Learning to Contract under Uncertainty in Strategic Alliances: The Co-evolution of a Firm's Absorptive Capacity: JMI

ABSTRACT

Firms have often used strategic alliances as a strategy to cope with increased uncertainty. This paper argues that a firm needs to learn to leverage its absorptive capacity to exploit and explore the contracting knowledge in strategic alliances so as to enhance efficiency, scope, and flexibility. It conceptually examines how a firm's contractual absorptive capacity co-evolves with its knowledge environment under uncertainty as part of learning. By integrating transaction cost economics and absorptive capacity literatures, this paper offers a rich picture of the co-evolutionary processes underlying contractual absorptive capacity in strategic alliances under uncertainty. It also incorporates a more refined (and underexplored) conceptualization of asset specificity and uncertainty, two key constructs in transaction cost economics, into the coevolutionary framework of absorptive capacity in strategic alliances. It illustrates some of the concepts with examples from the hospitality industry, where the impact of uncertainty is clearly evident - particularly in view of the COVID-19 pandemic.