Structural Homophily or Social Asymmetry? the Formation of Alliances by Poorly-embedded Firms

Recent research shows that pre-existing network structure constrains the formation of new interorganizational alliances. Firms that are poorly embedded in a network structure are less likely to form alliances, because they lack the informational and reputational benefits that richlyembedded firms enjoy. This paper examines the types of ties that poorly-embedded firms can form to overcome the constraints inherent in their structural position, which helps to explain how firms’ actions can transform existing social structure. We argue that poorly-embedded firms are more likely to participate in ties characterized by social asymmetry than by structural homophily. We also analyze the terms of trade that socially asymmetric partners negotiate for alliance governance and discuss how such alliances influence network dynamics. We use longitudinal data on the alliance activities of 97 global chemical firms in the period between 1983 and 1991 to test our arguments.