Alliance-created interdependence and the formation of alliance clusters

Given the rapid acceleration of alliance activity over the past two decades, the nature of alliance formation must now be considered as an essential part of the analysis of a market structure. In many markets, firms tend to ally into clusters, and competition in such markets often shifts to match cluster against cluster rather than firm against firm. This article introduces an explanation for the formation of alliance clusters, which suggests that firms' tendency to ally into clusters increases with the extent of interdependence created by their new and pre-existing alliances. The concept of alliance-created interdependence also provides insight into why firms in the same cluster tend not to compete with one another.