Alliance Dynamics for Entrepreneurial Firms

Small firms are thought to encounter various difficulties implementing strategic alliances. Due to these problems, they may be less able to reap the benefits of alliance adaptation, and the changes that do occur in alliances may not coincide with a small firm's interests. The evidence we present on contractual renegotiations in alliances suggests that small firms are no more or less likely to adjust their alliances contracts in general. However, small firms tend to bear inefficiencies of two kinds in their collaborations. First, they are less likely to adapt alliances in the presence of governance misalignments. Second, our sampled small firms were more prone to make transaction-specific investments, which can stimulate ex post hold-up in the form of contractual renegotiations.