Competition within and Between Networks: The Contingent Effect of Competitive Embeddedness on Alliance Formation

I examine how firms use alliances to respond to the alliance networks of their rivals, by either allying with their rivals ’ partners or by building countervailing alliances. Evidence from the global airline industry (1994–98) suggests that these strategic re-sponses depend on alliance cospecialization. Cospecialized alliances by rivals may involve exclusivity, precluding alliances with the rivals ’ partners and thus encourag-ing countervailing alliances. Nonspecialized alliances are less exclusive and are used when rivals share the same partners. Over the last decade, the network metaphor has become influential in research into strategic alli-ances and interorganizational relationships (Gulati, 1998), along with more established perspectives, such as the transaction cost and capability views (Hennart, 1988; Richardson, 1972). Alliance net-works may provide members such benefits as ac-cess to capabilities and information from direct and indirect partners, referrals to other potential part-ners and opportunities, brokerage opportunities with other relations, and an effective network gov-ernance context for individual alliances (Burt,