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Break-ups and member withdrawals are very common in strategic alliances, and may run as high as 50 percent in some industries. Existing research has mainly explained alliance instability through the prism of internal tensions. In this paper, we provide a complementary explanation of alliance termination as the result of unexpected external contingencies (i.e., adverse events). Drawing on the organizational stigma, organizational status, social network, and resource dependence literatures, we develop theoretical predictions about the conditions under which adverse events that are experienced at the firm level will be likely to represent disruptive factors at the alliance level and subsequently lead to premature alliance termination.

In this paper we argue that managers confront a paradox in selecting strategy. On the one hand, capital markets systematically discount uniqueness in the investment strategy choices of firms. Uniqueness in strategy heightens the cost of collecting and analyzing information to evaluate a firm’s future value. These greater costs in strategy evaluation discourage the collection and analysis of information regarding the firm, and result in a valuation discount. On the other hand, uniqueness in strategy is a necessary condition for creating economic rents and should, but for this information cost, be positively associated with firm value. We find empirical support for both propositions using a novel measure of investment strategy uniqueness in a firm panel dataset between 1985 and 2007.