Multipartner alliances among small firms promoted by external managers: Risk and governance mechanisms

Abstract

External managers may be key to setting up and managing multi-partner alliances (MPAs) among small firms, but their role has not yet been integrated in previous literature on risk and governance structures. This longitudinal matched-pair case study investigates the dynamics between relational and performance risks and control-based and trust-based governance mechanisms, in MPAs promoted and managed by external managers. The integration of external managers allows the identification of different levels of trust and control among partners. This is also the case between such partners and the external manager who controls/trusts, who is controlled/trusted, and how this changes over time. Our results show that trust and control are influenced by both the external actor and partner’s risk perceptions; they also complement each other to manage high performance and relational risks in a dynamic process. We extend prior knowledge by showing that the analysis of control/trust complementarity must take into consideration both partner-partner and partner- manager relationships.