Division of Relational Rents by Alliance Partners

Shiva Agarwal, PhD Student in Management, The Wharton School

Abstract: How do alliance partners generate relational rents in the partnership? Many studies in the strategy literature have investigated the creation of value by strategy alliances. However, it is somewhat surprising that very few of them have explored the division of the value created between alliance partners. Dyer and Singh (1998) have argued that firms can generate ‘relational rents’ i.e. create value in the alliances by investing in relational-specific assets, building knowledge-sharing routines, identifying partners with complementary resources and setting up an effective governance structure. However, the performance of the individual alliance partners is determined by how they split the created value. While researchers have identified specific mechanisms to create value in the alliances (Dyer and Singh, 1998), the determinants of the division of value between partners is underexplored. This research will focus primarily on identifying explicit mechanisms describing distribution of value between alliance partners.