Abstract/Summary

When forming new product development alliances, firms often face a strategic dilemma: should they partner with a familiar entity within their network, or collaborate with a ‘stranger’ who appears to possess better suited technological capabilities for the new project? Additionally, they must decide whether to maintain a high degree of bandwidth, i.e. information openness, within the alliance. These two interrelated decisions significantly shape firms’ innovation outcomes. Theoretically, the optimal approach is to engage in a high-bandwidth alliance with the technologically superior stranger, maximizing potential benefits. However, in practice, firms frequently make suboptimal choices, either by showing overreliance on familiar partners, or by opting for narrow-bandwidth collaborations with strangers. To explain when and why these deviations occur, we integrate regulatory focus theory and managerial perspectives on risk-taking with the relational view of alliances. We argue that partner and bandwidth decisions are shaped by how managers frame strategic choices. Industry leaders typically adopt prevention-focused strategies, reinforcing inertia and risk aversion, while challengers pursue promotion-focused strategies that embrace novelty and change. Our behavioral framework advances alliance formation theory by highlighting the role of managerial cognition and decision framing. These insights are particularly relevant as firms face growing uncertainty and rapid technological change.