Inertia, uncertainty, and exploratory partner selection

Abstract

Purpose The purpose of this paper is to examine the following research question in partner selection decisions in business-to-business strategic partnerships/collaborations literature: How do inertia and uncertainty affect partner selection? Explicitly, the paper analyzes how inertia of previous alliance selection routines and uncertainty of entire market movement shape firms’ preferences regarding exploratory partner selection (i.e. selecting new partners who never collaborate with the focal firm). Design/methodology/approach Grounded on inter-firm partnerships, partner selection and network theory literature, the study empirically tests a fine-grained sample of 511 open-end funds initiated by 61 fund management firms in China. To do so, it runs Tobit regression for main analysis and applies a variety of sensitivity analyses to check the robustness. Findings Results show that inertia in previous partner selection has a negative effect on exploration. Importantly, these inertial forces impact domestic firms but not international firms. Market uncertainty also affects exploratory partner selection: short-term market uncertainty encourages exploration, whereas long-term uncertainty inhibits it. These effects also depend on firms’ type: long-term market uncertainty has a negative effect on exploration for international firms but not for domestic firms. Both types of firms exhibit a stronger tendency toward exploration when they encounter short-term uncertainty. However, this inclination is stronger in international firms. Originality/value Earlier research has examined how inertia affects exploitation but largely overlooked its effect on exploration. A critical examination of firm and environment level factors provides a deeper understanding of why and when firms have inconsistent preferences for specific partner selection strategies. Thus, this study offers a unique perspective for understanding firms’ exploratory partner selection by focusing on two important characteristics of focal firms: one internal (inertia) and one external (market uncertainty) in nature.

How environmental turbulence influences firms’ entrepreneurial orientation: the moderating role of network relationships and organizational inertia

“…This uncertainty focuses on the organizational behaviors of strategic decisions for opportunistic gains by partners, not unpredictable situations from the external environment. Besides, Liang and Mei (2019) explore uncertainty by time scales of short and long terms. They consider that short- and long-term market uncertainties shape a firm’s different preferences of partner selection in alliance strategies.…”

Environmental turmoil and firms’ core structure dynamism: the moderating role of strategic alliances

“…The organizational ecology theory posits that individual firms are inert: they cannot change easily or quickly (Li et al , 2013; Mens et al , 2015; Peli et al , 1994). Such organizational inertia results from various sources, including routines, defined as the repeatable patterns of interdependent behaviors, established roles and formal organizational rules (Bresman, 2013; Liang and Mei, 2018). These factors comprise firms’ internal structure and are difficult to alter quickly (Yi et al , 2016).…”

Guest editorial

“…It is found that buyers with strong political ties are more likely to choose a market-based selection of suppliers, and hence magnitude of this relationship will be enhanced when technological uncertainty is high and will be diminished when buyer opts for social control over contractual control in supplier governance. The next article titled "inertia, uncertainty, and exploratory partner selection" by Liang and Mei (2019) add knowledge to network theory and B2B strategic alliances literature by analyzing how inertia of previous partner alliance routines and home country's market uncertainty influence firm's selection of new partners in the case of Chinese financial fund management business. Findings suggest that inertia of previous partner selection has a strong negative impact on domestic fund firm's exploratory partner selection, and hence, short-term market uncertainty in the home country influences both local and foreign fund firms toward the selection of new partners, though long-term market uncertainty influences only local fund firms and not foreign fund firms.…”