Contractual Renegotiations in Strategic Alliances

Abstract

This study provides an empirical investigation of the incidence and antecedents of contractual renegotiations in strategic alliances. We bring together initial conditions based on transaction cost theory and ex post contingencies highlighted by recent conceptual and qualitative research on the evolution of collaborative agreements. The results indicate that firms tend to change the governance of alliances when a misalignment exists between the chosen governance structure and features of the transaction. Further, we find that asset specificity affects alliance design as well as post-formation governance decisions. Contractual alterations are also more likely when firms employ less extensive contractual safeguards in their alliances and when a parent firm’s strategy changes. We find no evidence that cross-border alliances are any more or less likely to experience contractual renegotiations than domestic alliances.