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Determinants of Partner Opportunism in Strategic Alliances: A ...

J Bus Psychol (2010) 25:55–74

DOI 10.1007/s10869-009-9132-2

Determinants of Partner Opportunism in Strategic Alliances:

A Conceptual Framework

T. K. Das Æ Noushi Rahman

Published online: 16 September 2009

Ó Springer Science+Business Media, LLC 2009


Purpose We present a comprehensive framework of the

key determinants of partner opportunism in strategic


Design/methodology/approach We propose an extended

definition of partner opportunism and three categories of

the determinants of partner opportunism based on a review

of the literature. These categories comprise economic

factors (equity involvement, asymmetric alliance-specific

investments, mutual hostages, and payoff inequity), relational

factors (cultural diversity and goal incompatibilities),

and temporal factors (alliance horizon and pressures

for quick results).

Findings The framework of determinants makes clear

how the various determinants of partner opportunism may

be differentially salient in the three major alliance types,

namely, equity joint ventures, minority equity alliances,

and nonequity alliances.

Implications Based on the framework, a number of

propositions are developed to facilitate empirical research

on partner opportunism. Managerial implications flowing

from the proposed framework are also discussed.

Received and reviewed by former editor, George Neuman.

T. K. Das (&)

Department of Management, Zicklin School of Business, Baruch

College, City University of New York, One Bernard Baruch

Way, Box B9-240, New York, NY 10010, USA


N. Rahman

Management and Management Science Department, Lubin

School of Business, Pace University, One Pace Plaza, W-414,

New York, NY 10038, USA


Originality/value Although scholars in various disciplines

have studied the general topic of opportunistic

behavior, our understanding of partner opportunism in

strategic alliances appears to be fragmented and inadequate.

As partner opportunism is acknowledged as a significant

threat to alliance survival and success, a

comprehensive framework of the key determinants of such

opportunism should improve our understanding of this

phenomenon and to also provide an impetus for future

research. The article also responds to the need of alliance

managers for a framework of key factors that are responsible

for partner opportunism so that they may be able to

deploy appropriate deterrence mechanisms to minimize

opportunistic behaviors.

Keywords Strategic alliances Partner opportunism

Determinants of opportunism Alliance horizon

Opportunistic behavior Equity joint ventures

Minority equity alliances Nonequity alliances


For large corporations as well as small entrepreneurial

firms, strategic alliances are becoming more and more a

necessity for ensuring a competitive edge in the marketplace.

Strategic alliances are ‘‘interfirm cooperative

arrangements aimed at achieving the strategic objectives of

the partners’’ (Das and Teng 1998, p. 491). A high percentage

of alliances that are formed, however, end up as

failures (see Das and Teng 2000, for a discussion of possible

causes). Clearly, a member firm in an alliance faces

certain adversities that are unique because, unlike an

independent firm, it is subject to relational risk vis-à-vis its

partners in addition to the usual business risks. The


56 J Bus Psychol (2010) 25:55–74

literature recognizes the deleterious role that a partner

firm’s opportunistic behavior plays in alliances, often

resulting in their unplanned termination. Thus, partner

opportunism is of paramount concern to an alliance firm

engaged in collaborative activities.

Researchers have studied the impact of opportunistic

behavior in business for decades. According to Williamson

(1975, p. 9), opportunism ‘‘refers to a lack of candor or

honesty in transactions, to include self-interest seeking

with guile.’’ In the context of strategic alliances, opportunistic

behavior includes ‘‘breaking promises, not sharing

resources or facilities as per agreement, bluffing, lying,

misleading, misrepresenting, distorting, cheating, misappropriating,

stealing, etc.’’ (Das and Rahman 2001, p. 43).

However, scholars in economics, management, marketing,

and sociology have generally treated opportunism as an

undifferentiated phenomenon. It is only very recently that

some researchers have directed their attention to exploring

the essence of opportunism (e.g., Ghoshal and Moran 1996;

Wathne and Heide 2000). There is a need to understand

more adequately as to what increases the potential for an

alliance partner to act opportunistically in different situations.

We believe that a wide-ranging analysis of the

determinants of partner opportunism would help in

understanding its complex nature and in gaining better

insights for managing such opportunism.

We divide the remainder of the article into four parts.

First, we examine the origins and nature of partner

opportunism. Second, we suggest an overarching framework

of determinants of partner opportunism comprising

three distinct sets of factors: economic, relational, and

temporal. We identify and examine a list of significant

determinants constituting the framework. Third, we discuss

the differential salience of these determinants in each of the

three major alliance types: equity joint ventures, minority

equity alliances, and nonequity alliances. Lastly, we suggest

directions for further research and indicate some of the

more significant managerial implications of the proposed

framework of partner opportunism.

The Nature of Partner Opportunism

In this section, we briefly review the literature on the

general concept of opportunism and then suggest, specific

to the field of strategic alliances, a comprehensive definition

of partner opportunism as a prelude to proposing a

framework of its determinants in the next section.

In their efforts to delineate the character of opportunism,

scholars have mentioned various activities that reflect the

phenomenon. According to Williamson, for instance,

‘‘opportunism refers to the incomplete or distorted disclosure

of information, especially to calculated efforts to

mislead, distort, disguise, obfuscate, or otherwise confuse’’

(1985, p. 47). We give below several examples of partner

opportunism in alliances to indicate broadly its nature and


Consider, for example, the alliance between Red Dragon

Enterprises of China and Batrionics, an Australian manufacturer

of industrial batteries (Rarick 2004). Batrionics

was interested in setting up an operation in China after

having established itself in Taiwan. Rex Adams, representing

the Australian company, located a potential Chinese

partner in Red Dragon Enterprises, a manufacturer of

a variety of batteries. The quality of the Chinese products

was not acceptable but Adams ‘‘felt that he could leverage

his company’s knowledge and skill against a joint venture

partner’’ (Rarick 2004, p. 3). In due course, a joint venture

was formed, but a number of problems emerged, including

poor manufacturing quality, missing inventory, and lack of

finance. Adams accused Tsang, his Chinese counterpart, of

behaving opportunistically. In his eagerness to set up an

operation in China, Adams was perhaps less than thorough

in assessing the risks of opportunism.

Another illustrative case concerns Cameron Auto Parts

(B), a North American company, and its UK licensee

(Crookell and Beamish 2006). Alex Cameron had gone to

the UK to meet his licensee and to France to meet an

important customer, Michelard. The UK licensee was

interested in partnering with Cameron in establishing a

manufacturing facility in Australia. Alex Cameron, however,

went on to have a verbal agreement with his French

customer to invest 40% in a factory manufacturing flexible

couplings that was acquired by the latter. Angered at this

development, the UK licensee charged: ‘‘I thought you had

your head screwed on better than this, Alex. You realize

this makes us competitors. Michelard of all people! They

run that business in their spare time. You’ve made a damn

fool of yourself over there’’ (Crookell and Beamish 2006,

p. 7). To the UK licensee, Cameron had committed an

opportunistic act. To placate his UK licensee, Cameron

agreed to the original proposal to set up a joint venture in


Yet another form of opportunism is evident in the

decision of the Spanish telecommunications company,

Telefonica, to suddenly discontinue its participation in the

alliance with Bidland Systems, a small U.S. firm that

provided dynamic e-commerce. This is considered opportunistic

because Telefonica abandoned the alliance after it

had appropriated ‘‘Bidland’s proprietary business-to-business

auction and dynamic e-commerce business information

and technology through the promise of a lucrative joint

venture and investment contract’’ (Business Wire 2000). In

this case, the contractual provisions were helpful to Bidland

to proceed against Telefonica ‘‘for breach of contract,

breach of fiduciary duty, and violation of the Uniform


J Bus Psychol (2010) 25:55–74 57

Trade Secrets Act, among other charges’’ (Business Wire


Clearly, since strategic alliances are between two or

more firms, they create the circumstances where opportunism

is possible. Thus, given especially its ubiquitous

presence, opportunism in strategic alliances deserves much

more study than it has garnered so far. In that research

enterprise, we believe that both a careful analysis of the

definition of partner opportunism and then an inquiry into

its origins are necessary.

Opportunism involves activities generally characterized

as fraudulent, deceitful, and obfuscating. It is easy to see

that partner opportunism conflicts with partner cooperation

(Das and Teng 1998, p. 492). Indeed, partner opportunism

goes against the development of mutual trust and the

cooperative spirit, accentuating the perception of risk and

jeopardizing the interfirm relationship (Das and Teng 2001,

2004). Masten (1988, p. 183) considers moral hazard and

haggling as opportunism.

As a further refinement, Ghoshal and Moran (1996)

distinguish opportunistic attitude from opportunistic

behavior, arguing that the latter is the behavioral manifestation

of the former, and offer a set of psychologically

oriented factors that influence opportunistic attitude (pp.

