DOES FAMILIARITY BREED TRUST - THE IMPLICATIONS OF REPEATED TIES FOR CONTRACTUAL CHOICE IN ALLIANCES

Exploring the factors that explain the choice of governance structures in interfirm alliances, this study challenges the use of a singular e mphasis on transaction costs. Such an approach erroneously treats each transaction as independent and ignores the role of interfirm trust th at emerges from repeated alliances between the same partners. Comprehe nsive multiindustry data on alliances made between 1970 and 1989 suppo rt the importance of such trust. Although support emerged for the tran saction cost claim that alliances that encompass shared research and d evelopment are likely to be equity based, there is also strong evidenc e that repeated alliances between two partners are less likely than ot her alliances to be organized using equity.