Competition within and between networks: The contingent effect of competitive embeddedness on alliance formation

I examine how firms use alliances to respond to the alliance networks of their rivals, by either allying with their rivals' partners or by building countervailing alliances. Evidence from the global airline industry (1994-98) suggests that these strategic responses depend on alliance cospecialization. Cospecialized alliances by rivals may involve exclusivity, precluding alliances with the rivals' partners and thus encouraging countervailing alliances. Nonspecialized alliances are less exclusive and are used when rivals share the same partners.