DP12512 | The Contingent Effect of Alliance Design on Alliance Dynamics and Performance: An Experimental Study

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A core question in alliance research is how alliance design influences alliance success. Two underexplored aspects of this question are whether the effect of alliance design is contingent on the external competitive environment and how alliance design affects the behavioral dynamics in an alliance. We address these aspects by studying two core dimensions of alliance design, the level of commitment in an alliance and the number of alliance partners. We match two competitive environments, high and low competition, with different alliance designs and vary the number of alliance partners and the level of commitment and experimentally study the aggregate performance and behavioral dynamics of the different alliance designs. We find that with low competition, alliance design does not affect performance much, while with high competition, alliance performance depends heavily on alliance design. Regarding dynamics, we find that aggregate performance is most strongly affected by first-period behavior, while the willingness to forgive a partner's non-cooperative behavior has a more muted effect on alliance performance.