18, 21). Scholars have also pointed out certain kinds of

behaviors that should not be characterized as opportunism.

According to John (1984, p. 278), ‘‘hard bargaining,

intense and frequent disagreements, and similar conflictual

behaviors do not constitute opportunism.’’ Wathne and

Heide (2000) further clarify that ‘‘situations in which (1)

the parties jointly agree to modify an agreement or (2) one

party receives compensation in some form’’ and ‘‘situations

in which parties adjust contract terms ex ante in anticipation

of shirking’’ should not be considered opportunism

(p. 38).

Some attempts have been made to devise a classification

for the extensive inventory of activities that pertain to

opportunism. Griesinger (1990, pp. 486–487) categorizes

opportunism into three groups—dishonesty, infidelity, and

shirking. In a more systematic approach, Wathne and

Heide (2000, p. 41) categorize opportunism into four

groups: evasion, refusal to adapt, violation, and forced

renegotiation. These studies, however, do not attempt to

understand the roots of opportunism.

It would appear that most scholars accept Williamson’s

compact definition of opportunism, ‘‘self-interest seeking

with guile,’’ in their research on related topics. The literature

on the subject of opportunism is devoted to research

questions that can be considered peripheral to the actual

phenomenon of opportunism. There is a dearth of studies

on the basic concept of opportunism and, consequently, our

understanding of the complexities of partner opportunism

in strategic alliances remains inadequate.

Our own review of the research points to two key

deficiencies in the extant literature. First, most of the

research seems to be based on the classic definition offered

by Williamson (1975), mentioned earlier, with no particular

exploration of its implicit assumptions. Thus, we have

yet to adequately capture the complex nature of partner

opportunism in alliances. Second, the extant research on

the determinants of partner opportunism points to the need

for an integrated approach. We will now propose a definition

of partner opportunism and then present, in the next

section, an overarching framework of its determinants.

As we stated earlier, opportunism has been aptly defined

by Williamson as ‘‘self-interest seeking with guile’’ (1975,

p. 9). While this definition is parsimonious in scope, it

highlights only two attributes of opportunism: self-interest

and guile. It leaves certain attributes of opportunism

implicit, allowing researchers to interpret variously what

constitutes opportunism. In the following paragraphs we

make explicit the significant attributes of opportunism,

supplementing the definition of Williamson.

Based on a recognition of the assumptions implicit in

Williamson’s definition, we define partner opportunism in

a somewhat more extended form as behavior by a partner

firm that is motivated to pursue its self-interest with deceit

to achieve gains at the expense of the other alliance

members. This elaborated form of the Williamson definition

of opportunism, as applied to alliances, has five major

components: behavior, motives, self-interest seeking,

deceit, and gains at the expense of others. First, we

examine opportunism as a behavior, so that opportunism

refers to specific actions by an opportunistic alliance

partner. This is consistent with the extant literature (e.g.,

Joshi and Stump 1999; Luo 2007a; Wathne and Heide

2000). For instance, Wathne and Heide (2000, p. 36)

observe that ‘‘the concept of opportunism, as currently used

in the literature, includes a broad range of potentially different

behaviors.’’ Our definition is not concerned with the

opportunistic attitude or propensity of the partner because

our focus is on actual opportunistic behavior.

Second, the definition suggests that conscious motives

are involved in opportunism. In other words, opportunism

is deliberate, not accidental. If the partner firm inadvertently

brings harm to the focal firm in pursuing its selfinterest,

it is quite likely to make amends for it. It is only

when such harmful behavior has been consciously engaged

in that the partner will be unlikely to compensate for

damages. The motives of the opportunistic partner eventually

lead to opportunistic action. Prior research on strategic

alliances has not explicitly considered motives as an

essential element in understanding partner opportunism.

Third, partner opportunism takes place to gratify selfinterest.

There is a general consensus among scholars that

opportunism involves some form of self-interest seeking


58 J Bus Psychol (2010) 25:55–74

(Ghoshal and Moran 1996; Wathne and Heide 2000; Williamson

1975, 1993). We note that the nature of the pursuit

of this self-interest by an alliance partner can take two

alternate paths. First, the opportunistic partner could seek

to acquire the focal firm’s rightful share of the alliancespecific

gains. Second, the opportunistic partner could shirk

its own alliance-specific obligations, foisting the relevant

costs onto the focal firm. Both these approaches would

serve the self-interest of the partner, even as they also

adversely affect the focal firm.

Fourth, we should note that simple self-interest seeking

is not tantamount to opportunism. It is critical for an

opportunistic partner to keep its actual motives deliberately

hidden from other alliance members. Thus, a partner firm

must use deceit to conceal and mask its actual motives.

Whereas Williamson (1975) uses the term ‘‘guile’’ in discussing

opportunism, we prefer the more accessible term

‘‘deceit’’ to convey the same notion (Das 2005).

Fifth, we must recognize that seeking self-interested

gains by a partner firm that does not affect the focal firm in

any adverse way does not fall within the ambit of partner

opportunism. This would be so even if the partner’s actions

were not entirely above board. Such partner behavior must

also, somehow, result in gains that are at the expense of the

other members of the alliance. Note that the two paths of

self-interest seeking that we mentioned above also leave

the other alliance members worse off.

We suggest that the observations of various authors in

the literature on what constitutes partner opportunism in

alliances can be subsumed within the contours of our

proposed definition. By adopting this expanded definition,

we provide a general basis for the further study of partner

opportunism in a rigorous manner, recognizing the multifaceted

nature of the phenomenon.

Framework of Determinants

To facilitate a better understanding of the nature of partner

opportunism and advance empirical research, we believe an

analysis of the determinants of opportunism is essential.

We list in Table 1 some illustrative observations from the

literature on the determinants of both the general topic of

opportunistic behavior and the particular issue of partner

opportunism in strategic alliances. Our review of the literature

indicates—and the table reflects this—that the

research on the determinants of partner opportunism thus

far has been largely fragmented, so that it seems desirable

to attempt an integrated approach.

According to John (1984, p. 287), ‘‘opportunism can be

viewed usefully as an endogenous variable that is evoked

by certain determinants within a long-run relationship. In

other words, individuals may not always behave opportunistically

even if conditions permit such behavior.’’

Scholars in economics, management, and marketing have

proposed a number of factors that influence the incidence

of opportunism in alliances. We examined the nature of

these factors and concluded that they can be usefully

grouped according to the nature of the process through

which they influence partner opportunism.

Recently, Lee (1998, pp. 337–338) tested a set of three

antecedents of opportunism—decision-making uncertainty,

cultural distance, and economic ethnocentrism—and found

empirical evidence in support of them. Sako and Helper

(1998, pp. 393–394) used customer-specific assets, lack of

reciprocity, and uncertain market and technology environments

as antecedents of the supplier’s perception of

customer opportunism, while Joshi and Stump (1999,

p. 346) used only technological unpredictability as a

determinant of opportunism.

Provan and Skinner (1989, p. 205) find dependence and

control of decision making to be predictors of opportunism.

Nooteboom (1996, p. 999) lists different external events that

may trigger opportunistic behavior. Also, Wathne and Heide

(2000, p. 42) note that the focal firm would be vulnerable to

opportunism under conditions of information asymmetry

and lock-ins. Finally, according to John (1984, p. 281), an

alliance member would be more likely to act opportunistically

if it felt coerced by another alliance member.

We may note here that explicit cooperation-building

mechanisms are likely to impact upon the determinants

of opportunism. For example, Gulati (1995) shows that

familiarity breeds trust, a fundamental requirement for

cooperation. Hence, familiarity between alliance members

may temper opportunistic tendencies.

Clearly, not all firms behave opportunistically all the

time. Following Williamson’s reasoning, firms refrain from

opportunism when the resultant losses (i.e., loss of image,

goodwill, legal retribution, etc.) are expected to be greater

than the potential economic gains. The problematic feature

of this conceptualization is that it renders opportunism to

be a monolithic phenomenon. Because a partner may act

opportunistically for a variety of reasons, the focal firm

needs to be wary of all such possibilities. It would thus

seem useful to formulate an appropriately sophisticated

view of the concept of partner opportunism.

Our analysis yielded three distinct groups of determinants,

each group influencing the potential for partner

opportunism in its distinctive way. Accordingly, we propose

in this section three sets of key determinants that

significantly impact upon the potential for partner opportunism:

economic, relational, and temporal. We should

note that most of these determinants have been empirically

supported (see Table 2).


J Bus Psychol (2010) 25:55–74 59

Table 1 Types of determinants of opportunism

Authors Conceptual/empirical Illustrative observations Type of


Doney et al.


