When the weak are mighty: A t <scp>wo?sided</scp> matching approach to alliance performance

Network centrality is an important determinant of alliance performance. However, estimating how each member's affects performance challenging because the end market might value partner's contribution differently. We solve this empirical question with a two-sided matching model that accounts for partners' endogenous selection and estimates effect side's input quality on implement method in novel context Thoroughbred horse industry, foal-sharing alliances between buyers suppliers. find buyer has larger marginal than supplier buyers, who average are less central our context, more likely to diffuse valuable information market. Alliance partners often struggle identifying what their contributions use new identify alliance. Our findings offer few recommendations firms forming similar alliances. First, we partner business network greater impact due ability Second, results suggest product relatively unknown impacts low quality. may benefit from experimenting inputs. Third, actors reduce spending mass communications if comes through partners. Strategy scholars have long studied relationship (e.g., Gulati, Nohria, & Zaheer, 2000). Firms form networks relationships other such as suppliers distributors, horizontal partnerships. captures extent involvement firm (Bell, 2005; Borgatti, 2005). A can its gain access resources Knoke Burt, 1983; Wasserman Faust, 1994), influence diffusion throughout (Borgatti, Much previous research focuses positional benefits centrality, including infers firms' position industry (Lin, Yang, Arya, 2009; Stuart, Hoang, Hybels, 1999; Gözübüyük, Milanov, 2010). also vital facilitating resulting innovations opportunities Aral, 2016; Granovetter, 1973; Rogers, 1995). embedded networks, ensuring formation (Ahuja, Polidoro, Mitchell, Powell, Koput, Smith-Doerr, 1996) (Rowley, Behrens, Krackhardt, Each respective ties about final (Hansen, 1995) allows infer these (Lin et al., Stuart 1999), which turn determines Still, differently separate Therefore, alliances, It thus long-lasting estimate direct Anderson, 1990; Lunnan Haugland, 2008). Answering fraught challenges unobserved characteristics, easily confounded estimations. Regressing characteristics exposes coefficients omitted variable biases (Greve, Mitsuhashi, Baum, 2013; Shaver, 1998; Sørensen, 2007). In paper, investigate fulfilling different roles. execute by roles variety ways - instance, biotech pharmaceutical (Mindruta, Moeen, Agarwal, 2016), designers manufacturers (Ni Srinivasan, 2015), or purchasers (McEvily, Fudge Kamal, 2017). rigorous empirically while accounting mutual Specifically, jointly equation address selection. comparing matches corresponding across multiple markets (Chen, Honoré Ganco, 2020; Park, The explicitly without assuming drivers automatically explain Mindruta, 2013). employ study supplier's effects auction prices, contracts. alliance, supplier, stud farm owns sires (male horses), agrees buyer, nursery dams (female horses) match sire dam co-produce offspring sell at market, bidders. sells yearling, 1 year old. operate joint owners auction: they create product, share within auction. provides rich setting exogenous measures inputs, genetic parents offspring, allowing us disentangle capture financial measure price level. revealed becomes aggregated Hayek, 1945; Smith, 1982), outcome reveals English mechanism valuation assigned end-market bidders yearling horse. particularly well suited estimation model. institutional fixed annual cycle eight major auctions held every year. all participate no wait fits assumptions characterized role specialization places either (nurseries farms). Thus, two distinct sides. unique represents contract equity terms remain constant agents transactions (60% owner, nursery, 40% farm). nontransferable utility. Fourth, year, nurseries, limited one transaction suppliers, farms, many per horse, one-to-many identification properties separately measuring contributions. indicate buyers' (the nursery) suppliers' farm) centralities contribute positively outcome. buyer's three times effect. are, Based anecdotal evidence, argue most plausible underlying attach higher observed If inferred based relying diffusion, should been larger. think overly diffused making even pronounced situations where need (such mismatch geographical entering auction). To summarize, paper's three-fold. employing endogeneity affect benefits, members bring that, despite being network, exert influence, margin, high-quality inputs products (Hoetker, self-select into increase Greve 1998). main goal maximize Hagedoorn, 1993; Hamel, Doz, Prahalad, 1989; Teece, 1992). potential compete capable providing highest (Das Teng, 2000; Hennart Reddy, 1997; Nistor Selove, 2020) generally, desirable (Chatain Plaksenkova, 2019; 2020). Furthermore, levels Research inter-organizational tends party proxy entire overlooks (Graebner, Lumineau, Lumineau Oliveira, 2018). This simplification lead erroneous conclusions firm's For example, some be show partners, lack resource altogether. examine taking account part industry. select (Ahuja Powell (Rowley Foundationally, conduits participants gather (Podolny, 2001). Seminal work established weaker participant play disseminating broader (Granovetter, 1973). structure ties. Central recalled shared readily (Asch, 1940; Merton, 1968; Podolny, contrast, help innovation enabling traction (Rogers, “particularly links reach out system, interlocking ingrown nature” 1995, p. 295). Two possible mechanisms reflect market's inference product. Table lists seminal papers using mechanism.11 detailed review literature inference, refer A1 Appendix. A1, include status non-network sources determine hierarchy firms. On hand, both strong weak observes examines past performances make purchasing decision 1999). More broadly, occurs media coverage press releases (Castellucci Ertug, paper disentangles controlling formation. focus combine sold Their roles: directly allow products. cases, decisions. vary centrality. Prior suggests able Hansen, prior