Resource Dependence and Power-Balancing Operations in Alliances: The Role of Market Redefinition Strategies

Abstract

This article studies power imbalances in alliances. More precisely, we seek to understand how – and under what circumstances – firms can leverage market redefinition strategies to change the structure of their markets and to reduce the bargaining power of actual or potential partners. Based on resource dependence theory, our analysis examines the causes of disproportionate power in alliances and describes various power-balancing operations that can be implemented to reduce dependence. In previous research, the presence of alternative sources that might reduce resource dependence has been given exogenously, and the set of power-balancing operations has been rather limited. Based on the alliance literature, the bargaining power literature and the market redefinition literature, we elaborate a theoretical framework to study the extent to which firms can leverage market redefinition strategies to shape the structure of their markets, in general, and reduce the bargaining power of partners, in particular. We illustrate our theoretical framework by means of multiple case studies and discuss our conclusions. Focusing on air-rail intermodal strategies, we emphasise that firms can proactively redesign their market boundaries to find new partners. These market redefinition strategies reduce dependence on powerful partners in the traditional market and offer new strategic partnership options for firms. In addition, we note that processes can be implemented to increase the quality offered by these new substitutes. Finally, we elucidate several theoretical and managerial implications regarding the role of market redefinition strategies in alliance development.