ABSTRACT
This chapter examines the formation, governance, operation, and consequences of inter organizational networks, ranging across levels of analysis from dyads to large- and small-firm networks, from industrial districts to organizational fields. It describes Northwest KLM partnership was a minority equity investment that eventually dissolved because of persistent policy disagreements and mistrust between the partners. The chapter discusses alternatively, poor performance, slacking off, and free-riding may lead to deteriorating trust and eventual termination of an alliance, as revealed in the KLM-Northwest story. Resource dependence explanations of alliance formation emphasize inherent tensions between organizational resource procurement needs and the desire to preserve freedom of strategic decision making. Inter-firm connections formed because people know one another from social circles at work, schools, clubs, and kinship. A Chief Executive Officer with personal ties to two unconnected others would act as a go-between, making introductions and vouching for the potential business partners' trustworthiness.
