Competitor Identification and Value Creation of Strategic Alliance: A Cognitive Approach

Based on the notion that rivals are not always harmful, this study investigates whether a firm’s subjective competitor identification influences alliance performance, and what the boundary condition is. Relying on the organizational learning and interfirm competition literatures, we predict that a focal firm’s alliance leads to higher performance as the number of competitors that the focal firm subjectively identifies increases, given that firms could acquire information and knowledge to manage their alliances effectively by observing diverse rivals. Moreover, we hypothesize that the positive relationship between the number of a focal firm’s competitors identified and the focal firm’s alliance performance weakens with partner status since the high visibility of a high status partner may reduce the importance of learning from competitors in effectively managing alliances. Empirical findings via analyzing data from US software firms between 1995 and 2005 support the predictions. This study advances the literature on alliance by examining the relationship between competitor identification and alliance performance. Furthermore, this study provides a novel angle for integrating cognitive approach to interfirm competition and strategic alliances.