Ghoshal and

Moran (1996)



Heide and

Miner (1992)

Conceptual ‘‘Norms supporting power differentials also provide evidence that targets will act for personal gain. … To the

extent that such self-serving behaviors are sanctioned, one might infer that targets in high power distance

societies will act opportunistically and fail to associate high costs with opportunistic behavior.’’ (p. 613)

‘‘Targets in low uncertainty avoidance cultures may engage in opportunistic behavior, even if doing so risks

damaging the relationship. This follows from the fact that people in low uncertainty avoidance cultures do not

fear the future and tolerate risk easily …’’ (p. 614)

Conceptual ‘‘Opportunism is influenced by three factors. The first is ‘‘prior conditioning’’ (relationship ‘‘i’’) that includes all

the attitudes and values formed through exposure to conscious as well as subliminal stimuli … Second,

opportunism is influenced by what we describe as the ‘‘feeling for the entity,’’ which represents the

individuals’ favorable or unfavorable assessment of the specific transaction partner, the group or the

organization… The third influencer of opportunism is opportunistic behavior.’’ (p. 2)

Conceptual ‘‘The extent of the risk [of dishonesty] depends on the magnitude of the possible deception, the norms of

disclosure surrounding the transaction, the possibility of detection, and the conscience of the potential

offender. If the transaction is nonrecurrent, the information inherently asymmetric, and the parties strangers to

each other (i.e., the moral character is not known), then the risk will be high and safeguards are warranted.’’ (p.


Empirical (155 purchasing

agents; 60 suppliers)

John (1984) Empirical (147 dealers of major

oil company; dealer–company


Johnson et al.


Joshi and Stump


‘‘Parties who make idiosyncratic contributions to an exchange are particularly vulnerable to the termination of

the relationship because their investments have substantially less value apart from it.’’ (p. 486)

‘‘The analysis of games implies that although anticipated open-ended interaction does not require cooperation, it

does make it possible – even when neither party has altruism or concern about the other party’s well-being.’’

(p. 269)

‘‘Players may cooperate in the present because they anticipate possible reciprocal future responses. Or they may

cooperate in the present because they know that they can retaliate for a defection by defecting later

themselves.’’ (p. 269)

‘‘Bureaucratic structuring is related positively to opportunism and negatively to the attitudinal orientation of

involvement with another channel member’’ (p. 280). ‘‘When perceptions of increased formalization,

centralization, and controls (rule enforcement and surveillance) are present they lead to an erosion of positive

attitudes and consequently more opportunism.’’ (p. 287)

‘‘Perceptions of coercive power attribution lead to a less favorable attitudinal orientation and a greater degree of

opportunism. Reward power usage leads to similar effects, but to a much lesser degree’’ (p. 281). ‘‘When

attributions of influence are made to rewards and coercion, more opportunistic behavior is induced. The

coercive attributions also have a deleterious effect on attitudinal orientation which in turn leads to more

opportunism.’’ (p. 287)

Empirical (155 IJVs) ‘‘In general, cross-cultural interaction, often replete with misunderstandings and miscommunication, can foster

opportunistic tendencies.’’ (p. 83)

Empirical (168 purchasing managers;

buyer–supplier relationships)

‘‘A manufacturer’s investment of specific assets in a supplier is positively related to the manufacturer’s

dependence on the supplier’’ [and] ‘‘A manufacturer’s dependence on a supplier is negatively related to that

manufacturer’s opportunism against the supplier.’’ (pp. 338, 340)

‘‘Technological unpredictability is negatively related to a manufacturer’s dependence on a supplier’’ [and] ‘‘A

manufacturer’s dependence on a supplier is negatively related to that manufacturer’s opportunism against the

supplier.’’ (pp. 338, 340)














60 J Bus Psychol (2010) 25:55–74

Table 1 continued

Authors Conceptual/empirical Illustrative observations Type of


Kanter (1994) Conceptual ‘‘Many relationships die an early death when they are scrutinized for quick returns. COMCO’s alliance with

Martech for environmental cleanup services in Eastern Europe dissolved in less than two years because of

disputes over slower-than-expected results and the need for new investment, even though the market potential

was still great.’’ (p. 102)

Lee (1998) Empirical (105 Australian exporters;

alliances with Korean importers)

Provan and



Sako and Helper


Wathne and

Heide (2000)



Empirical (226 farm and power

equipment dealers)

Empirical (675 U.S. and 472

Japanese first-tier automotive



‘‘Exporters’ perceptions of decision making uncertainty will be positive related to their degree of opportunism.’’ Economic

(p. 337)

‘‘Exporters’ cultural distance towards the importing country will be positively related to their degree of Relational

opportunism.’’ (p. 337)

‘‘Exporters’ economic ethnocentrism will be positively related to their degree of opportunism.’’ (p. 338) Relational

‘‘A low level of dependence on a supplier may well lead to high levels of opportunism among dealers; if caught,

these dealers can more easily shift to other suppliers or provide critical services on their own than can their

highly dependent counterparts.’’ (p. 205)

‘‘Opportunistic behavior by dealers in relations with their primary supplier will be positively related to supplier

control over dealer decisions.’’ (p. 205)

‘‘The more a supplier is asked to provide information to its customer without the customer reciprocating by

giving information to the supplier, the greater the supplier’s perception of customer opportunism.’’ (p. 393)

‘‘The more uncertain the market and technology environments, and the higher the degree of asset specificity, the

greater the level of customer opportunism.’’ (p. 394)

Conceptual ‘‘In general, information asymmetry means that one party’s ability to detect opportunism is limited … [which]

gives the exchange partner the opportunity to pursue opportunistic actions without being caught.’’ (p. 42)

‘‘Lock-in, in contrast, represents vulnerability because a party cannot leave a given relationship without

incurring economic losses. As a consequence, a lock-in situation may require a party to tolerate opportunistic

behavior.’’ (p. 42)

Conceptual ‘‘Opportunism refers to a lack of candor or honesty in transactions, to include self-interest seeking with guile.’’

(p. 9)

‘‘Responsible parties who would otherwise be prepared to self-enforce promises to take efficient loss-mitigating

actions may find that such behavior is not competitively viable and will consequently be induced to imitate

opportunistic types by underinvesting in loss mitigation.’’ (p. 15)










J Bus Psychol (2010) 25:55–74 61

Table 2 Selected studies of the determinants of opportunism

Authors Hypotheses Study sample Findings Remarks

Equity involvement







‘‘An equity investment by the partner firm will

decrease perceived opportunism.’’ (p. 145)

‘‘Alliances are more likely to be equity based

if they have a shared R&D component.’’ (p. 91)

Asymmetric alliance-specific investments


et al.


Joshi and




et al.


Mutual hostages

Dyer and





‘‘The hotel’s opportunism will be reduced

the more the hotel has invested in TSAs

of its own.’’ (p. 53)

‘‘A manufacturer’s investment of specific assets in a

supplier is positively related to the manufacturer’s

dependence on the supplier.’’ (p. 338)

‘‘A manufacturer’s dependence on a supplier is

negatively related to that manufacturer’s

opportunism against the supplier.’’ (p. 340)

‘‘Perceived asymmetry of commitment rises as

actual asymmetry of commitment rises.’’ (p. 683)

‘‘The greater the commitment a focal party attributes

to its counterpart, relative to its own, P1a: The less

conflict the focal party will perceive in the relationship

[and] P1b: The more profit (current and expected) the

focal party will derive from the relationship.’’ (p. 684)

‘‘hostages may be financial (e.g., equity) or symmetric

investments in specialized or cospecialized assets,

which constitute a visible collateral bond that aligns

the economic incentives of exchange partners.’’ (p. 669)

‘‘A minority party’s opportunism is negatively

associated with equity captiveness, ceteris

paribus.’’ (p. 861)

52 biotechnology


b = -0.126


While partner’s equity involvement leads to focal firm perceiving

less partner opportunism, the effect is not substantial. Nevertheless,

it is possible that equity involvement has a substantial effect

on decreasing the likelihood of actual partner opportunism.

2,417 alliances b = 0.90 It is assumed that alliances with a shared R&D component will

(p \ .01) have a higher likelihood of partner opportunism. Findings

suggest that a firm apprehending partner opportunism will

395 general


of hotels

168 purchasing


510 focal actors

from 255 dyads

(insurer and agent)

prefer equity structure for its alliance.

t = 2.29 Results are significant in the opposite direction from the hypothesized

(p \ .05) relationship. The findings suggest that more alliance-specific

investments can lead to higher potential for opportunism as well.

This supports the notion of paranoid concerns about making asymmetric

resource commitments, which increases the potential for opportunism.

t = 12.16 Alliance-specific investments directly affect asymmetry in resource

(p \ .001) commitment. It increases dependence, which in effect reduces the

dependent firm’s potential for opportunism. Conversely, the less

t = -2.10

(p \ .05)

dependent partner has a higher potential for opportunism.

b = 0.116 Resource commitment is the most objective form of commitment.

