The Alliances of Spin-Offs Versus Start-Ups: Social Ties in the Genesis of Post-Soviet Alliances

This paper links the alliance strategy of emergent firms to the structural relations in the network of new firm organizers. Data gathered in Russia from 1991 to 1993 on nine post-Soviet commodity exchange markets demonstrate how the difference in internal social structure between spin-off and startup exchanges shapes the strategy of their inter-firm networks and initial performance. The way in which managers come together structures their diversity and openness to the outside environment. In turn, the social structure internal to the firm affects the range and scope of their ties to other organizations. I show how the high range of overlap among the ties between spin-off founders has a more concentrated connection to the outside environment than the exchanges created by more loosely-linked startup founders. The relational costs of the more concentrated ties increases the cost of search, however, it lowers the cost of malfeasance. Thus, the model suggested proposes that the relative advantage of investing in relational capital is a double-edged sword which poses constraints along with its particular advantages. Finally, the model also brings to question the relative merits of concentrated alliances supposedly advantageous to new firms in particular by suggesting that conditions of transition and institutional instability may under-cut the relative advantage of familiarity and specialization found in Western settings.