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How tight an embrace? Choosing the optimal degree of partner interaction in alliances based on risk, technology characteristics, and agreement provisions



This study examines a key question one asks when negotiating an alliance: ‘how tight or loose a relationship do we wish to have with our partner?’ Interaction with one's partner is necessary in order to coordinate operations, effectively transfer tacit knowledge, monitor for opportunism, maximize joint synergistic value, and make sure that an appropriate share of the net benefit created by the alliance is appropriated by the technology provider. However, too tight an ‘embrace’ or too high a degree of interaction between the allies can increase coordination costs and increase the chance of unintended technology leakage. The sample, comprising 95 international alliances involving technology transfers, is grouped into four clusters with rising levels of interaction between allies. The optimal degree of interaction between the partners is explained by variables drawn from (1) technology characteristics and future technology policy, (2) coordination costs and risks, (3) agreement provisions, and (4) firm and sector characteristics that existed during the negotiation of the alliance. Using a proportional odds model, variables in the ‘coordination costs and risks’ and ‘agreement provisions’ categories found the most support in the results.