(p \ .01) Actual asymmetry in resource commitment will increase the

b = 0.279

perceived asymmetry in resource commitment.

(p \ .01)

Perceived asymmetry in commitment increases perceived conflict.

It is argued that perceived conflict leads to fears of opportunism.

– – Mutual hostages pave the way for credible commitments, strengthening

interfirm relational bonds. Also, by acting opportunistically a partner

would lose the assets that are held hostage by the focal firm. Hence,

mutual hostages decrease the potential for partner opportunism.

192 international

joint ventures

(163 IJVs used

to test this


b = -0.29 Equity captiveness in this paper is akin to a mutual hostage situation.

(p \ 0.001 when Whereas a local party is more opportunistic when equity captiveness

minority party is less, a foreign party is consistently less opportunistic regardless

is local; not of its equity captiveness.



minority party

is foreign)


62 J Bus Psychol (2010) 25:55–74

Table 2 continued

Authors Hypotheses Study sample Findings Remarks

Payoff inequity

Ring and

Van de



Cultural diversity





Goal incompatibilities


and Weitz


Ross et al.


Alliance horizon

Heide and



Joshi and



‘‘We assume that an equally important criterion for

assessing a cooperative IOR is equity, defined as

‘fair dealing’ (which does not require that inputs

or outcomes always be divided equally between

the parties).’’ (p. 93; emphasis in original)

‘‘We also assume that the parties to a cooperative

IOR are motivated to seek both equity and efficiency

outcomes because of a desire to preserve a reputation

for fair dealing that will enable them to continue to

exchange transaction-specific investments under

conditions of high uncertainty (Helper and Levine

1992).’’ (p. 94; emphasis in original)

‘‘Differences in uncertainty avoidance between home

and host country – rather than differences in power

distance, individualism and masculinity – have a

negative impact on IJV survival.’’ (p. 849)

‘‘Differences in long-term orientation between home

and host country – rather differences in power distance,

individualism and masculinity – have a negative

impact on IJV survival.’’ (p. 850)

‘‘A channel member’s trust in a manufacturer increases

… the more congruent the manufacturer’s and channel

member’s goals.’’ (p. 315)

A focal firm’s ‘‘belief that the counterpart shares the

focal party’s objectives’’ refers to goal congruence,

which is negatively associated with the conflict the

focal firm experiences in the relationship. (p. 691)

‘‘Extendedness in a relationship will have a positive

effect on the level of cooperation between two interacting

firms in a Prisoner’s Dilemma context.’’ (p. 269) (Note:

Four measures of cooperation for both purchasers and

suppliers, creating eight regression coefficients)

‘‘A manufacturer’s long-term orientation toward a

supplier is negatively related to that manufacturer’s

opportunism against the supplier.’’ (p. 340)

– – Ensuring equitable outcomes in alliances is considered just as important

as attaining economic efficiency. Since alliance members are keen on

preserving equity, partners perceiving payoff inequity will strive to

bring back equity to the alliance. Subtle forms of opportunistic behavior

(e.g., shirking) offers a quick way to resolve perceived inequity in the


228 international

joint ventures

690 dyadic


510 focal actors

from 255 dyads

(insurer and


155 purchasing


and 60 suppliers

168 purchasing


t = 2.01 Differences in cultures, in general, are negatively related to alliance

(p \ .05) performance. More specifically, however, only select dimensions

of uncertainty avoidance and long-term orientation negatively

t = 2.61

(p \ .01)

influences alliance outcome. It is implied by the authors that

alliance survival is threatened due to relational difficulties

(one specific form of which is partner opportunism).

t = 14.46 If goal congruence increases interfirm trust, then goal incompatibility

(p \ .01) will increase the potential for partner opportunism in alliances

(assuming trust and opportunism are inversely related).

b = 0.156 Reversing the logic, goal incompatibility will be positively associated

(p \ 0.05) with perceived conflicts in an alliance relationship, which undermines

relational bonds and increases the potential for opportunism.

p \ .01 for 7


p \ .10 for




Evidently, firms expecting to continue in an alliance are likely to be

more cooperative. In alliances with long horizons, firms will

not only expect to continue in their alliances, but will also be

less likely to act opportunistically.

t = -2.47 Long-term orientation of a manufacturer will be reflected in its

(p \ .01) preference for a long alliance horizon. Evidently, this condition is

negatively related to the potential for a manufacturer’s opportunism.


J Bus Psychol (2010) 25:55–74 63

Table 2 continued

Authors Hypotheses Study sample Findings Remarks

Pressures for quick results

– – Pressures for quick results are very real in most alliances. Many firms

are unable to cope with such pressures for various reasons. Since opportunism

offers a clear-cut and quick way to reap substantial benefits

(albeit through unfair means), these firms have a higher potential to act

opportunistically to respond to the pressures for quick results.

‘‘Partners demand quick results in the short run and tend

to be less patient with long-term investment and

commitment. Consequently, alliance performance

evaluation will rely heavily on financial and marketbased

indicators.’’ (p. 59)

Das and



– – An alliance partner that evaluates alliance performance without

allowing sufficient time is not going to be satisfied with the results.

A dissatisfied partner will be disinclined to continue in the joint

project, perhaps causing premature termination of the alliance.

‘‘Many relationships die an early death when they are

scrutinized for quick returns.’’ (p. 102)



We take the focal firm’s perspective and analyze the

potential for opportunistic behavior by its partner, so that

an increase in the level of a particular determinant (as it

relates to the partner firm) would be likely to increase/

decrease partner opportunism. In Fig. 1 we present our

framework of determinants of partner opportunism.

Economic Determinants

The economic determinants of opportunism are the most

widely acknowledged in the literature, but especially so in

transaction cost economics (Klein et al. 1978; Masten

1988; Williamson 1975, 1979, 1993). Scholars maintain

that an alliance partner’s opportunism is shaped by economic

considerations (e.g., Klein 1996). An alliance partner

is driven by the need to procure economic benefits or to

avert economic losses. When such needs are acute, an

alliance partner may harm other alliance members in furtherance

of its own economic self-interest. The larger the

potential economic gains to be made, the more an alliance

partner would be driven toward opportunism. Thus, ‘‘even

among the less opportunistic, most have their price’’ to

give in to opportunism (Williamson 1979, p. 234). The

presence or absence of these factors can restrict or facilitate

a partner in opportunistically pursuing its economic selfinterest.

As a group, we call these factors the economic

determinants of partner opportunism. The set of economic

determinants comprise equity involvement, alliance-specific

investments, mutual hostages, and payoff inequity.

Equity Involvement

Broadly, alliance structural arrangements can be either

equity-based or nonequity-based. Equity alliances are considered

more effective than nonequity alliances in curbing

opportunistic behavior (Das and Teng 1996; Gulati 1995)

because equity binds member firms to the alliance, making

it difficult for them to withdraw easily. A partner firm will

not jeopardize its alliance relationship by exploiting the

focal firm’s alliance-specific investments if it has an equity

stake in that alliance. Similarly, if both firms contribute

known shares of equity in their alliance, they would be more

accepting of asymmetric resource commitments.

Equity is generally expressed in monetary terms. The

equity invested in the alliance would get tied up with

ongoing operations for an indefinite period of time and,

thus, cannot be readily retrievable. In fact, a partner would

have to depend on the focal firm’s cooperation to withdraw

its equity stake from the alliance. Plainly, a partner

behaving opportunistically with the focal firm cannot

expect cooperation from the focal firm in the withdrawal

process. Thus, opportunism creates problems for the partner

in recovering its equity stake in the alliance. The value of


64 J Bus Psychol (2010) 25:55–74

Fig. 1 Framework of

determinants of partner

opportunism. Note: (?) and (-)

indicate that an increase in the

level of the particular

determinant (as it relates to the

partner firm) would be likely to

increase/decrease potential

partner opportunism


Equity Involvement (–)

Asymmetric Alliance-specific Investments (+)

Mutual Hostages (–)

Payoff Inequity (+)


Cultural Diversity (+)

Goal Incompatibilities (+)




Alliance Horizon (–)

Pressures for Quick Results (+)

the tied-up equity that an opportunistic partner risks losing

would raise the required threshold of economic gains from


Proposition 1 The extent of equity involvement will

be negatively associated with potential for partner


Asymmetric Alliance-Specific Investments

In alliances, members often have to develop facilities or

acquire assets that are useful and valuable only within the

specific alliance context. The rationale for investing in

alliance-specific assets is to achieve higher efficiency in

alliance operations. However, as an unintended consequence,

a focal firm investing in these alliance-specific

assets becomes dependent on its partner’s cooperation in

the alliance. If there is a low level of dependence on the

focal firm, the partner will be more likely to behave

opportunistically, since it ‘‘can more easily shift to other

suppliers or provide critical services on their own than can

their highly dependent counterpart’’ (Provan and Skinner

1989, p. 205). Asymmetry in actual resource commitments

may affect the perceived asymmetry in commitment.

