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Is a powerful rival a right partner?

Author

Listed:
  • Yi-Ju Lo

    (Yuan Ze University)

  • Tung M. Hung

    (Rutgers University)

Abstract

This paper explores why powerless firms are faced with the dilemma of whether or not to collaborate with other powerful firms. Two natures of power, competitive and cooperative natures, are compared to study such an imbalance between firms in market power and social power. Testing the syndicated underwritings in the U.S. from 1998 to 2009, we find that egos of low market power are less likely to partner with alters of high market power. In contrast, egos of low social power are more likely to collaborate with alters of high social power. Moreover, the results show that collaborations with powerful partners are not necessarily beneficial or detrimental for the performance of powerless focal firms; only when the high power partners possess a high network constraint which constrains opportunism and facilitates trust, do collaborations with such partners help the performance of powerless focal firms.

Suggested Citation

  • Yi-Ju Lo & Tung M. Hung, 2017. "Is a powerful rival a right partner?," Review of Managerial Science, Springer, vol. 11(3), pages 661-690, July.
  • Handle: RePEc:spr:rvmgts:v:11:y:2017:i:3:d:10.1007_s11846-016-0200-5
    DOI: 10.1007/s11846-016-0200-5
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    More about this item

    Keywords

    Power; Inter-firm collaboration; Partner selection; Market share; Network status;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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