J Bus Psychol(2010)25: 55-74 DOI10.1007/s10869-0099132-2 Determinants of Partner Opportunism in Strategic Alliances: A Conceptual Framework T K Das. Noushi rahman Published online: 16 September 2009 e Springer Science+Business Media, LLC 2009 Abstract Originality/value Although scholars in various disci- Purpose We present a comprehensive framework of the plines have studied the general topic of opportunistic key determinants of partner opportunism in strategic behavior, our understanding of partner opportunism in alliances strategic alliances appears to be fragmented and inade- Design/methodology/approach We propose an extended quate. As partner opportunism is acknowledged as a sig definition of partner opportunism and three categories of nificant threat to alliance survival and success,a the determinants of partner opportunism based on a review comprehensive framework of the key determinants of such of the literature. These categories comprise economic opportunism should improve our understanding of this actors(equity involvement, asymmetric alliance-specific phenomenon and to also provide an impetus for future investments, mutual hostages, and payoff inequity ), rela- research. The article also responds to the need of alliance ties), and temporal factors(alliance horizon and pressures sible for partner opportunism so that they may be able tional factors(cultural diversity and goal incompatibili- managers for a framework of key factors that are respo for quick results) deploy appropriate deterrence mechanisms to minimize Findings The framework of determinants makes clear opportunistic behaviors. how the various determinants of partner opportunism may be differentially salient in the three major alliance types, Keywords Strategic alliances. Partner opportunism namely, equity joint ventures, minority equity alliances, Determinants of opportunism Alliance horizon and nonequity alliances Opportunistic behavior. Equity joint ventures Implications Based on the framework, a number of Minority equity alliances. Nonequity alliances propositions are developed to facilitate empirical research on partner opportunism. Managerial implications flowing from the proposed framework are also discussed Introduction For large corporations as well as small entrepreneurial Received and reviewed by former editor, George Neuman. firms, strategic alliances are becoming more and more a necessity for ensuring a competitive edge in the market- T.K.Das(区) place. Strategic alliances are interfirm cooperative Department of Management, Zicklin School of Business, Baruch arrangements aimed at achieving the strategic objective College, City University of New York, One Bernard Baruch Way, Box B9-240, New York, NY 10010, USA the partners"(Das and Teng 1998, p. 491). A high per- e-mail: TK. Das baruchcuny.edr centage of alliances that are formed. he owever. end up failures(see Das and Teng 2000, for a discussion of pos- N. Rahman sible causes). Clearly, a member firm in an alliance faces Management and Management Science Department, Lubin School of Business, Pace University, One Pace Plaza, W-414 certain adversities that are unique because, unlike an New York. NY 10038. USA independent firm, it is subject to relational risk vis-a-vis its e-mail: rahman@ pace.edu partners in addition to the usual business risks. The 2 Springer
Determinants of Partner Opportunism in Strategic Alliances: A Conceptual Framework T. K. Das Æ Noushi Rahman Published online: 16 September 2009 Springer Science+Business Media, LLC 2009 Abstract Purpose We present a comprehensive framework of the key determinants of partner opportunism in strategic alliances. 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. 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 Introduction 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-a`-vis its partners in addition to the usual business risks. The 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 e-mail: TK.Das@baruch.cuny.edu N. Rahman Management and Management Science Department, Lubin School of Business, Pace University, One Pace Plaza, W-414, New York, NY 10038, USA e-mail: nrahman@pace.edu 123 J Bus Psychol (2010) 25:55–74 DOI 10.1007/s10869-009-9132-2
J Bus Psychol (2010)25: 55-74 literature recognizes the deleterious role that a partner mislead, distort, disguise, obfuscate, or otherwise confuse firms opportunistic behavior plays in alliances, often (1985, p. 47). We give below several examples of partner resulting in their unplanned termination. Thus, partner opportunism in alliances to indicate broadly its nature and opportunism is of paramount concern to an alliance firm variety engaged in collaborative activities. Consider, for example, the alliance between Red Dragon Researchers have studied the impact of opportunistic Enterprises of China and Batrionics, an Australian manu- behavior in business for decades. According to williamson facturer of industrial batteries(Rarick 2004). Batrionics (1975, p 9), opportunism"refers to a lack of candor or was interested in setting up an operation in China after honesty in transactions, to include self-interest seeking having established itself in Taiwan. Rex Adams, repre- with guile. " In the context of strategic alliances, opportu- senting the Australian company, located a potential Chi- nistic behavior includes"breaking promises, not sharing nese partner in Red Dragon Enterprises, a manufacturer of resources or facilities as per agreement, bluffing, lying, a variety of batteries. The quality of the Chinese products misleading, misrepresenting, distorting, cheating, misap- was not acceptable but Adams"felt that he could leverage propriating, stealing, etc. "(Das and Rahman 2001, p. 43). his companys knowledge and skill against a joint venture