Why Do Strategic Alliances Persist? A Behavioral Decision Model

Strategic alliances are considered a flexible form of organizing, yet they are often long-lived. Even when systematic benefit–cost analysis suggests that their organizational form should be changed or terminated, some alliances still persist. Drawing on behavioral decision theory, we propose a theoretical model that explains this phenomenon. Decision makers are subject to a variety of biases that can lead to the overvaluation of the net benefits of an alliance and, hence, inhibit the change or discontinuation of underperforming alliances. Our model illustrates how decision-making biases at the individual, interpersonal, organizational, and interorganizational levels are moderated by the design of an alliance and the tools employed in the decision-making process. This behavioral decision perspective advances our theoretical understanding of the longevity of strategic alliances and their embeddedness in complex decision-making contexts.