Built to last or meant to end: Time bounds specification in strategic alliances

This article augments Resource Dependence Theory with Real Options reasoning in order to explain time bounds specification in strategic alliances. Whereas prior work has found about a 50/50 split between alliances that are time bound and those that are open-ended, the antecedents that underlie the choice between them are ill understood. To address this, we suggest that the two alliance modes present different real options trade-offs in adaptation to environmental uncertainty. As a consequence, we expect that organizations in more uncertain environments will be relatively more likely to place time bounds on their strategic alliances. Findings from longitudinal data collected amongst a large sample of firms in 38 industry clusters are consistent with our expectations, and contribute to the recent renaissance of Resource Dependence Theory by specifying the conditions under which organizations choose different time windows in strategic partnering, and to strategic alliance research by separating planned termination out of duration-based performance measures.