Implementing Project-Based Alliances: Three Paradoxes of Brokerage

Abstract

We theorize that organizations with higher brokerage positions (which we call brokers) benefit from access to capital and distribution that, paradoxically, causes them to implement poorer projects but to survive longer. Whereas prior research proposes that such organizations implement alliance projects because of their superior quality, we argue that they can do so despite project quality, because they have better access to capital and distribution. This access subjects their ventures to fewer implementation hurdles. As a result, there emerge three paradoxes and associated hypotheses: (a) brokers are able to implement more alliance projects, but their projects will perform on average more poorly; (b) brokers will tend to ally with other brokers but will do better when they ally with those having lower brokerage positions; and (c) despite the poorer performance of alliance projects, brokers will experience fewer risks and be less likely to exit the business. Paradoxically, brokerage makes organizations perform worse in each alliance but benefit from longer-term sustainability. In a study of 2,694 movie production companies in the Hollywood film industry from 1994 to 2009, we find considerable support for our hypotheses and develop a novel perspective on brokerage.