spring 1994
Article
MIT Sloan Management Review

Unilateral Commitments and the Importance of Process in Alliances

By: Ranjay Gulati, Tarun Khanna and Nitin Nohria

Format:Print

Abstract

How the partners in an alliance view their joint venture can have much to do with its success or failure. Each partner fears that the other will get the larger payoff by acting opportunistically while it cooperates in good faith. The result is that both partners choose not to cooperate and are worse off than if they had cooperated. Each partner's understanding of the alliance's economics is crucial for understanding the incentives to cooperate and for realizing the possible ways each can unilaterally influence the alliance's outcome. Since different payoff situations have different managerial implications, companies should structure and manage alliances to recognize changes in the payoff structure and build in explicit mechanisms to acquire an appropriate managerial style.

Keywords

Management Style; Partners and Partnerships; Joint Ventures; Management Practices and Processes; Alliances; Trust; Game Theory

Citation

Gulati, Ranjay, Tarun Khanna, and Nitin Nohria. "Unilateral Commitments and the Importance of Process in Alliances." MIT Sloan Management Review 35, no. 3 (spring 1994): 61–69.