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How do public capital markets influence alliance formation by new ventures? Resource dependency logic suggests that new ventures form fewer alliances when public capital markets are munificent because public investors demand less management control than do alliance partners. In contrast, according to the strategic behavior view, public capital market munificence can also motivate alliance formation because such munificence can enhance the returns that new-venture managers expect from using alliances. We seek to reconcile these two conflicting views of reinforcing versus attenuating effects of public capital market munificence on alliance formation. In this study of new Internet ventures, we find evidence that public capital market munificence increases alliance formation, which provides support for the reinforcing effect. However, availability of other resource alternatives�venture capital and product markets�decreases the positive influence of public capital market munificence on alliance formation. Thus, a contingency perspective in which resource dependency-based motivations moderate strategic motivations best explains the influence of capital market munificence on new ventures� alliance formation behavior.
