Formal controls and alliance performance: the effects of alliance motivation and informal controls

Abstract

In this research, we study the use of formal control types (outcome, behavior) across different alliance motivations (exploitation, exploration, ambidextrous) and the effects on alliance performance. This study further examines whether this relationship is moderated by the use of informal controls. Survey data from 236 organizations pursuing strategic alliances indicate that when firms opt for one primary strategic alliance motivation, firms' emphasis on either outcome controls (in exploitation alliances) or behavior controls (in exploration alliances) increases alliance performance. Results also support a complementary relationship between outcome and behavior controls in explaining alliance performance in ambidextrous alliances. Furthermore, our findings reveal that while informal controls enhance the effectiveness of behavior controls in exploration alliances, the benefits of informal controls disappear in the context of outcome controls and exploitation alliances. In ambidextrous alliances, firms need to carefully proportion the informal control level because beyond a moderate level, informal controls seem to negatively affect a control configuration using outcome and behavior controls. Our analysis provides a more nuanced view on how organizations may successfully control alliances with different motivations.