Indeed, as Ross et al. (1997) observe, ‘‘in the principalagent

context it may be discomfiting or disadvantageous

for the perceiver to believe that it is overcommitted relative

to its counterpart because this belief may create fear of

opportunism’’ (p. 683; emphasis in original).

Generally speaking, a focal firm becomes vulnerable to

partner opportunism when it invests in alliance-specific

assets. This is because there would be sufficient scope for

the opportunist to misappropriate the quasi-rents generated

from such investments. As Klein et al. (1978, p. 298)

emphasize: ‘‘After a specific investment is made and such

quasi rents are created, the possibility of opportunistic

behavior is very real.’’ If the opportunistic partner were to

leave the alliance, the focal firm would likely lose the

alliance-specific value of its assets. Hence, as long as the

loss of abandoning the alliance is greater than the loss

incurred due to partner opportunism, the focal firm will

have to continue to be a part of the alliance. The opportunistic

partner, in turn, would try to ensure just enough

reward for the focal firm to dissuade it from severing ties.

If a focal firm believes its commitment to the alliance to

be greater than that of the partner firm, it might perceive a

higher potential for partner opportunism, but especially so if

the focal firm happens to be a small firm or an entrepreneurial

firm (Das and He 2006). A firm’s apprehension of

opportunistic behavior by the partner may be exacerbated

when it has ‘‘paranoid concerns and fantasies about the

long-term lack of equity in the transfer of knowledge and

capability’’ (Gould et al. 1999, p. 697). By a similar logic, a

partner firm will also be apprehensive about possible

opportunistic behavior by the focal firm if it believes that its

own resource commitments are greater than that of the

focal firm. This heightened apprehension will, in turn, lead

to an increase in the partner’s potential for opportunistic


J Bus Psychol (2010) 25:55–74 65

behavior. In other words, the fear of the focal firm’s

opportunism may increase the partner’s own potential for

opportunistic behavior. The focal firm should understand

this logic, and realize that just as it apprehends opportunistic

behavior by the partner, the partner may in turn also fear

opportunism from the focal firm in situations of asymmetric

investments. Accordingly, the asymmetry intrinsically adds

to the potential for partner opportunism.

Proposition 2 Asymmetric alliance-specific investments

will be positively associated with potential for partner


Mutual Hostages

The idea of using mutual hostages by alliance members is

not new as a means of expressing credible commitment and

deterring partner opportunism. Mutual hostages serve as a

guarantee against defection (Williamson 1983). Alliance

firms can hold mutual hostages by exchanging their

respective critical resources with counterparts. The type,

amount, or value of resources to be used as hostages (e.g.,

equity, know how, personnel) can be explicitly stated as

contractual provisions. In this context, Hwang and Burgers

(1997, p. 105) assert that ‘‘mutual commitment offers a

way of enhancing the robustness of cooperation and

diminishing the attractiveness of defection.’’

Clearly, mutual hostages would thwart partner opportunism

even when the focal firm makes alliance-specific

investments. Such hostages would also reduce the perceived

asymmetry in resource commitments, since credible

commitments are established by both alliance members.

Finally, mutual hostages would artificially reduce the level

of private benefits for the opportunist, since it would have

to forgo its own hostage investment. This would yield a

low private to common benefits ratio, effectively decreasing

the potential for partner opportunism.

Proposition 3 Mutual hostages will be negatively associated

with potential for partner opportunism.

Payoff Inequity

Partners often perceive their gains from the alliance to be

inequitable compared to those of the focal firm. Following

equity theory (Adams 1963), the partner that perceives its

rewards as inequitable would be driven to assure a sense of

equity. Often, this may be accomplished by resorting to

opportunistic behavior. We are, of course, concerned here

only with under-compensation as a form of inequity. An

over-compensated partner firm will have no motivation for

behaving opportunistically. It is only when the partner feels

under-compensated that it will seek to even out the payoff

arrangements through non-cooperative means.

The partner firm will react opportunistically to restore

equity when it perceives inequitable allocation of alliance

gains. Alliance firms tend to work in an intertwined fashion,

often to such an extent that it becomes impossible to

objectively account for each partner’s contribution toward

the alliance’s performance. Ambiguity in measuring each

member’s performance would complicate the problem of

payoff inequity. The greater the perceived inequity, the

higher will be the potential for opportunistic behavior by

the partner.

Proposition 4 Payoff inequity will be positively associated

with potential for partner opportunism.

Relational Determinants

The second set of determinants of opportunism is relational.

Ghoshal and Moran (1996) note that a partner’s

feeling for other alliance members would affect that partner’s

opportunistic attitude, which would lead to opportunistic

behavior. The relational determinants influence

partner opportunism in three general ways. First, a relationship

that lacks interpartner legitimacy (Kumar and Das

2007) can act as a sanction for a partner to be less sensitive

to the well-being of other members. Therefore, an opportunistic

partner would not feel guilty or even be concerned

about the focal firm being adversely affected by its

opportunism. Second, when an alliance partner feels

coerced by the focal firm in some way, it would be likely to

consider a response to the coercion. An atmosphere of

interpartner harmony (Das and Kumar 2009a) is breached,

thereby making way for partner opportunism. Third, the

lack of an intimate relationship could easily give rise to

misunderstandings, thereby provoking partner opportunism.

The relational determinants of opportunism discussed

here are cultural diversity and goal incompatibilities.

Cultural Diversity

Cultural diversity among alliance members is a common

phenomenon. Although most research on cultural diversity

in alliances has been in the context of cross-national alliances

(e.g., Johnson et al. 1996; Kumar and Das 2009; Meschi and

Roger 1994), alliance firms from the same country may also

have very distinct organizational cultures (Harrigan 1988).

However, regardless of the source—be it national or organizational—cultural

diversity creates relational issues in

alliances. Firms from different cultures see the strategic

behavior of their partners through different lenses, since

‘‘different cultures are likely to interpret and respond to the

same strategic issue in different ways’’ (Schneider and De

Meyer 1991, p. 307). Thus, the chances of misinterpreting

the partner’s actions are high. Contrasting national cultures,


66 J Bus Psychol (2010) 25:55–74

Brown et al. (1989, pp. 237–238) observe: ‘‘The Japanese

believe the straightforwardness of Westerners is rude and

probably masks deceit. Westerners believe the Japanese

inability to come to the point quickly denotes trickery, and

find their negotiating tactics underhanded.’’ In their study of

IJVs, Johnson et al. (1996, p. 83) argue that, in general,

‘‘cross-cultural interaction, often replete with misunderstandings

and miscommunication, can foster opportunistic


From the focal firm’s perspective, cultural diversity

would be cause for increased partner opportunism for a

couple of reasons. First, the partner firm may react

opportunistically based on a misinterpretation of the focal

firm’s behavior as threatening. According to Brouthers

et al. (1995, p. 23), ‘‘Different cultures have unique time

frames, alternative priorities, and distinctive methods of

saying no. Those managers cognizant of these cultural

differences will not misread partner signals and will

therefore be more successful in their alliances.’’ Misunderstandings

due to different cultural values and interpretation

mechanisms would hinder communication and lead

to poor interfirm relationship, perhaps provoking the partner

into behaving opportunistically.

Second, cultural distance may result in a self-centered,

ethnocentric approach in dealings with alliance members.

Firms would be more likely to hold a positive feeling for a

potential alliance partner with a similar cultural background,

whereas they would be more apprehensive about

one with a different cultural background. As Ghoshal and

Moran (1996, p. 21) also observe: ‘‘As shown by Ajzen and

Fishbein (1977) and Eagly and Chaiken (1992), a positive

feeling for the entity would reduce opportunism whereas a

negative feeling would enhance it.’’ Over all, increased

cultural diversity leads to greater potential for partner


Proposition 5 The cultural diversity among alliance

members will be positively associated with potential for

partner opportunism.

Goal Incompatibilities

Goals are incompatible when the pursuit of one hinders the

pursuit of the others. This is different from goal dissimilarity,

whereby alliance members have different goals, but

without any problem, because these goals are not in conflict

with each other. Although mutual strategic interests often

bring prospective alliance partners together, their goals can

sometimes be incompatible. According to Hill and Hellriegel

(1994, p. 594), ‘‘joint ventures are particularly likely

to be subject to goal conflicts since they are formed by two

or more firms, each with its own set of goals. Ultimately, a

joint venture is measured by the extent to which the venture

meets the goals and expectations of the individual partners.’’

