The gloomy side of embeddedness: The effects of overembeddedness on inter-firm partnership formation

We discuss the ‘gloomy’ side of firms’ embeddedness in networks of inter-firm partnerships. We propose a nested understanding of the effects of three levels of overembeddedness – environmental, inter-organizational and dyadic overembeddedness – on subsequent inter-firm partnership formation and argue for a joint examination of these three levels and their interactions over time. As a whole, increases in firms’ embeddedness will generate decreasing returns to the firms involved, prompting (i) the search for and attachment to novel partners and (ii) the dissolution of extant partnerships. On the flipside, overembeddedness thus sparks network evolution – by cueing firms to look beyond their embedded partnerships.