lowever, scholars in economics, management, marketing, partner"(Rarick 2004, p. 3). In due course, a joint venture and sociology have generally treated opportunism as an was formed, but a number of problems emerged, including undifferentiated phenomenon. It is only very recently that poor manufacturing quality, missing inventory, and lack some researchers have directed their attention to exploring finance. Adams accused Tsang, his Chinese counterpart, of the essence of opportunism(e. g, Ghoshal and Moran 1996: behaving opportunistically. In his eagerness to set up an Wathne and Heide 2000). There is a need to understand operation in China, Adams was perhaps less than thorough more adequately as to what increases the potential for an in assessing the risks of opportunism alliance partner to act opportunistically in different sit Another illustrative case concerns Cameron Auto parts tions. We believe that a wide-ranging analysis of (B), a North American company, and its UK licensee determinants of partner opportunism would help in Crookell and Beamish 2006). Alex Cameron had gone understanding its complex nature and in gaining better the UK to meet his licensee and to France to meet an insights for managing such opportunism important customer, Michelard. The UK licensee was We divide the remainder of the article into four parts. interested in partnering with Cameron in establishing a First, we examine the origins and nature of partner manufacturing facility in Australia. Alex Cameron, how- opportunism. Second, we suggest an overarching frame- ever, went on to have a verbal agreement with his french work of determinants of partner opportunism comprising customer to invest 40% in a factory manufacturing flexible three distinct sets of factors: economic, relational, and couplings that was acquired by the latter. Angered at this temporal. We identify and examine a list of significant development, the UK licensee charged: " I thought you had determinants constituting the framework. Third, we discuss your head screwed on better than this, Alex. You realize the differential salience of these determinants in each of the this makes us competitors. Michelard of all people! They three major alliance types: equity joint ventures, minority run that business in their spare time. You ve made a damn equity alliances, and nonequity alliances. Lastly, we sug- fool of yourself over there"( Crookell and Beamish 2006, gest directions for further research and indicate some of the P. 7). To the UK licensee, Cameron had committed an more significant managerial implications of the proposed opportunistic act. To placate his UK licensee, Cameron framework of partner opportunism agreed to the original proposal to set up a joint venture in australia Yet another form of opportunism is evident in the The Nature of Partner Opportunism decision of the Spanish telecommunications company, Telefonica, to suddenly discontinue its participation in the this section, we briefly review the literature on the alliance with d Systems, a small U.S. firm that general concept of opportunism and then suggest, specific provided dynamic e-commerce. This is considered oppor- to the field of strategic alliances, a comprehensive defini- tunistic because Telefonica abandoned the alliance after it tion of partner opportunism as a prelude to proposing a had appropriated"Bidland,s proprietary business-to-busi- framework of its determinants in the next section ness auction and dynamic e-commerce business informa- In their efforts to delineate the character of opportunism, tion and technology through the promise of a lucrative joint scholars have mentioned various activities that reflect the venture and investment contract"(Business wire 2000 phenomenon. According to Williamson, for instance, this case, the contractual provisions were helpful to Bid- pportunism refers to the incomplete or distorted disclo- land to proceed against Telefonica"for breach of cont sure of information, especially to calculated efforts to breach of fiduciary duty, and violation of the Uni 2 Springer
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 variety. 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 Australia. 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 56 J Bus Psychol (2010) 25:55–74 123
J Bus Psychol(2010)25: 55-74 Trade Secrets Act, among other charges"(Business wire Our own review of the research points to two key 2000 deficiencies in the extant literature. first. most of the e Clearly, since strategic alliances are between two or research seems to be based on the classic definition offered re firms, they create the circumstances where oppor- by Williamson(1975), mentioned earlier, with no partic- tunism is possible. Thus, given especially its ubiquitous ular exploration of its implicit assumptions. Thus, we have presence, opportunism in strategic alliances deserves much yet to adequately capture the complex nature of partner more study than it has garnered so far. In that research opportunism in alliances. Second, the extant research on enterprise, we believe that both a careful analysis of the the determinants of partner opportunism points to the need definition of partner opportunism and then an inquiry into for an integrated approach. We will now propose a defi nition of partner opportunism and then present, in the next Opportunism involves activities generally characterized section, an overarching framework of its determinants fraudulent, deceitful, and obfuscating. It is easy to see As we stated earlier, opportunism has been aptly defined that partner opportunism conflicts with partner cooperation by Williamson as"self-interest seeking with guile"(1975 (Das and Teng 1998, p. 492). Indeed, partner opportunism p. 9). While this