prominent better increases test whether performance, other. goes beyond transmission explanation, inference. attaches information. Suppliers positions regularly overwhelm redundant next sections, provide thorough description discuss explanation inform future work. breeding sales (Cassidy, 2007), estimated $122 billion economic United States (American Horse Council, largest activity fees auctions. primary horses bloodlines known producing successful racehorses newly bred profit. buy train them racing breed when career over. yearlings,22 An considered foal once it born nurses. After weaned referred weanling, until reaches first birthday (January 1) yearling. one-year-old horses, created “foal-sharing contracts,” well-defined arrangement. Foal-sharing contracts own (60:40) offspring) (Campbell, Hall, Kropp, Landen, Donath, 1985). contracts, dominate breeding. Nurseries farms collaborate, offspring: best expected successful, off together old (yearling). Partners dam, information, criteria dams' pregnancies farms' managerial capabilities. price, determined second half draw Stakes high valuable.33 average, worth $50,000, but millions. found highly influential necessary receipts activities related essential disseminate (i.e., sires, dams, foals) represent significant bell-weather overall health full horse's not trained raced yet. evaluate up small amount time.44 Some boast inspect 150 yearlings day. will fatigue sets after viewing 50 effective scrutiny. Inspections frequently interrupted informal meetings. Buyers offspring's attitude veterinarian care, addition publicly available bloodlines. excitement Auctions typical format auctioneer presents opening bid, subsequent bids value. itself social experience converges grounds trade horses. At auctions, purchase race them. High profile top trainers associated famous firms.55 2006, Bloodhorse list 10 shows large operations divisions respectively. represented Darley Coolmore, divisions. Many choose discreet so attention start bidding war. Bidders prefer side conversations nurseries under shaded area barns. They engage subtle cues paddock rather visible gallery. Bid spotters situated pavilion detect tip hat, glasses, nod crowded indicates bid. companies settle sale agents. winning bidder uses agent, owner's identity years later during considering observable. Fortunately, close approximation proxies intertwined networks. rooted tradition, handshake formal span generations, players tie cycles: connections player extensive network. before usually repeated dealings interview conducted, reflected revisit breeders “some [breeders] easier from.” tend follow same process Prospective offered arrive 2 days sale, culminates placing actual promote acquaintances, gained year's dealings. Cot Campbell, racehorse writes, Logistically, inspection reinspection those animals preparation demanding severe time constraints. addition, you know practically everyone sale. You constantly stopping shake hands, told hot item [yearling], answer progress bought germane guidance offerings 2000, 142) involves visiting temporary stable requesting see interest. watch walk oval, stands beginning any training. Moreover, prospective opportunity ask breeder temperament get reserve (a minimum clear Importantly, rely assessment “Unless your closest friend, never another [bidder] he thinks horse” 167). consider competition Jeffrey Bloom, 2019 documentary All In, describes “You line potentially two-million-dollar horse.” Realizing preferred above budget, finalize shortlists During auction, continue seek bid discreetly holding area. contains representatives updates Campbell states (2000, 147), “…while I'm waiting my [yearling]… I may[…] ‘out back’ chew fat someone.” Later, “I hurried [a yearling] sell. way, someone stopped me became engrossed juicy tidbit gossip.” These interactions made public scarce conflicting. come state were raise questions racing. Similarly, whose obvious must reconcile optimistic costly risky situations, trusted yearlings. Stud setting, Will Farish, renowned Lane's End farm, remarks, “stallions ‘the breadwinners.’ Stallions attention.” (Patton, 2012) host open houses fans visit iconic champions sport richest highest-profile horseraces America, Kentucky Derby Breeders Cup Classic, emphasize male horses.66 Female enter races; however, enter, fewer win. Male win races become attractive sires. Ethnographer Cassidy (2007, 88) “The stallion category bloodstock.” Justify, recent triple crown winner, had his rights $75 million (Rovell, trainer Bob Baffert, recently missed buying two-year-old was focused (Cherwa, 2019). Baffert said “Jill [his wife] always telling me, ‘Do snob,’ sometimes let away us.” deliberate trying perceptions saturate run advertising campaigns, houses, tours close. Ethnographic feat [of offering sire] achieved broadest sense” 88). stables ornately decorated stained-glass windows lighting makes sires' haircoat gleam. modern [sire] manager, just breed, gambling medium, prolonged campaign. contemporary popularity theories dosage [an index rates horses' pedigree speed, AEI], concentrate expense depends this, current orientation contrast very experience. Within decisions care foal. Because nurseries' smaller scale, outside visitors only invited owner manager. several acres field disrupt farmworker's day groom visitor. insight water land climate could limit growth offspring. itself, preferences professionally presented well-developed physical attributes. Direct observation connection perspective. Zenyatta, hall fame racehorse, famously skin fungus, quite common. David Ingordo, bidder, (Lintner, 2018) recounts, “Hip 703 2005 Keeneland September Yearling Sale disease her 'which, day, scale 10, it's issue […]. happens […] When $60,000] thought wrong personalized way Instead intense campaigns like community cultivate 106) notes reveal “proof friendship respect: wouldn't tell Joe, Storm Cat [sire name] guy want looking at. Him Rahy [another filly.” (Conley, 2003); leverage hear sire. overwhelmed flow hundreds sire, decreases piece illustrated above, gaining challenging. Making consuming grounds.