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MARTIN GARGIULO INSEADThis paper explores the effects of partner substitutability and alliance network structure on organizational profitability. Although firms are expected to benefit from the exclusive resources brought in by resource-rich, nonsubstitutable alliance partners, the costs of allying with such partners could offset those benefits. Analyzing alliances in the U.S. telecommunications industry, we show that a firm facing nonsubstitutable partners was better off when its alliances were embedded in third-party ties, which allowed the firm to gain indirect leverage on such partners.An earlier version of this article was presented at the 2002 annual meeting of the Academy of Management, Denver. We thank Boris Kabanoff, Louise Mors, Violina Rindova, Govert Vroom, John Weeks, Zhixing Xiao, and Emery Yao for their comments and suggestions. We also appreciate the comments from Henrich Greve and three anonymous reviewers that helped to improve the quality of this article substantially. The order of authors is alphabetic.