research. 1 Whereas I focus on reputation, several studies referred to in this paper discuss the concept of status. However,

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1 LARGE ENVIRONMENTAL REPUTATION ASYMMETRY, R&D ALLIANCE SUSTAINABILITY, AND THE MODERATING ROLE OF THE LOWER- REPUTATION FIRM S FRAMING OF ENVIRONMENTAL ISSUES The strengthened focus on environmental sustainability over the last two decades (Hart & Dowell, 2011) has instigated a substantial stream of research on how firms environmental performance affects their financial performance (Orlitzky, Schmidt, & Rynes, 2003; Russo & Fouts, 1997). It has been shown that this relationship is considerably mediated by reputationbased outcomes (Allouche & Laroche, 2005; Hart & Dowell, 2011; Orlitzky et al., 2003; Surroca, Tribó, & Waddock, 2010). For instance, like other types of reputation or status 1 (Dollinger, Golden, & Saxton, 1997; Ferguson, Deephouse, & Ferguson, 2000; Lin, Yang, & Arya, 2009), strong environmental reputations can positively influence stakeholders contracting decisions (Aaron, McMillan, & Cline, 2012; Aiman-Smith, Bauer, & Cable, 2001; Alniacik, Alniacik, & Erdogmus 2012). Of particular interest to this study is the evidence that such reputations can facilitate strategic alliance formation (Norheim-Hansen, 2013); in view of the fact that interfirm cooperative agreements tend to have important ramifications for firms financial performance. Today, alliances are often needed to stay competitive (Das & Teng, 2000a; Teng & Das, 2008). Among other things, they allow for sharing costs and risks, and reducing the time span of innovation (Gulati & Singh, 1998) through joint research and development (R&D). However, besides facilitating formation, reputations can affect alliance outcomes (Saxton, 1997). Still, we know little about how, if at all, the environmental reputations of the two (or more) partner firms affect alliance performance (Lunnan & Haugland, 2008). Environmental reputation is conceptualized as the level of environmental credibility (Brady, 2005) attributed to a firm by its stakeholders; i.e., the perceived level of past and likely future environmental performance relative to other actors within the same industry 2 (Walker, 2010). I contend that firms implementing environmental activities in their business operations only when these become mandatory by the law are the firms with the lowest reputation in the alliance context, as it is improbable that firms with average or good environmental reputations ally with firms not complying with environmental regulations (Mitsuhashi, 2002). I further assume that the more proactive the firms environmental strategies (Hart, 1995), the higher the environmental reputation. At first sight, it may seem unlikely that partnering firms environmental reputations influence alliance performance unless the alliance is an environmental collaboration (Wassmer, Paquin, & Sharma, 2012), excluded from this study. However, given the well-established notion that reputation asymmetry or gap (Obloj & Capron, 2011) represents different incentives as well as disincentives for the high- and low-reputation partners (Ahuja, Polidoro Jr., & Mitchell, 2009; 1 Whereas I focus on reputation, several studies referred to in this paper discuss the concept of status. However, prior research has confused status with reputation (Washington & Zajac, 2005, p. 283) and used the terms interchangeably as they are closely related (Ibid.). Status can be considered a strong correlate of reputation or a dimension that stabilizes reputation ordering (Rhee & Valdez, 2009, p. 153). Thus, it is legitimate to draw on status research when discussing reputation (Rhee & Haunschild, 2006). Following Rhee and Haunschild (2006) and Rhee and Valdez (2009), I acknowledge but do not address the differences between reputation and status (Jensen & Roy, 2008) as they do not affect my propositions. 2 Seeing environmental reputation relative to other actors within the same industry further justifies drawing on status research. 1

