The role of horizontal and vertical new product alliances in responsive and proactive market orientations and performance of industrial manufacturing firms

This study examines different roles of new product alliance partners in enhancing responsive market orientation (RMO) and proactive market orientation (PMO) of industrial manufacturing firms in the context of learning in business-to-business (B2B) relationships. A survey of 146 firms shows that horizontal new product alliances with competitors provide access to similar industrial knowledge and know-how and thus help improve a manufacturing firm's RMO through exploitative learning. Although vertical new product alliances with suppliers may grant access to similar domains of knowledge, the findings of this study do not provide any support for their effect on a manufacturing firm's RMO. In contrast, the study shows that vertical new product alliances with research institutions provide access to a broader knowledge base and greater know-how with higher levels of non-redundancy and thus help improve a PMO through explorative learning. In addition, the results suggest that both RMO and PMO developed in different types of new product alliances enable a manufacturing firm to improve its new product performance and eventually its overall performance.     

Resource ambidexterity through alliance portfolios and firm performance

Research summary : Partner resources can be an important alternative to internal firm resources for attaining dual and seemingly incompatible strategic objectives. We extend arguments about managing conflicting objectives typically made at the firm level to the level of a firm's alliance portfolio. Specifically, will a balance between revenue enhancement and cost reduction attained collectively through partner resources accessed via a firm's various alliances be similarly beneficial for firm performance? Additionally, how do strategic attributes of alliance portfolio configuration, specifically alliance portfolio size and partner resource scope, condition the balance‐performance relationship? Based on data from the global airline industry, we find support for the balance‐performance relationship, though such balance is less beneficial for firms in the case of access to a broader resource scope per partner . Managerial summary : Increasing revenue and reducing costs simultaneously can potentially enhance firm competitiveness. We highlight that an alliance strategy can be an important alternative to internal resources for attaining such dual strategic objectives, particularly when partner resources accessed through alliances are treated collectively as portfolios. We examine the importance of balancing product‐market extending and efficiency‐improving partner resources in the global airline industry as well as the impact of two alternate strategies for accessing resources through alliances: fewer partners with more resources per partner or more partners with fewer resources per partner. We find that resource balance at the portfolio level helps airlines improve performance. Our results also suggest that managers should be cautious of accessing too many resources through just a few partners . Copyright © 2015 John Wiley & Sons, Ltd.     

Network resource stocks and flows: how do alliance portfolios affect the value of new alliance formations?

We examine how new network resources accessed through alliance formations interact with network resources present in a firm's alliance portfolio. We test our theoretical model using event study methodology and data from the global air transportation industry. We find that the market rewards firms forming alliances that contribute resources that can be synergistically combined with firms' own resources as well as with network resources accessed through their alliance portfolios. Our results also indicate that the market penalizes firms entering into alliances that create resource combinations that are substitutes to resource combinations deployed by existing alliance partners. Copyright © 2011 John Wiley & Sons, Ltd.     

Interorganizational alliances and the performance of firms: a study of growth and innovation rates in a high‐technology industry

This paper investigates the relationship between intercorporate technology alliances and firm performance. It argues that alliances are access relationships, and therefore that the advantages which a focal firm derives from a portfolio of strategic coalitions depend upon the resource profiles of its alliance partners. In particular, large firms and those that possess leading‐edge technological resources are posited to be the most valuable associates. The paper also argues that alliances are both pathways for the exchange of resources and signals that convey social status and recognition. Particularly when one of the firms in an alliance is a young or small organization or, more generally, an organization of equivocal quality, alliances can act as endorsements: they build public confidence in the value of an organization's products and services and thereby facilitate the firm's efforts to attract customers and other corporate partners. The findings from models of sales growth and innovation rates in a large sample of semiconductor producers confirm that organizations with large and innovative alliance partners perform better than otherwise comparable firms that lack such partners. Consistent with the status‐transfer arguments, the findings also demonstrate that young and small firms benefit more from large and innovative strategic alliance partners than do old and large organizations. Copyright © 2000 John Wiley & Sons, Ltd.     

Network location and learning: the influence of network resources and firm capabilities on alliance formation

This paper presents a dynamic, firm‐level study of the role of network resources in determining alliance formation. Such resources inhere not so much within the firm but reside in the interfirm networks in which firms are placed. Data from extensive fieldwork show that by influencing the extent to which firms have access to information about potential partners, such resources are an important catalyst for new alliances, especially because alliances entail considerable hazards. This study also assesses the importance of firms’ capabilities with alliance formation and material resources as determinants of their alliance decisions. I test this dynamic framework and its hypotheses about the role of time‐varying network resources and firm capabilities with comprehensive longitudinal multi‐industry data on the formation of strategic alliances by a panel of firms between 1970 and 1989. The results confirm field observations that accumulated network resources arising from firm participation in the network of accumulated prior alliances are influential in firms’ decisions to enter into new alliances. This study highlights the importance of network resources that firms derive from their embeddedness in networks for explaining their strategic behavior. Copyright © 1999 John Wiley & Sons, Ltd.     

