Why Different Birds Flock Together? A Social Exchange Perspective on Asymmetric Alliance Formation

Why firms with different status are motivated to ally? Although status homophily hypothesis argues that firms with a similar status are more likely to associate with each other, there exists a high tendency for high-status and low-status firms to form an alliance. Extending a social exchange perspective, this study identifies several critical conditions for the exchange relationship between asymmetric partners to occur. Specifically, we move beyond implicit assumptions of status homophily by highlighting a reciprocity rule in this exchange relationship. We argue that firms are motivated to seek complementary resources from asymmetric partners and the formation of this relationship is subject to the influences of exchange contexts such as network density and technological uncertainty. An analysis of alliance relationships in U.S. computer and pharmaceutical industries from 1992 to 2000 largely supported our thesis.