Inter-alliance Collaborations: Cohesion and Negotiation Between Two Multi-Partner Alliances

Jul 25, 2023

  • Research question:

How does alliance cohesion affect the time it takes to reach an agreement with another alliance?

  • What the literature said:

- Cohesion facilitates information dispersion and processing through the use of multiple communication channels and easier interpretation of information (Coleman, 1990; Gulati, 1995; Zhang, Gupta, & Hallen, 2017). Accordingly, cohesion is expected to result in faster within-alliance decision-making (Das & Teng, 2001; Ring & Van de Ven, 1994) and shorter negotiation time with out-group organizations

- Cohesion leads to greater inter-alliance differentiation and polarization (Friedman & Jacka, 1969; Janis, 1991). Thus, cohesion can hinder sensemaking and mutual understanding with outside organizations, leading to protracted negotiations or even impasses (Klosseka, Meyerb, & Nippa, 2015; Nelson, 1989).

  • Central argument:

The cohesion-negotiation relationship depends on the resource-dependence position. Resource-dependent groups focus inward with cohesion, quickening internal decisions and reducing negotiation time. However, dominant alliances supplying critical resources use cohesion to assert their position, prolonging negotiation. 

  • Main Findings:

- Cohesion in SPV is negatively related to the financial closing period (i.e., negotiation time). But, for loan syndicates, cohesion has a positive relationship with the financial closing period.

- As the financial sector is more developed in the country where the project is located, the strength of the relationship between cohesion and negotiation time is mitigated.

  • Context & Data:

- Context: project-finance deals between two alliances, the special-purpose vehicle (SPV) and the loan syndicate

- Data: An original database containing 901 project-finance deals across 65 countries and eight different sectors between 2000 to 2021