definition is parsimonious in scope, it goes against the development of mutual trust and the highlights only two attributes of opportunism: self-interest cooperative spirit, accentuating the perception of risk andand guile. It leaves certain attributes of opportunism jeopardizing the interfirm relationship(Das and Teng 2001, implicit, allowing researchers to interpret variously what 2004). Masten (1988, p. 183)considers moral hazard and constitutes opportunism. In the following paragraphs we haggling as opportunism. make explicit the significant attributes of opportunism, As a further refinement, Ghoshal and Moran (1996) supplementing the definition of williamson. distinguish opportunistic attitude from opportunistic Based on a recognition of the assumptions implicit in behavior, arguing that the latter is the behavioral mani- Williamsons definition, we define partner opportunism in festation of the former, and offer a set of psychologically a somewhat more extended form as behavior by a partner oriented factors that influence opportunistic attitude(pp. firm that is motivated to pursue its self-interest with deceit 18, 21). Scholars have also pointed out certain kinds of to achieve gains at the expense of the other alliance behaviors that should not be characterized as opportunism. members. This elaborated form of the Williamson defini- According to John (1984, p. 278),"hard bargaining, tion of opportunism, as applied to alliances, has five major intense and frequent disagreements, and similar conflictual components: behavior, motives, self-interest seeking behaviors do not constitute opportunism " Wathne and deceit, and gains at the expense of others. First, we Heide(2000)further clarify that"situations in which (1) examine opportunism as a behavior, so that opportunism he parties jointly agree to modify an agreement or(2)one refers to specific actions by an opportunistic alliance party receives compensation in some form"and"situations partner. This is consistent with the extant literature(e. g in which parties adjust contract terms ex ante in anticipa- Joshi and Stump 1999; Luo 2007a: Wathne and Heide tion of shirking"should not be considered opportunism 2000). For instance, Wathne and Heide(2000, p. 36) observe that"the concept of opportunism, as currently used Some attempts have been made to devise a classification in the literature, includes a broad range of potentially dif- for the extensive inventory of activities that pertain to ferent behaviors. "Our definition is not concerned with the opportunism. Griesinger (1990, pp. 486487) categorizes opportunistic attitude or propensity of the partner because opportunism into three groups--dishonesty, infidelity, and our focus is on actual opportunistic behavior shirking. In a more systematic approach, Wathne and Second, the definition suggests that conscious motives Heide(2000, p. 41)categorize opportunism into four are involved in opportunism. In other words, opportunis groups: evasion, refusal to adapt, violation, and forced is deliberate, not accidental. If the partner firm inadver renegotiation. These studies, however, do not attempt to tently brings harm to the focal firm in pursuing its self- understand the roots of opportunism interest, it is quite likely to make amends for it. It is only c It would appear that most scholars accept Williamson's when such harmful behavior has been consciously engaged compact definition of opportunism, " self-interest seeking in that the partner will be unlikely to compensate for with guile, "in their research on related topics. The liter- damages. The motives of the opportunistic partner even- ature on the subject of opportunism is devoted to research tually lead to opportunistic action. Prior research on stra- questions that can be considered peripheral to the actual tegic alliances has not explicitly considered motives as an phenomenon of opportunism. There is a dearth of studies essential element in understanding partner opportunism on the basic concept of opportunism and, consequently, our Third, partner opportunism takes place to gratify self- understanding of the complexities of partner opportunism interest. There is a general consensus among scholars that in strategic alliances remains inadequate. opportunism involves some form of self-interest seeking 2 Springer
Trade Secrets Act, among other charges’’ (Business Wire 2000). 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 defi- nition 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 J Bus Psychol (2010) 25:55–74 57 123
J Bus Psychol (2010)25: 55-74 ( Ghoshal and Moran 1996: Wathne and Heide 2000: Wil- other words, individuals may not always behave opportu- lamson 1975, 1993). We note that the nature of the pursuit nistically even if conditions permit such behavior. of this self-interest by an alliance partner can take two Scholars in economics, management, and marketing have alternate paths. First, the opportunistic partner could seek proposed a number of factors that influence the incidence to acquire the focal firms rightful share of the alliance- of opportunism in alliances. We examined the nature of specific gains. Second, the opportunistic partner could shirk these factors and concluded that they can be usefully its own alliance-specific obligations, foisting the relevant grouped according to the nature of the process through costs onto the focal firm. Both these approaches would which they influence partner opportunism. serve the self-interest of the partner, even as they also Recently, Lee(1998, pp 337-338)tested a set of three adversely affect the focal firm. antecedents of opportunism--decision-making uncertainty, Fourth, we should note that simple self-interest seeking cultural distance, and economic ethnocentrism-and