In time, alliance relationships may become sour,

filled with bickering and the blaming of each other. When

the attractions of newness in cooperative arrangements fade

away and the potential for disputes becomes apparent,

alliance members ‘‘may feel compelled to retreat from

interactions, withhold information, and safeguard personal

interests’’ (Gassenheimer et al. 1996, p.77).

Self-interest seeking may encourage deceit when goals

are not aligned. When goals are compatible, each member

can pursue its own interests without harming those of the

others. In that case, mutual self-interest seeking becomes

possible. However, when alliance members’ goals are

incompatible, a partner firm trying to accomplish its own

goals may seem to behave in an uncooperative manner.

‘‘Firms involved in alliances must have goals that support

each other, not compete with each other. Competitive

goals, such as ‘get all you can,’ are counterproductive

and result in alliance failure’’ (Brouthers et al. 1995,

pp. 21–22). Thus, the focal firm is likely to perceive its

partner’s actions as opportunistic when goals are incompatible.

An alliance partner would harm the focal firm if it

pursues self-interest when the focal firm’s goals are

incompatible. Opportunism yields no risk of loss for the

partner, for the focal firm’s goals would not benefit

the partner anyway. Thus, the relational tension would

increase—and the relational bond would weaken. A partner

would feel less restraint against opportunism. Thus, conflict

is very likely when alliance firms have incompatible goals.

As a consequence, as Cullen et al. (1995, p. 95) observe,

‘‘Conflict erodes trust, increases the potential for opportunistic

behavior, and reduces the likelihood of partners

dedicating necessary idiosyncratic assets to the relationship.’’

Disagreement over goals may also lead to dissatisfaction

with the relationship, to the detriment of the

cooperative spirit. Dissatisfied alliance members will be

less likely to feel committed to each other or to the alliance,

thereby increasing the likelihood of opportunism.

Proposition 6 Goal incompatibilities among alliance

members will be positively associated with potential for

partner opportunism.

Temporal Determinants

The third set of factors determining partner opportunism is

concerned with the time dimension. Alliances differ in

their intended duration of existence. A short duration

would elicit a different partner behavior, with scope for

easy exit after opportunistic gains, compared to a long

duration, in which the partner has to continue dealing with

the focal firm for some period of time. Also, temporal

pressures can motivate a partner to behave in ways that it


J Bus Psychol (2010) 25:55–74 67

would not do under ordinary conditions. For instance, the

sense that operating results need to be achieved in an

accelerated manner can cause a partner to worry excessively

and to resort to desperate measures (i.e., opportunistic

actions) to meet deadlines. The notion that partner

opportunism may arise from temporal determinants has

been proposed recently by Das (2006). We need to be

careful here to exclude factors that merely evolve over

time, and may superficially appear to be temporal in nature

(such as learning races) but are intrinsically economic in

motivation. The temporal determinants of opportunism are

comprised of alliance horizon and pressures for quick


Alliance Horizon

Strategic alliances are inherently temporary. Although

some joint ventures have lasted for multiple decades, the

underlying intention of alliance members during the formation

of the alliance is to have an arrangement that would

exist for a finite time period, not a permanent arrangement.

While explicit dates of dissolution are generally agreed on

during alliance formation, some alliances have an indeterminate

termination date. Alliance horizon is the duration

an alliance is expected to be in existence, or the intended

time span between the formation of an alliance and its


Alliance horizons can vary in time span from short to

long to open-ended. A short alliance horizon would foster

opportunism, whereas a long alliance horizon would deter

such deceitful behavior. Alliance horizons affect partner

opportunism in several ways (Das 2004, 2006). First, alliance

horizons positively impact the length of ‘‘the shadow

of the future.’’ Research suggests that a long shadow of the

future compels a partner to seriously assess the prudence of

engaging in opportunism, for it has to be concerned about

possible repercussions it might have to face in the

upcoming future (Axelrod 1984; Heide and Miner 1992).

Second, during the course of alliance operations, not all

gains can be split equitably between alliancing firms. When

the alliance horizon is long, sufficient time is usually

available for evening out temporary inequities between

alliance members. Therefore, a long alliance horizon would

give a partner confidence that apparent inequities will not

persist in the long run. In such a circumstance, a partner

will not have to resort to opportunism to restore its sense of

equity. Third, having set up a long alliance horizon, a

partner would be more inclined toward preserving the

relationship. According to Ring and Van de Ven, ‘‘in the

temporal development of a cooperative IOR [interorganizational

relationship], social psychological processes

will create a separate set of pressures to preserve the

relationship’’ (1994, p. 95). Moreover, continued and

supplementary commitments are likely to be high in an

alliance with a long horizon, which would also serve to

constrain partner opportunism.

Proposition 7 The length of alliance horizon will be negatively

associated with potential for partner opportunism.

Pressures for Quick Results

It usually takes some considerable time before alliances

start producing results. Das and Teng (1999, p. 59) explain

that ‘‘alliances are time-consuming projects because partner

firms have to learn to work together smoothly and efficiently,’’

so that pressures for quick results during the initial

stages of the alliance may in fact jeopardize the possibilities

of that alliance becoming a profitable venture. However,

firms differ in their preferences: ‘‘One partner may have a

sense of urgency and favor quick results, while the other has

a long-term view and is more oriented towards investments

in financial assets and in building up a relationship with the

partner’’ (Barkema and Vermeulen 1997, p. 849). Also,

firms may have a host of reasons for seeking quick results

from their alliance projects. First, firms often lack the

patience to allow the interfirm relationships to develop, so

that they tend to treat the alliance merely as a one-off

business transaction. Second, a firm may be unwilling to

wait sufficiently long to see the performance results develop

because it does not have the requisite faith in its partner or

in the alliance. Third, a firm may simply not be able to

afford to wait long enough for optimum alliance outcomes,

because substantial resources would remain tied up in the

alliance during such an extended period.

A partner experiencing pressures for quick results may

resort to desperate means to acquire gains from the alliance.

One of the significant advantages of opportunistic behavior

is that it provides immediate results, although it comes at

the expense of potentially greater long-term benefits. Brown

et al. (2000, p. 51) observe: ‘‘A firm behaves opportunistically

to increase its short-term, unilateral gains. As a result,

opportunism by one party can erode the long-term gains

potentially accruing to both parties in a dyadic channel

relationship.’’ Because a partner under pressure for quick

results would discount future outcomes at a much higher

rate, the opportunity cost of opportunistic behavior would

appear negligible to such firms and the potential for

opportunistic behavior would be high.

Proposition 8 Pressures for quick results will be positively

associated with potential for partner opportunism.

Our discussion of the broad framework of determinants

should, we hope, help in appreciating the multiplicity of

influences that are simultaneously at play in constituting


68 J Bus Psychol (2010) 25:55–74

partner opportunism in alliances. In particular, the wide

variety evident in the list of determinants attests to the

inherent complexities of partner opportunism. It would be

useful now to explore the differential saliencies of the

various determinants in the three principal forms of


Determinants in Different Types of Alliances

The basic distinction among the myriad forms of strategic

alliances is in terms of equity and nonequity alliances. This

simple dichotomy is widely evident in the empirical literature

for eminently practical reasons (e.g., Gulati 1995). Of

course, more complex classifications have also been proposed

(e.g., Lorange and Roos 1993). However, for our

purposes here, we follow a somewhat parsimonious categorization

of the rich variety of alliances, and use the three

types followed by Das and Teng (1998)—equity joint

ventures, minority equity alliances, and nonequity alliances.

Equity joint ventures are the only form of alliances

involving the creation of a third entity. Alliance members

are usually referred to as parents of the joint venture

organization. The parents share the ownership of the joint

venture and influence its strategic direction. Minority

equity alliances are interfirm relationships where a member

holds an equity stake in the partner, or cross-hold equity in

each other. Sharing of ownership reflects a high level of

commitment to the alliance on the part of the alliance

members. Nonequity alliances, as the name suggests, do

not involve any equity or the transfer of ownership. They

are contract-based and contingency provisions in the contract

can usually make them quite flexible. Nonequity

alliances do not ordinarily bring alliance members into

close proximity and do not usually foster an intimate

business relationship.

The characteristics of each type of alliance allow certain

determinants of opportunism to become more salient than

others. For an understanding of the dynamics of the various

factors at play, we select and discuss briefly, for each

alliance type, the most salient factor in each of the three

sets of determinants. In Table 3, we indicate these significant

determinants of partner opportunism in the three

types of alliances.

