The Influence of Institutional Differences on Control Mechanisms in Alliances

Abstract

Cross-border alliances expose firms to heightened risks, posing different governance and control challenges than domestic alliances. We examine the impact of differences in alliance partner countries' institutional environments. Analysis of survey data supports our contention that cross-border alliances involve a greater reliance on formal controls, particularly when firms collaborate with partners in countries with a weaker institutional environment. These relations exist regardless of governance structure (i.e., equity or nonequity alliance) that prior research considers a critical choice for addressing cross-border alliance risks. Additional analyses show that four sub-dimensions of insti..