When the Social Structure Overshadows Competitive Incentives:

Embeddedness of interfirm relationships in the social structure resulting from prior partnerships engenders order in new tie formation. However, competitive incentives make firms likely to undermine the order that they achieve through the formation of interfirm relationships. We focus empirically on unplanned dissolution of joint ventures between firms competing in the same industry and examine how network embeddedness helps firms maintain order by mitigating partners’ antagonistic competitive incentives. We find that the value of network embeddedness in promoting alliance stability is highest when partners’ incentives to pursue self-interest at the expense of joint benefits are strongest.