Equity Joint Ventures

Among the economic determinants of partner opportunism,

equity involvement appears to be the most prominent in

equity joint ventures. A joint venture requires the parent

firms to invest substantial equity to set up the commonly

owned, independent organization. Therefore, equity

involvement is likely to be an active determinant of

opportunism in a joint venture. Scholars have argued, both

conceptually and empirically, that the more equity an alliance

member invests in a joint venture, the less likely it is to

resort to opportunism (Beamish and Banks 1987; Buckley

and Casson 1988; Das and Teng 1996; Gulati 1995). This is

because of the possibility of losing the equity investments

tied up in the joint venture if the partner firm were to get

caught in an opportunistic act and had to face legal or social

consequences. There is added complication if we try to

distinguish between equal and unequal splits in equity

involvement by the members. However, the specific kind of

arrangement that would most enhance the effects of equity

involvement, as a determinant of opportunism, is unclear

from existing empirical findings. Whereas some scholars

have found equal equity involvement to be more conducive

to joint venture success (Bleeke and Ernst 1991; Blodgett

1991), others have found unequal equity involvement by the

parents to be positively associated with joint venture success

(Killing 1982).

Of the relational determinants, cultural diversity has the

more important role in equity joint ventures. First, joint

venture parents have to work very closely with each other.

This closeness would reveal the various critical cultural

characteristics of each parent. Hence, also, the cultural

differences are more likely to surface in equity joint ventures

than in other forms of alliances. These differences

could be a serious problem, because they could hinder the

tightly integrated work process through poor communication,

misunderstanding, and unnecessary provocations

(Glaister and Buckley 1999, p. 127). Research also suggests

that organizational culture differences are more detrimental

to interfirm relationships than are national cultural

differences of the joint venture firms (Harrigan 1988).

We observed from our analysis that the temporal

determinants of opportunism would be important in

influencing potential partner opportunism in equity joint

Table 3 Significant determinants of partner opportunism in different alliance types


Alliance types

Equity joint ventures Minority equity alliances Nonequity alliances

Economic Equity involvement Asymmetric alliance-specific investments Payoff inequity

Relational Cultural diversity Goal incompatibilities Goal incompatibilities

Temporal Alliance horizon Pressures for quick results Pressures for quick results


J Bus Psychol (2010) 25:55–74 69

ventures. As the parent firms jointly create a new firm, it is

usually the case that operations would have to continue for

a long period of time to realize net gains. Given the relatively

long-term nature of equity joint ventures, alliance

members realize that they would have to work together for

a relatively long period of time. Therefore, firms planning

to form an equity joint venture would generally prefer a

long alliance horizon. Based on our rationale regarding

temporal determinants, a long alliance horizon would have

a significant impact on decreasing the potential for partner


Minority Equity Alliances

Among the economic determinants, asymmetric resource

commitments in the form of alliance-specific investments

would have a strong influence on partner opportunism in

minority equity alliances. When an alliance firm commits

alliance-specific resources, it becomes very vulnerable to its

partner’s potential exploitative intentions. In such asymmetric

contributions, one firm is bound to become more or

less dependent vis-à-vis the other firm. A partner that is less

dependent may behave opportunistically because of the

excessive dependence of its counterpart. It should be noted

that the impact of alliance-specific resource commitments

would be strong when such commitments are made disproportionately

or one-sidedly, i.e., only by the focal firm.

The problem is more acute in a minority equity alliance than

in an equity joint venture. This is because a partner with less

alliance-specific resource commitments may take advantage

of the focal firm’s vulnerability arising from more

resources committed.

Of the relational determinants, goal incompatibilities

appear to be the important influence on partner opportunism

in minority equity alliances. Incompatible goals

between alliance members of a minority equity alliance

would be likely to erode relational harmony over time. The

effect of goal incompatibilities is further complicated by

the fact that alliance firms cannot just disband the alliance

on account of the equity stakes they hold in each other. As

dissolving the alliance is not a ready option, a partner firm

would seek self-interest through every way possible,

including opportunism. A partner would resort to shirking,

withholding of critical information, and various acts of

infidelity under such circumstances.

Of the temporal determinants, pressures for quick results

affect opportunism in minority equity alliances. Such

pressures might arise if a partner overlooks the time it

would take to resolve numerous unforeseen problems

within the alliance, before getting into actual performancerelated

activities (Das and Teng 1999). Because of the

idiosyncratic nature of the equity tie-up, where a partner

cannot just hold back and leave the alliance, a partner

feeling put upon by pressures for quick results would discount

long-term results and would be drawn toward shortterm

gains. Since opportunism offers the perfect method

for ensuring short-term gains, a partner feeling pressures

for quick results would be inclined toward opportunism.

Nonequity Alliances

A partner is most likely to perceive payoff inequity in a

nonequity alliance. Given the lack of an objective and

tangible basis for distributing income generated from alliance

activities (there being no relative equity contribution

by alliance members in a nonequity alliance that can serve

as a basis for distributing residuals), perceptions of payoff

inequity can exist. Reacting to its perceptions, a partner firm

may resort to opportunistic behavior to regain a sense of


Of the relational determinants, goal incompatibilities

could be potent in breeding opportunism in nonequity

alliances. In this type of alliance, member firms usually do

not have to interact closely in carrying out alliance tasks.

Thus, they are not exposed to each other’s organizational

culture, diminishing the saliency of cultural diversity as a

relational determinant of opportunism. However, an alliance

partner might find it convenient to breach the principle

of exclusivity that forms part of the contracts of

nonequity alliances. Griesinger (1990) characterizes this

form of opportunism as infidelity.

Of the temporal determinants, pressures for quick results

are common in nonequity alliances. Firms start off with

this type of alliance to test the waters before engaging in

more deeply involved business relationships. An alliance

partner feels the pressures for quick results because realizing

alliance outcomes quickly lets it decide on possible

extension of the existing alliance. Unfortunately, a lack of

time often yields less than satisfactory results, prompting

the alliance partner to behave opportunistically to secure


Discussion and Conclusion

Theoretical Contribution

We noted from a review of the literature that our understanding

of partner opportunism in strategic alliances has

generally been inadequate. In this article we attempted to

contribute to the literature by proposing an overarching

framework of determinants of potential partner opportunism.

We began by suggesting an encompassing definition of

partner opportunism as a basis for better understanding and


70 J Bus Psychol (2010) 25:55–74

study of the phenomenon. We then identified a comprehensive

set of determinants comprising three categories of

factors: economic, relational, and temporal. These determinants

were discussed individually to better understand

the rationale for a partner firm to behave opportunistically.

We followed this up with a brief examination of the

differential saliencies of these determinants in three major

types of alliance settings, namely, equity joint ventures,

minority equity alliances, and nonequity alliances. This

kind of analysis should eventually assist mid-range theorizing

consistent with our contingency approach.

A striking—and unexpected—insight that emerged from

this exercise is that minority equity and nonequity alliances

seem to be prominently influenced by very similar kinds of

determinants of partner opportunism (see Table 3).

Although these two types of alliances have different economic

determinants, they have the same relational and

temporal determinants. The overall array of the determinants

in minority equity and nonequity alliances are in

clear contrast with the list of determinants in equity joint

ventures. We believe this difference maybe due to the

fundamental distinction between an equity joint venture,

which involves the creation of a third entity by the member

firms, and the other two forms of alliances, which involve

no such third entity. Thus, the mostly similar sets of critical

determinants in minority equity and nonequity alliances,

and a quite different set of determinants in equity joint

ventures, suggest that perhaps we should adopt a new

perspective in research concerning partner opportunism in

alliances. Whereas extant empirical studies have routinely

contrasted equity and nonequity alliances (i.e., treating

equity joint ventures and minority equity alliances together

as one cluster), such categories may not be the most conceptually

sound way of grouping alliances for purposes of

testing hypotheses relating to partner opportunism.

Accordingly, we suggest that it would probably be useful to

distinguish joint ventures from all other forms of alliances,

minority equity and nonequity. This would facilitate more

focused research on partner opportunism, especially in

light of the specific sets of salient determinants in the three

different alliance forms discussed here.

As an extension, we would speculate that there might

indeed be reason for entertaining the notion that other

relevant constructs in alliance research—such as confidence

in partner cooperation, relational risk, interfirm trust,

and partner control—might also be better examined

through the dichotomy based on creation or otherwise of a

third entity rather than on the basis of equity versus nonequity.

Our discussion also, of course, suggests a fortiori

that a three-part categorization, giving minority equity

alliances a distinctive status along with the other two,

would be warranted in all research where alliance variety is

of interest and focus.

Limitations and Future Research

The framework of determinants of opportunism proposed

here may be augmented with other factors. We mention

briefly a few other candidates for determinants, each of

which can be included in one of our three categories. For

example, a partner firm’s embeddedness in a dense network

ensures good behavior (Hill 1990), since opportunistic

behavior with the focal firm will become known to all

networked members, who are in a position to collectively

impose social sanctions on the opportunistic firm. Relational

embeddedness (i.e., the extent of direct relationship

between two firms) and structural embeddedness (i.e., the

structural position of the firm in the network) reduce the

potential for partner opportunism within the context of

sparse and dense networks respectively (Rowley et al.