Standardization Alliance Networks,Standard-Setting Influence,and New Product Outcomes*

Standardization alliances evolve through collaborations among firms for developing and implementing industry technical standards. Cooperative standard setting can help allied firms to gain access to external knowledge and technologies, but it is unclear how the configuration of a standardization alliance can result in improving a firm’s performance in new product development. This study examines how standardization alliance network-based resource advantages vary across a firm’s network position and the firm’s ability to influence industry standard setting and new product outcomes. Empirical analyses, based on archival data from 170 Chinese automobile manufacturers from 1999 to 2013, indicate that firms that span structural holes in standardization alliance networks gain an advantage when focusing on early new product introductions but suffer a disadvantage when aiming at more innovative products. In contrast, taking a central position in standardization alliance networks is negatively related to a firm’s speed in bringing new products to market but positively related to the firm’s new product introduction rate. Further, standard-setting influence significantly mediates the effect of network position on a firm’s new product speed to market. Increasing centrality and structural holes can lead to the improvement of a firm’s standard-setting influence, and this, in turn, positively affects speed to market.     

Exploration and exploitation alliances in biotechnology: a system of new product development

We link the exploration–exploitation framework of organizational learning to a technology venture's strategic alliances and argue that the causal relationship between the venture's alliances and its new product development depends on the type of the alliance. In particular, we propose a product development path beginning with exploration alliances predicting products in development, which in turn predict exploitation alliances, and that concludes with exploitation alliances leading to products on the market. Moreover, we argue that this integrated product development path is moderated negatively by firm size. As a technology venture grows, it tends to withdraw from this product development path to discover, develop, and commercialize promising projects through vertical integration. We test our model on a sample of 325 biotechnology firms that entered 2565 alliances over a 25‐year period. We find broad support for the hypothesized product development system and the moderating effect of firm size. Copyright © 2004 John Wiley & Sons, Ltd.     

Orchestrating resources for FMA in coopetitive NPD

The rapid introduction of new products in high‐tech industries is a key competence for firms wanting to benefit from the first‐mover advantage (FMA). Prior studies call for forging links between FMA and the resource‐based view, as the resources at the disposal of a firm tend to influence the likelihood and timing of market entry. Analysing the way firms orchestrate internal and external resources enables a better understanding of this link. More precisely, synchronising the combination of internal and external resources is important in determining the development time of new products. This issue becomes vital when the NPD process regroups competitors due to the short age of the acquired knowledge. An in‐depth case study of the product development strategies of four competitors that collaborated to develop Ethernet solutions identifies three different product introduction strategies based on different resource orchestrations and timing: pioneer, wise and slow. The firms that structured their resources early to make them available for bundling during coopetition were able to introduce products faster than firms that structured their resources during coopetition. Furthermore, our results show that only prepared firms are able to reap benefits from knowledge gained through coopetitive NPD.     

The Effects of Knowledge Depth and Scope on the Relationship between R&D Alliances and New Product Development

In this study, we extend the new product development (NPD) literature that proposes that firms' knowledge depth, defined as the reuse of well understood technical knowledge, and scope, defined as the use of newly acquired technical knowledge, and new knowledge accessed from R&D alliances all positively impact NPD. Building on the knowledge‐based view of the firm, we posit that the impact of firms' R&D alliances is limited when their internal knowledge depth and scope are adequate for NPD needs. We suggest that although firms form R&D alliances to gain the right to access external knowledge of R&D alliance partners, they are not obligated to invest in resources to integrate external knowledge from R&D alliances. We propose that they wait to see if their internal knowledge depth and scope prove sufficient for NPD. If the external knowledge proves to be unnecessary, firms choose not to invest the resources required to integrate this knowledge with their internal knowledge. Alternatively, we suggest an increased impact of R&D alliances on NPD when firms are more limited in their internal knowledge depth and scope. We propose that when knowledge depth and scope prove insufficient, firms make the additional investments required to integrate external knowledge from R&D alliances with their internal knowledge stock. This reasoning is consistent with real options theory as it has been applied in alliance research, where strategic alliances are characterized as real options. We find support for our hypotheses using panel data of 738 firm year observations for 143 U.S. biopharmaceutical firms operating in 2007. Our study contributes to the NPD literature and suggests new directions for future research.     

