The Dissolution of Alliances: It’s Business, But It’s Also Social

Topic:Conflict, Trust
Publication: Academy of Management Journal
Article: Built to last but falling apart: Cohesion, friction, and withdrawl from interfirm alliances
Authors: H. R. Greve, J. A. C. Baum, H. Mitsuhashi, & T. J. Rowley
Reviewed By: Katie Bachman

Forming alliances between organizations is all well and good when the groups have a cohesive vision and sunny prospects, but sometimes the more interesting question is: how do alliances dissolve and why? In a study of transoceanic shipping companies, researchers assess these questions. Transoceanic shipping is an interesting situation in itself because firms often team up with others to share shipping routes. Multiple firms operate ships on the same route and single ships may carry cargo from multiple firms. Hence, there’s a lot of overlap and interdependence among allied firms.

If you’re reading this post, then you’re probably not bobbing around at sea, but bear with me because the reasons for which alliances disband is applicable in many realms.

Before talking about the factors that lead to the dissolution of alliances, let’s talk about how alliances are formed. Organizations see an opportunity to cut costs by sharing the burden of operating multiple vessels along one route. Thus, those firms can increase their presence in other markets because the ships are not all tied to a particular route.

They may make contact with firms in multiple markets and, under many circumstances, it behooves them to form alliances rather than compete.

So that’s why alliances are formed; now here’s where things start to go downhill. Beyond competition, the most common reason that alliances dissolve is because there is an imbalance of power. It may seem to be a good idea for the weakling company to cozy up to the big ol’ linebacker company, but when it comes to decision making, the stronger company will stifle the smaller. In the end, it is not in a smaller company’s interest to ally with a larger company.

One thing in the article that struck me as particularly interesting was an unexpected finding that alliances formed in triads were more likely to breakup than dyads and the groups of three tended to become groups of two. Think of the dancing metaphor again—couples dropped the loser third wheel so they could dance by themselves.

This is the point where I usually try to give the reader some words of wisdom to apply in the workplace. I don’t have one glorious kernel to share this time, but here are three general ideas to take away with you: 1) don’t get into an alliance with a firm substantially larger than yours—it won’t work out, 2) one party in a triad alliance is bound to become a wallflower with no one to dance with, and 3) avoid reading scholarly articles on transoceanic shipping. Trust me.

Greve, H. R., Baum, J. A. C., Mitsuhashi, H., & Rowley, T. J. (2010). Built to last but falling apart: Cohesion, friction, and withdrawl from interfirm alliances. Academy of Management Journal, 53, 302-322.