Alliance Group Formation Enabling and Constraining Effects of Embeddedness and Social Capital in Strategic Technology Alliance Networks

We examine the role of embeddedness and social capital in the process of alliance group formation in strategic technology alliance networks. In particular, we study the social mechanisms that enable and enforce alliance group formation. We argue that the enabling effect of embeddedness during the first stages of the group formation process may turn into paralyzing effects as the group formation process progresses. Through the formation of subsequent ties, firms in social systems tend to rely heavily on their direct and indirect contacts in forming new partnerships. This so-called local search enables firms to create trustworthy and preferential relations. Over time, those relations tend to develop into strong ties, as firms rely on the same partners by replicating their existing ties. This enabling effect of embeddedness at the group level can, however, turn into a paralyzing effect as actors become locked-in, because they rely on partners only in their closed social system. Searching for, or switching to, partners outside of the alliance group is not likely, particularly when trustworthy partners are already available in this system. The firms in alliance groups tend to become more similar over time as a result of contagion and the replication of their existing ties. This so-called phe-