Environmental Shocks and SME Alliance Formation Intentions in an Emerging Economy: Evidence from the Asian Financial Crisis in Indonesia Louis D. Marino Franz T. Lohrke John S. Hill K. Mark Weaver Tulus Tambunan Environmental shocks can occur when emerging country governments open their markets to outside influences. We extend research conducted primarily in mature economies on how managers react to environmental shocks by evaluating how environmental shock type, a firm’s strategic orientation, and its slack resources affected strategic alliance formation intentions during and immediately following the Asian Financial Crisis. Results from two Indonesian small- and medium-sized enterprises (SME) samples show that these factors influenced alliance intentions, although not always in ways that were consistent with previ- ous research findings in more mature markets. Overall, our results provide critical insights into emerging market firms’ strategic actions, particularly related to key managerial motiva- tions for SME alliance formation. How do small- and medium-sized enterprises (SMEs) in emerging economies respond when faced with rapid, often unforeseen, changes in their external environments? These “environmental shocks,” resulting from major shifts in technology, economic forces, political regimes, or, in some cases, from natural disasters, can create substantial uncertainty in these firms by changing an industry’s “rules of the game” (Tushman & Romanelli, 1985; Wright, Filatotchev, Hoskisson, & Peng, 2005). Firms that do not realign their strategies with the new environmental realities resulting from these shocks can face performance declines that threaten their long-term viability (Fischer, Lee, & Please send correspondence to: Louis D. Marino, tel: (205) 348-8946; e-mail: Lmarino@cba.ua.edu P T E & 1042-2587 © 2008 by Baylor University 157 January, 2008