Multi-party alliances: The relationship between perception and partners’ free-riding
The rise in strategic multi-party alliances has been clearly discernible in recent years. However, the success of this collaborative model risks being undermined by free-riding behavior on part of alliance members, aiming at reaping benefits from the alliance while at the same time contributing less than their fair share. A closer look at a multi-party technology consortium comprising firms, universities, and government agencies allows insight into such phenomenon and provides guidelines for how alliance members and managers should behave to contrast such behavior.
The reality of the business partnerships has assumed a new dimension in recent times with the emergence of multi-party alliances, i.e. alliances comprising multiple, often heterogeneous members, which provide greater resources and higher chances of meeting the alliance’s goals leveraging the unique contributions of each member. Such organizational forms are set up to facilitate learning, maximize knowledge-sharing, and collectively solve problems. All this, though, comes with greater complexity: the more numerous and heterogeneous the members, the more difficult the management of the alliance can become. Partners may differ in size and role, come from different sectors, and have different agendas and objectives. One particular problem in these organizational forms is the emergence of free-riding behavior, which is the tendency of some partners not to pull their weight in the alliance: such behavior impedes the full benefits of the alliance to emerge, and leads to what is known as the “collective action problem”. Until now, research in multi-party alliances has concentrated primarily on alliance design, the types of members selected, and communications between partners. While these aspects remain crucial for the success of the alliance, less attention has been paid to the role of partners’ perceptions. What if such perceptions were key to the emergence of partners’ free-riding and thus crucial in ensuring the alliance’s continued success or imminent failure?
The importance of perceptions
Partnerships of any kind – business or otherwise – are fueled by the prospective of mutual benefits and, to ensure their smooth operation, require partners’ building and maintenance of trust in each other. The behavior of members once they enter an alliance is thus critical to its success, a fact that has so far received limited attention in research. Entry conditions are important, but an alliance’s existence and success hinge on how partners act once they become members and, ultimately, how they sense – or perceive – other partners contribute to the alliance and the general direction in which the alliance is heading. Perception of partners’ behavior – especially of efforts made by similar partners – and the gauging of the success of all these efforts for the overall alliance is crucial in ensuring the required level of member motivation to be an active member in it. In particular, such cognitive elements affect the extent to which partners are willing to invest in the alliance, thus conditioning its long-term viability and success. A recent study of a 40-party inter-organizational technology consortium comprising companies, universities, and government agencies provides evidence to this regard. In this study, authors argued that, especially in alliances where partners’ actual behaviors are difficult to observe and monitor, members resort to perceptions about the behavior of their closest peers – i.e., members that are similar to them, and are thus easier to observe – and the overall state of the alliance to gauge how much to invest in it. Data was collected through a series of open-ended interviews and questionnaires with each partner organization in the consortium, where each was questioned, among other things, about their perception of their partners’ behavior – to ascertain the extent to which partners were engaging in free-riding – and the overall performance of the alliance. Analyses show that, after controlling for several variables such as network structure, communication activity, type of involvement, trust, organization tenure in the alliance, and type of partner, each partners’ levels of free riding were negatively associated to the perception it held about its peers’ efforts in the alliance, so that the more effort it perceived they put, the less it would free ride.
Taking the foot off the gas
A second, particularly intriguing finding from this study has to do with the fact that partners are likely to free ride when they perceive the alliance to do either very bad or very well, i.e. in perceived bad or good times for the consortium. In the former case, partners likely pull back because they are less motivated to get as involved as they should for fear of being associated with a failing alliance, among other things. In the latter case, some alliance members might consider less important the need to contribute as success is already pretty much guaranteed. The study argues that the latter case is the more potentially damaging, as carrying free-riders might lead to the demise of even well-performing arrangements.
From a practical perspective, the study raises important questions for alliance members and managers alike. In the case of an alliance that is performing well, there is legitimate cause for downplaying results to ensure that members do not take their foot off the gas. Communication within the alliance is therefore crucial to maintaining the required pressure to keep driving members and the alliance as a whole forwards. Thus, while managers must obviously do something to fix underperforming alliances, in better performing arrangements they are also called to strike a fine balance between motivating the troops whilst not creating a feeling of over-confidence, with the risks of free-riding that this might engender. This can perhaps be done by carefully crafting their internal as well external communication activities. Finally, from a member perspective, continued membership of an alliance must be carefully considered both when it is perceived to start underperforming and when peers are seen as not pulling their own weight in the arrangement. Knowing when to leave an alliance might reveal as much, if not more crucial than knowing the right time to enter a potentially successful one.
This article draws inspiration from the following paper : Fonti F, Maoret M, Whitbred R. 2017. Free-riding in multi-party alliances: The role of perceived alliance effectiveness and peers’ collaboration in a research consortium. Strategic Management Journal, 38(2): 363–383.
Fabio Fonti is a professor of Organizational Behavior and Leadership and Associate Dean for Research and Doctoral Programmes Director at Rennes School of Business (Rennes, France). His research interests include organizational networks, classification and categorization processes, institutional logics, managerial cognition, and design.