2 Castellucci & Ertug, 2010; Lavie, 2006; Mayer, 2006; Simonin & Ruth, 1998; Yu & Lester, 2008) and recent research linking it to higher alliance termination likelihood the question is arguably worth exploring. Besides, differing environmental reputations signal differing stances towards society embedded in the organizational culture, and discrepant priorities and goals, which can influence alliance performance (Chen, Liu, & Hsieh, 2009; Das, 2006; Greve, Mitsuhashi, & Baum, 2012). There is also anecdotal evidence, in my conversations with top executives, suggesting so: This has to do with the organizational cultures of the firms...what you re preoccupied with and how you run things whether you re managing with a longterm or short-term perspective. I think that if you have two firms where both are conscious about the environment, it will tell you something about [ ] the culture embedded in management, and hopefully the whole organization and then, I think there would be potential for a very good collaboration. As opposed to if one is and one isn t... [implying] a basis for conflict, [concerning] what you re spending money on and focus on (Mr. Bauer, CEO) 3 More specifically, as manifest in the citation, a particularly pertinent question is how large environmental reputation asymmetry affects alliance performance. In order to answer this question, we have to look at the benefits and costs for both firms simultaneously. For that reason, this paper discusses both positive (focal firm s reputation>partner firm s reputation) and negative (focal firm s reputation<partner firm s reputation) asymmetry effects. Given the vastness of the multidimensional alliance performance concept (Lunnan & Haugland, 2008), as well as numerous alliance objectives (Kale & Singh, 2009), I see it as necessary to make certain choices. First, I concentrate my analyses on R&D alliances, considered as the most accessible dimension of alliance scope in terms of conceptual clarity (Oxley & Sampson, 2004, p. 726). Second, I focus on implications for the long-term alliance performance (Lunnan & Haugland, 2008) or alliance sustainability meaning there is no unplanned alliance termination due to instabilities (Das & Teng, 2000b; Makino, Chan, Isobe, & Beamish, 2007) because it is implausible that there will be significant short-term performance consequences from environmental reputation asymmetry. This claim finds support in Saxton (1997): reputation was not significantly related to [the lower-reputation firm s] initial satisfaction, suggesting the benefits may accrue over time (p. 455). Third, the aim of this study is to develop a longitudinal conceptual framework informing my research question, covering key performance drivers in several alliance phases (Kale & Singh, 2009). Referring again to Saxton (1997), it is clear that reputation combinations may have different outcomes in different alliance phases (Ray, Barney, & Muhanna, 2004). Including relevant indicators in multiple alliance phases should allow for better predicting implications for the net effect on overall long-term performance (Ibid.). Fourth, in my endeavors, I mainly draw from two theoretical perspectives seen as particularly suitable, and both complementary and compatible: (i) the natural-resource-based view (NRBV) of the firm (Hart, 1995; Hart & Dowell, 2011; Sharma & Vredenburg, 1998) contends that firms can, through proactive environmental strategies, develop resources and capabilities that are sources of competitive advantage and that cognitive biases and valuation difficulties cause continuing underinvestment in this area (Berchicci & King, 2007); (ii) the strategic cognition perspective (Narayanan, Zane, & Kemmerer, 2011) assumes that behavioral biases and interpretative frames 3 All names are male pseudonyms to assure confidentiality. 2

3 determine which information receives managerial attention and how managers interpret it (Bundy, Shropshire, & Buchholtz, 2013, p. 356). I extend theory by integrating the natural-resource-based and strategic cognition perspectives to explain how and, also, when environmental reputation asymmetry has negative consequences for R&D alliance sustainability. Hence, this paper contributes to the research literature on reputation asymmetry outcomes in the alliance context, by exploring one widely salient reputational issue (Bonardi & Keim, 2005). Different types of reputation have distinct effects (Deephouse, 2000; Dollinger et al., 1997; Ferguson et al., 2000) 4. This is demonstrated in the findings of Lin et al. (2009), showing that a large asymmetry in societal status between a firm and its alliance partners will bring more benefit to the firm with low rather than high societal status (p. 936), but no support for the hypothesis that a large asymmetry in network status between a firm and its alliance partners will bring more benefit to the firm with low rather than high societal status (Ibid.). Yet, while there are dynamics specific to the main independent variable of this study, the framework proposed offers guidance for future research on other types of reputations as well as other sources of partner asymmetry, besides reputations. Moreover, criteria found to influence alliance formation should be analyzed for their impact on alliance performance as emphasized by Mitsuhashi and Greve (2009). The following quote encapsulates their appeal: Testing effects on performance is important because a comparison of findings on alliance formation with those on organizational outcomes helps illuminate whether the criteria managers use in alliance formation reflect actual drivers of performance (p. 980). Although not among the main partner selection criteria in alliance formation, except when the alliance is an environmental collaboration (Wassmer et al., 2012), strong environmental reputation has been found to enhance partner attractiveness (Shah & Swaminathan, 2008). Furthermore, this study adds to the important scholarly work done to unearth determinants of alliance failure and success (e.g., Das & Teng, 2003; Krishnan, Martin, & Noorderhaven, 2006; Lunnan & Haugland, 2008; Mitsuhashi & Greve, 2009; Mohr & Spekman, 1994; Zollo, Reuer, & Singh, 2002). Last but not least, this paper contributes with new insights to the research stream on the environmental financial performance linkage (Orlitzky et al., 2003; Russo & Fouts, 1997). The paper is organized as follows. First, I describe Kale and Singh s (2009) conceptual representation of the alliance phases (formation, design and postformation) and discuss its key indicators of alliance success. I propose an adapted framework, specifically pertaining to R&D alliances and long-term alliance performance. Subsequently, I use this framework for building propositions on large environmental reputation asymmetry outcomes related to each phase and overall long-term performance. In these developments, I draw from the natural-resource-based view and strategic cognition perspectives, and introduce the lower-reputation partner s framing of environmental issues as a core moderating concept. Finally, a concluding section discusses the implications of my propositions, and limitations pointing out avenues for future research. In sum, my complete framework proposes that, all else being equal, large environmental reputation asymmetry between the partners has negative consequences for alliance performance indicators in the formation, design, and postformation phases and, thus, for overall R&D alliance sustainability. Furthermore, it suggests that harmful effects are moderated by the lowerreputation firm s framing of environmental issues. Stated differently, I propose that it is not the 4 The corporate reputation construct consists of various types of reputation or reputational issues. Whereas prior studies sometimes suggest an overview of the dimensions (e.g. Brady (2005) lists seven components; Dollinger et al. (1997) list three), such overviews are not exhaustive. 3

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