Whether and when do alliance terminations pay off?

Engaging in multiple strategic alliances, a firm forms an alliance portfolio. While a larger alliance portfolio signals investors a firm's ability to exploit new opportunities and improve financial performance, having multiple alliances may also undermine financial performance due to a firm's limited ability to effectively manage these alliances. Announcing an alliance termination, a firm signals an intention to increase the effectiveness of a larger alliance portfolio. This article examines the extent to which alliance termination announcements create value for firms with multiple alliances. Building on the resource-based view of the firm and organizational learning literature, the paper hypothesizes a U-shaped relationship between alliance portfolio size and a firm's cumulative abnormal stock return following an alliance termination announcement. This effect is moderated by the amount of a firm's alternative resources and partner-specific experience that affect its ability to effectively manage multiple alliances. The results show that alliance termination announcements create firm value when an alliance portfolio is large.     

Alliance portfolio diversity and firm performance

In this paper, we offer a comprehensive alliance portfolio diversity construct that includes partner, functional, and governance diversity. Grounding our work primarily with the resource‐ and dynamic capabilities‐based views, we argue that increased diversity in partners' industry, organizational, and national background will incur added complexity and coordination costs but will provide broadened resource and learning benefits. Increased functional diversity results in a more balanced portfolio of exploration and exploitation activities that expands the firm's knowledge base while increased governance diversity inhibits learning and routine building. Hypotheses were tested with alliance portfolio and performance data for 138 multinational firms in the global automobile industry during the twenty‐year period from 1985 to 2005. We found alliance portfolios with greater organizational and functional diversity and lower governance diversity were related to higher firm performance while industry diversity had a U‐shaped relationship with firm performance. We suggest firms manage their alliances with a portfolio perspective, seeking to maximize resource and learning benefits by collaborating with a variety of organizations in various value chain activities while minimizing managerial costs through a focused set of governance structures. Copyright © 2010 John Wiley & Sons, Ltd.     

The evolution of coopetitive and collaborative alliances in an alliance portfolio: The Air France case

This research studies the evolution of the composition of an alliance portfolio from a coopetition perspective. Building on resource dependence theory, market uncertainty appears to be a driver of alliance portfolio formation and evolution. Scholars have previously neglected key dimensions in analyzing the composition of firms' alliance portfolios: the partner type (pure partner or competitor) and partner interactions (horizontal, vertical or mixed). We build on the coopetition and alliance portfolio literature to explore (1) the composition of an alliance portfolio and (2) its evolution over time. We illustrate our theoretical framework with a longitudinal single-case study of Air France's alliance portfolio. First, we show that when market uncertainty is high, firms do not increase their reliance on collective strategies, but they do modify the composition of their portfolio. Second, to address high levels of market uncertainty, firms rely more on coopetitive alliances than on collaborative alliances. Third, firms use more horizontal than vertical interactions when market uncertainty is high.     

Learning to collaborate through collaboration: How allying with expert firms influences collaborative innovation within novice firms

Research summary : Strategic alliances have been recognized as a means for firms to learn their partners' proprietary knowledge; such alliances are also valuable opportunities for partner firms to learn tacit organizational routines from their counterparts. We consider how relatively novice technology firms can learn intraorganizational collaborative routines from more experienced alliance partners and then deploy them independently for their own innovative pursuits. We examine the alliance relationships between Eli Lilly & Co. (Lilly), a recognized expert in collaborative innovation, and 55 small biotech partner firms. Using three levels of analysis (firm, patent, and inventor dyad), we find that greater social interaction between the partner firm and Lilly subsequently increases internal collaboration among the partner firm's inventors. Managerial summary : Can collaborating externally advance internal collaboration? Yes. Our research found that collaboration among scientists at small, early‐stage biotechnology firms significantly increased after these firms formed highly interactive R&D alliances with a large pharmaceutical company known for its expertise in such collaboration. It is well known that alliances help new firms learn specific new technologies and commercialize innovations. Our study broadens the scope of potential benefits of alliances. New firms can also learn collaboration techniques, deploying them internally to enhance their own abilities in collaborative innovation. Managers should take this additional benefit into consideration in developing their alliance strategies. Pursuing alliance partners with expertise in collaboration and keeping a high level of mutual interactions with partner firm personnel should be important considerations to extract this value. Copyright © 2015 John Wiley & Sons, Ltd.     

