners.