Book Report on "Trust"

SPRING 2005

VOL.46 NO.3

Erin Anderson and Sandy D. Jap

The Dark Side of Close Relationships

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REPRINT NUMBER 46314

The Dark Side of Close Relationships

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or decades, close relationships between firms and their suppliers and customers have been highly touted as a business strategy that can expand the pie of benefits for the parties involved. From 1996 to 2001, companies formed these relationships at a brisk pace: CEOs signed a partnership into existence every hour of every day, resulting in 57,000 alliances over this six-year period.1 And as the economy grows, firms are continuing to rely on close collaborations to grow their pie of benefits. However, there is a persistent problem with this strategy that cannot be ignored: Close relationships are not always synonymous with good relationships. This is evidenced by the fact that many of these close relationships — whether they are joint ventures or loose alliances — fail. Indeed, a number of studies put the failure rate of joint ventures at anywhere from 30% to 50%.2 This reality of close relationships has been studied from a variety of perspectives, including psychology, marketing, management and economics. Each offers its own causal explanation. For example, psychologists have found that the closer and safer the parties of a relationship feel, the likelier they are to raise annoying issues and generate conflict.3 Marketing researchers speculate that partners grow increasingly dissatisfied as the relationship persists.4 Perhaps each side becomes less objective and its offerings stale, even as expectations grow unreasonably high. Strategic management research on joint ventures posits that partners initially depend highly on each other. Over time, as each party learns what the other knows, the relationship becomes unstable and vulnerable.5 Economists...