found is not tantamount to opportunism. It is critical for an empirical evidence in support of them. Sako and Helper opportunistic partner to keep its actual motives deliberately 98, pp 393-394)used customer-specific assets, lack of hidden from other alliance members. Thus, a partner firm reciprocity, and uncertain market and technology envi- must use deceit to conceal and mask its actual motives. ronments as antecedents of the supplier's perception of Whereas illiamson(1975)uses the term"guile"in dis- customer opportunism, while Joshi and Stump(1999, cussing opportunism, we prefer the more accessible term p. 346)used only technological unpredictability as a ¨ deceit” to convey the same notion(Das2005) determinant of opportunism. Fifth, we must recognize that seeking self-interested Provan and Skinner(1989, p 205) find dependence and gains by a partner firm that does not affect the focal firm in control of decision making to be predictors of opportunism any adverse way does not fall within the ambit of partner Nooteboom(1996, p. 999)lists different external events that opportunism. This would be so even if the partner's actions may trigger opportunistic behavior. Also, Wathne and Heide were not entirely above board. Such partner behavior must (2000, P. 42)note that the focal firm would be vulnerable to also, somehow, result in gains that are at the expense of the opportunism under conditions of information asymmetry other members of the alliance. Note that the two paths of and lock-ins. Finally, according to John(1984, p. 281),an self-interest seeking that we mentioned above also leave alliance member would be more likely to act opportunist- the other alliance members worse off ally if it felt coerced by another alliance member. We suggest that the observations of various authors in here that explicit cooperation-building the literature on what constitutes partner opportunism in mechanisms are likely to impact upon the determinants alliances can be subsumed within the contours of our of opportunism. For example, Gulati(1995) shows that proposed definition. By adopting this expanded definition, familiarity breeds trust, a fundamental requirement for e provide a general basis for the further study of partner cooperation. Hence, familiarity between alliance members pportunism in a rigorous manner, recognizing the multi- may temper opportunistic tendencies. faceted nature of the phenomenon. Clearly, not all firms behave opportunistically all the me. Following williamsons reasoning, firms refrain from opportunism when the resultant losses (i.e, loss of image, Framework of Determinants goodwill, legal retribution, etc. are expected to be greater than the potential economic gains. The problematic feature To facilitate a better understanding of the nature of partner of this conceptualization is that it renders opportunism to opportunism and advance empirical research, we believe an be a monolithic phenomenon. Because a partner may act analysis of the determinants of opportunism is essential. opportunistically for a variety of reasons, the focal firm We list in Table I some illustrative observations from the needs to be wary of all such possibilities. It would thus literature on the determinants of both the general topic of seem useful to formulate an appropriately sophisticated opportunistic behavior and the particular issue of partner view of the concept of partner opportunism opportunism in strategic alliances. Our review of the lit- Our analysis yielded three distinct groups of determi- erature indicates-and the table reflects this-that the nants, each group influencing the potential for partner research on the determinants of partner opportunism thus opportunism in its distinctive way. Accordingly, we pro- far has been largely fragmented, so that it seems desirable pose in this section three sets of key determinants that to attempt an integrated approach significantly impact upon the potential for partner oppor- According to John(1984, P. 287),"opportunism can be tunism: economic, relational, and temporal. We should viewed usefully as an endogenous variable that is evoked note that most of these determinants have been empirically by certain determinants within a long-run relationship. In supported(see Table 2) 2 Springer
(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). 58 J Bus Psychol (2010) 25:55–74 123
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Table 1 Types of determinants of opportunism Authors Conceptual/empirical Illustrative observations Type of determinant Doney et al. (1998) 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) Relational ‘‘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) Relational Ghoshal and Moran (1996) 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) Relational Griesinger (1990) 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. 486) Relational ‘‘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) Economic Heide and Miner (1992) Empirical (155 purchasing agents; 60 suppliers) ‘‘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) Temporal ‘‘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) Temporal John (1984) Empirical (147 dealers of major oil company; dealer–company relationships) ‘‘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) Relational ‘‘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) Relational Johnson et al. (1996) Empirical (155 IJVs) ‘‘In general, cross-cultural interaction, often replete with misunderstandings and miscommunication, can foster opportunistic tendencies.’’ (p. 83) Relational Joshi and Stump (1999) 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) Economic ‘‘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) Economic J Bus Psychol (2010) 25:55–74 59 123