Alliance capability,stock market response,and long‐term alliance success: the role of the alliance function

This paper addresses two key questions: (1) what factors influence firms' ability to build alliance capability and enjoy greater alliance success, where firm‐level alliance success is measured in two ways: (a) abnormal stock market gains following alliance announcements and (b) managerial assessments of long term alliance performance; and (2) are the two alternate ways of assessing alliance success correlated? We find that firms with greater alliance experience and, more importantly, those that create a dedicated alliance function (with the intent of strategically coordinating alliance activity and capturing/disseminating alliance‐related knowledge) realize greater success with alliances. More specifically, firms with a dedicated alliance function achieve greater abnormal stock market gains (average of 1.35%) and report that 63 percent of alliances are successful whereas firms without an alliance function achieve much lower stock market gains (average of 0.18%) and only a 50 percent long‐term success rate. We also find a positive correlation between stock market‐based measures of alliance success and alliance success measured through managerial assessments. In addition to providing insights into the development of alliance capability among firms, this paper is one of the first to provide empirical support for the efficient markets argument by demonstrating that the initial stock market response to a key event positively correlates to the long‐term performance and value of the event. Copyright © 2002 John Wiley & Sons, Ltd.     

Can entrepreneurial orientation improve R&D alliance performance? An absorptive capacity perspective

Research and Development (R&D) alliance studies maintain that alliance partners’ entrepreneurial interactions that pursue innovation opportunities through collective exploitation and exploration of knowledge resources lead to alliance success. Despite the importance of productive resource exchange and generation through such interactions, performance-by-alliance mechanisms remain under-researched. In this study, we develop a theoretical framework hypothesizing that the entrepreneurial orientation (EO) of alliance firms, which underlies their approach to seeking and utilizing resources productively, has a potential impact on their R&D alliance performance, depending on their absorptive capacity (AC). To specify the value creation and capture mechanism in the alliance, we adopt two performance indicators: technological competitiveness and business performance. Findings from a study of 218 small technology-intensive firms conducting R&D alliance projects show that EO translates into business performance through technological competitiveness and that AC leverages the alliance performance implications of EO. The results suggest that EO–AC complementarity is a strategic stimulant that triggers firms to extract greater benefits from R&D alliances.     

Stepping in and stepping out: Strategic alliance partner reconfiguration and the unplanned termination of complex projects

Research summary : I add to work that emphasizes the stability of strategic alliances by considering the consequences of alliance partner reconfiguration. I offer two contrasting perspectives: (1) alliance partner reconfiguration leads to disruption, hence increases the risk of subsequent project termination; (2) partner reconfiguration leads to adaptation, hence decreases this risk. Data on 1,025 interfirm Australian mining alliances (2002–2011) shows that on average alliance partner reconfiguration increases the risk of project termination. For firm exit from an alliance, the effect is contingent on a firm's resource base, but not for firm entry. Surprisingly, I do not find that alliance partner reconfiguration is beneficial in a dynamic environment. I discuss the implications of these findings for the literature on strategic alliance dynamics and that on strategic alliance outcomes. Managerial summary : This paper studies what happens when over time strategic alliances change their original membership. The research shows that both entry in and exit from an alliance increase the risk of project termination. Hence, weathering difficult times and managing conflict by keeping teams stable should be a prime directive if project survival is the alliance partners' overriding concern. In addition, I find that the exit of a firm with a comparatively large resource base increases the hazard of termination more than if the departing firm has a relatively small resource base. Therefore, one cannot underestimate the importance of trying to keep on board those alliance partners who bring a critical resource to the table. Copyright © 2015 John Wiley & Sons, Ltd.     

An examination of the effects of venture capitalists on the alliance formation activity of entrepreneurial firms

Research Summary : Alliances offer benefits such as access to capital, knowledge, and markets. Yet, due to their lack of legitimacy, entrepreneurial firms find it challenging to engage in alliances. Thus, it is important to examine which factors may drive alliance formation for entrepreneurial firms. We examine whether the presence of venture capitalists (VCs) is such a factor. Whereas current research suffers from endogeneity concerns that make the comparison of VC- and non-VC-backed firms problematic, our empirical design reduces this problem. Overall, we find that the presence of a VC and a VC's experience with taking firms public are positively associated with entrepreneurial firms’ alliance formation, and that VCs are more active in forming an alliance when the exit outcome is an acquisition, rather than going public. Managerial Summary : Alliances can be of fundamental importance to the growth of entrepreneurial firms. However, because entrepreneurial firms hold limited resources, their access to alliances may be limited. We study whether entrepreneurial firms backed by venture capitalists (VCs) are more likely to enter into alliances than firms without VC backing. A major problem with this sort of analysis is that VCs may cherry pick the best firms, which in turn are more likely to engage in alliances to begin with, irrespective of VCs. Accordingly, we control for the quality of funded firms, and therefore, isolate the VCs’ contribution to alliance formation. In doing so, we find support for the importance of the role VCs play in entrepreneurial firms’ alliance formations.     

