Alliance performance and subsequent make-or-ally choices: Evidence from the aircraft manufacturing industry

We examine how the performance of a firm's prior alliances influences its propensity to persist with the alliance mode or switch to independent operations in the context of new product introductions (NPIs). Drawing on the behavioral theory of the firm (BTOF), we argue that a firm's alliance performance has a U-shaped effect on its likelihood of undertaking the subsequent NPI independently and that competitive intensity strengthens this U-shaped relationship. We also predict that firms with above-aspiration alliance performance are more likely to achieve breakthrough performance in the subsequent NPI if they switch to independence than if they continue to ally. Data on NPIs in the global aircraft manufacturing industry (1944-2000) support our hypotheses. Our study extends the alliance literature and contributes to research on how firm performance influences subsequent strategic choices.