2000). Relational embeddedness reduces the potential for

opportunism that can occur due to a lack of relational

harmony. Hence, we would include this factor in the category

of relational determinants. In contrast, structural

embeddedness reduces the potential for opportunism by the

threat of sanctions that could result in substantial economic

losses for the opportunistic partner. Thus, this factor can be

placed in the category of economic determinants.

Furthermore, John (1984) found that coercion is related

to the perception of partner opportunism. Thus, a focal firm

that feels coerced by the partner would perceive its partner

to be opportunistic. This type of opportunism arises from a

lack of relational understanding and feeling of antipathy

toward the supposedly coercive partner. Thus, we would

categorize this factor under relational determinants.

While there may be other factors that can be thought of

as determinants of opportunism, we believe that all these

will consistently fit into the three-category framework we

have proposed here. Doz et al. (2000) reviewed nine latent

constructs that play significant roles in making up the initial

conditions of alliance formation. Some of the latent

constructs they review may influence the incidence of

opportunism once the alliance gets underway, e.g., similar

interests, domain consensus, escalation of commitment,

continuity of expectation, and learning. Similar interests

allude to less goal conflicts (Doz 1996; Larson 1992),

thereby reducing the potential for opportunistic behavior.

Seeking domain consensus implies ‘‘efforts to produce

consensus by sense making and understanding processes

undertaken during negotiation processes. … Potential collaborators

need to reach meetings of the mind not only

intellectually and strategically, but also culturally and

ethically’’ (Doz et al. 2000, p. 241). Thus, domain consensus

can foster cultural blending as well as common

alliance objectives for member firms, which effectively

would reduce the probability of partner opportunism, and

can thus be included among relational determinants. This is


J Bus Psychol (2010) 25:55–74 71

also true of the construct of escalation of commitment,

which would tend to reduce the likelihood of the alliance

partner behaving opportunistically, as relational bonds

between alliance firms grow stronger over time.

The construct of continuity of expectation has time at its

core (Telser 1980). A partner’s expectation of continuing

the alliance relationship is subsumed in the notion of alliance

horizon, which is one of the temporal drivers of

opportunism that we have introduced in this paper (see also

Das 2004, 2005, 2006). While Doz et al. (2000, p. 242)

argue that difficulties in learning and adapting initial conditions

invite spiraling conflicts between alliance members,

that issue is more about adaptation than learning. Partner

opportunism can also be associated with the learning race

in alliances (Hamel 1991). Learning races conjure up the

probability of a partner outlearning a focal firm (Das and

Kumar 2007). In such circumstances, the faster-learning

partner would be in a position to find ways to advantageously

back out of the alliance, violating the spirit of the

alliance contract. This kind of partner opportunism, stemming

from learning races, would belong in the economic

determinants category.

An interesting question is whether partner opportunism

may be associated with exogenous factors, such as demand

uncertainty and technological uncertainty. Clearly, these

factors limit the probability of accomplishing alliancespecific

goals, thereby increasing the performance risk of

alliances. However, such conditions have no direct effect in

triggering non-cooperative behavior (i.e., partner opportunism).

Nevertheless, economic hardship, arising from

exogenous factors, can make economic drivers of opportunism

more salient. That is, a partner’s desire to acquire

economic benefits through opportunistic behavior may

increase when the general economic conditions are not

favorable (i.e., under conditions of high demand and

technological uncertainty). Therefore, these exogenous

variables may positively moderate the relationship between

economic determinants and the potential for partner


Future research would also need to explore the role,

generally, of various moderators that could affect the

potency of the three categories of determinants of partner

opportunism. For instance, the financial standing of a

partner firm may have a moderating effect on the impact

that some of the economic determinants may have on

opportunism. A partner with a weak financial standing

would have a dire need for economic gains from the alliance

and would accentuate the influence of the economic

determinants. In terms of the relational determinants,

industry similarity between alliance members may have a

moderating role. Alliance members from similar industries

would more likely understand the managerial styles of their

counterparts. Thus, even if conflicts or misunderstandings

occur, the impact on partner opportunism would be much

less when alliance members come from the same or similar

industries. In the case of the temporal determinants, the

preferred planning horizon of a partner firm may have a

moderating effect. A partner’s long-term goal (e.g., building

market share) would be in alignment with a long alliance

horizon but at odds with a short alliance horizon (Das

2006). Similarly, a short-term primary goal (boosting the

stock price) would probably enhance the function of

pressures for quick results in partner opportunism. Furthermore,

it would be useful to study how particular

determinants of potential partner opportunism may have

selectively conspicuous roles in specific alliance developmental

stages (Das and Teng 2002a). The temporal aspects

of alliances and their intersection with potential partner

opportunism may also have critical significance in alliance


As academic inquiry of the role of partner opportunism

extends into the emerging areas of alliance research, it

would be fruitful to explore how the various determinants

discussed here would be modified in the case, for example,

of multi-partner alliances. Having much more complex

internal dynamics because of indirect reciprocity among

the members (Das and Teng 2002b), it would be reasonable

to expect that the relational determinants, in particular, in

this type of alliance will have the more prominent part.

Renewed attention is needed for examining the changing

functional impact of partner opportunism in the increasingly

micro-behavioral approaches that are being adopted

for studying alliance functioning, such as interpartner

legitimacy (Kumar and Das 2007), interpartner sensemaking

(Das and Kumar 2009b), interpretive schemes (Das

and Kumar 2009c), and the socio-cognitive motivational

principle of regulatory focus (Das and Kumar 2009d). For

instance, it seems that alliance firms with a promotion

regulatory focus will be more tolerant of their partners’

opportunistic behavior than alliance firms with a prevention

regulatory focus. When this contingent view of the

sensitivity to partner opportunism is considered in conjunction

with the different stages of alliance development,

an obvious research task would be to seek a fine-grained

appreciation of the comparative influences of the different

categories of determinants of partner opportunism across

all developmental stages and alliance types.

Managerial Implications

Our discussion here has important managerial implications.

The comprehensive approach to the determinants of partner

opportunism should help the manager of the focal firm to

evaluate systematically the circumstances that may

increase or decrease the probability of the partner firm

acting opportunistically. Thus, managers of the focal firm


72 J Bus Psychol (2010) 25:55–74

would be in a better position to assess the risk of an alliance

engagement with a particular partner.

Alliance managers have at their disposal a set of tools to

ensure the smooth functioning of the alliance. These tools

are related to the functions of alliance managers and to

ongoing operations. The unique feature of these managerial

tools is that they are all geared toward restricting the scope

of partner opportunism. The key tools to deter and control

potential partner opportunism comprise monitoring, budgeting,

and participatory decision making (Das 2005; Das

and Rahman 2001, 2002).

Monitoring is useful in detecting signs of the partner’s

opportunistic behavior by closely observing the activities

of the partner within the alliance context. At a conceptual

level, we would argue that the probability of being exposed

as an opportunist would sometimes be sufficient in dissuading

the partner from misbehavior. Close monitoring

can identify shirking even when performance measurement

is ambiguous. The focal firm can also use this mechanism

when the partner has a reputation for defecting. In the

alliance context, budgeting covers the allocation of

resources to alliance members to enable them to perform

designated tasks. Budgets financially restrict wasteful

behavior by the partner. Since a minimum level of performance

is expected within specific budget constraints,

misrepresentations or delivery of sub-standard goods

would very likely get detected. Therefore, budgets can

effectively put a leash on an ill-reputed partner’s conduct

within the alliance. As a managerial tool, participatory

decision making involves bringing in representatives of all

member firms to make decisions regarding alliance goals,

maintenance, operations, performance, and the like. It also

bridges the gap in values, understanding, and communication

between partners. Furthermore, when alliance

members share in decision making, the inequity perceived

by each member can be readily addressed. For these reasons,

participatory decision making will decrease the

potential for partner opportunism.

Depending on the potential for partner opportunism, the

focal firm would be able to use the optimally efficient

combination of deterrence mechanisms to curb the incidence

of opportunism (Das 2005). In particular, managers

may be able to select specific mechanisms that would be

appropriate for controlling partner opportunism generated

primarily by each of the three types of determinants. For

instance, if the focal firm is apprehensive of partner

opportunism that is driven predominantly by cultural

diversity (a relational determinant), it might well emphasize

employee training designed specifically to foster sensitivity

to cultural differences and institute trust-building


In summary, we hope this article contributes toward

a better appreciation of the factors that account for

opportunistic behavior of partner firms. The framework of

determinants proposed here should facilitate the rigorous

study of partner opportunism, thus far inadequately

examined as a problematic and complex phenomenon in

the field of strategic alliances.


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