The impact of R&D‐specific factors on the attractiveness of small‐ and medium‐sized enterprises as partners vis‐à‐vis alliance formation in large emerging economies

This study examines the impact of research and development (R&D)‐specific factors in determining the likelihood of small‐ and medium‐sized enterprises (SMEs) from developed countries to be attractive partners vis‐à‐vis forming alliances with SMEs from large emerging economies (LEEs). This study is founded on the knowledge‐accessing theory of alliance formation, which emphasises the higher efficiency gains of knowledge application as opposed to knowledge generation. We extend this theory to SMEs on the basis that smaller firms, because of their resources constraints and drive to survive, are likely to use alliances to access external knowledge bases leading to new product development (NPD) opportunities because of the low feasibility of acquiring knowledge. As a mix of complex knowledge is necessary to develop most modern products and services, SMEs are also likely to adopt a more flexible operational approach and to accept compromises to forge knowledge‐accessing alliances. We illustrate this theoretical development using primary data collected from British and German biotechnology SMEs, declaring the intention prospectively to form alliances with their counterparts in Brazil. Binary logistic regression was used to identify the factors influencing the likelihood of a firm as an attractive alliance partner. Our results indicate that R&D‐specific factors influence the likelihood of firms to be attractive alliance partners. In particular, firms showing an in‐house innovation history focused on one or few products are more likely to be attractive alliance partners with LEE firms than those that do not. Another R&D‐specific predictor that enhances the chances of alliance partner attractiveness with LEE firms is the firm's focused searching and identifying capability relative to technology or equipment that demonstrates good prospects to improve the firm's line of products. A third predictor refers to the firm's awareness regarding non‐cost obstacles for its own technological development. Implications for policy makers and practitioners are also discussed.     

Building firm capabilities through learning: the role of the alliance learning process in alliance capability and firm‐level alliance success

In recent years, academics and managers have been very interested in understanding how firms develop alliance capability and have greater alliance success. In this paper, we show that an alliance learning process that involves articulation, codification, sharing, and internalization of alliance management know‐how is positively related to a firm's overall alliance success. Prior research has found that firms with a dedicated alliance function, which oversees and coordinates a firm's overall alliance activity, have greater alliance success. In this paper we suggest that such an alliance function is also positively related to a firm's alliance learning process, and that process partly mediates the relationship between the alliance function and alliance success observed in prior work. This implies that the alliance learning process acts as one of the main mechanisms through which the alliance function leads to greater alliance success. Our paper extends prior alliance research by taking a first step in opening up the ‘black box’ between the alliance function and a firm's alliance success. We use survey data from a large sample of U.S.‐based firms and their alliances to test our theoretical arguments. Although we only examine the alliance learning process and its relationship with firm‐level alliance success, we also make an important contribution to research on the knowledge‐based view of the firm and dynamic capabilities of firms in general by conceptualizing this learning process and its key aspects, and by empirically validating its impact on performance. Copyright © 2007 John Wiley & Sons, Ltd.     

Alliance portfolio reconfiguration following a technological discontinuity

Research summary : We study how technological discontinuities generate first‐ and second‐order effects on alliance formation and termination, leading to reconfiguration of firms' alliance portfolios. Following technological shocks, we argue that firms often seek alliances that provide new resources while also having incentives to form alliances for reinforced and challenged resources that complement the new resources. In parallel, alliance terminations, even involving resources otherwise unaffected by the discontinuity, increase due to limits in firms' alliance carrying capacity. We study biopharmaceutical firms between 1990 and 2000, which faced a technological discontinuity in 1995 in the form of combinatorial chemistry and high‐throughput screening. We improve understanding of how technological discontinuities affect the value of resources and how firms reconfigure alliance portfolios in response. Managerial summary : When firms form alliances to gain new resources during technological discontinuities that disrupt their industry, they cannot consider only the focal new partnerships. Instead, new alliances create complementarity and substitution pressures that lead to broader reconfiguration of the firms' alliance portfolios: (1) complementarity creates incentives to also form alliances for resources that the technological discontinuity reinforces or challenges in order to improve the collective value of co‐specialized assets; (2) substitution creates incentives to terminate existing alliances, even if their value is otherwise unaffected by the discontinuity, in order to create carrying capacity for new alliances. Thus, one new alliance can generate a cascade of reconfiguration that challenges the balance between the benefits of stability and the need for change in an alliance portfolio. Copyright © 2016 John Wiley & Sons, Ltd.