Returns to alliance portfolio diversity: The relative effects of partner diversity on firm's innovative performance and productivity

This study considers the impact of diversification in types of technological alliances, resulting in alliance portfolio diversity, on various dimensions of a firm's performance, as they relate to exploration and exploitation. Using a large panel of innovative firms in the Netherlands, this study shows that partner type diversity in a firm's alliance portfolio has an inverted U-shaped relationship with productivity and radical innovative performance and a positive relationship with incremental innovative performance. Moreover, the results suggest that a lower level of diversity is needed to achieve an optimal level of productivity compared to radical innovative performance, whereas for incremental innovative performance a higher level of portfolio diversity appears to give the best performance.     

Exploring the innovation strategies of young firms: Corporate venture capital and venture capital impact on alliance innovation strategy

We investigate how governance structure and power influence alliance exploration strategy. Adopting a real options perspective and the agency view, we suggest that innovation strategies differ based on the firm's governance authority. We find that the motivations of corporate venture capitalist firms, venture capitalists, and firm founders may have an impact on the formation of exploratory alliances among adolescent firms. Using a sample of 122 adolescent firms, we examine the influence that governance structure has on the firm's alliance portfolio and innovation potential. While the influence of corporate venture capitalist firms alone do affect alliance formation strategy, corporate venture-backed firms with founders having high influence (knowledge or ownership in the firm) are more likely to form innovation-focused alliances. In contrast, venture capitalist-backed firms tend to avoid innovation-focused alliances, preferring more exploitive ones, even when founders have high influence within the firm.     

The effects of absorptive capacity,knowledge sourcing strategy,and alliance forms on firm performance

This paper explores the relationship between absorptive capacity, knowledge sourcing strategy, alliance forms, and firm performance. Based on the literature, the concept of a knowledge sourcing strategy in alliance contexts is proposed, which can be categorised into two types: a knowledge internalisation strategy and a knowledge access strategy. From an organisational learning perspective, it is argued that a firm's absorptive capacity has a positive influence on a knowledge internalisation strategy, and accordingly a firm's choices of alliance forms are also influenced. R&D performance is also included in the theoretical model in order to generate further managerial implications. Instead of using conventional regression methods, structural equation modelling (SEM) is adopted to conduct path analysis, as SEM is well suited in verifying multiple-dependent models. The arguments advanced are supported by empirical analysis of a sample of 148 alliances.     

Alliance type,alliance experience and alliance management capability in high-technology ventures

We investigate a high-technology venture's alliance management capability. Thus, we develop a model that links differential demands of alliance type and the benefits of alliance experience to an observable outcome from a firm's alliance management capability. We test our model on a sample of 2226 R&D alliances entered into by 325 global biotechnology firms. We find that alliance type and alliance experience moderate the relationship between a high-technology venture's R&D alliances and its new product development. These results provide empirical evidence for the existence of an alliance management capability and its heterogeneous distribution across firms.     

Strategic alliances and the rate of new product development: An empirical study of entrepreneurial biotechnology firms

A key to success in industries populated by entrepreneurial high-technology firms is the rate at which the firm develops new products. Rapid product development creates significant advantages for entrepreneurial firms, including access to early cash flows, external visibility, legitimacy, and early market share. The higher a firm's rate of new product development, the more likely the firm is to achieve and maintain these first-mover advantages. This is particularly true in industries such as pharmaceuticals, where the effectiveness of patent protections leads to patent races in which a “winner take all” scenario exists. But even in industries where patent protection is weak, the advantages of being first, in terms of market preemption, reputation effects, experience curve effects, etc., can still be of major importance. We argue that one way an entrepreneurial firm can increase its rate of new product development is by entering into strategic alliances with firms that possess complementary assets.The basic proposition advanced is that a firm's rate of new product development is a positive function of the number of strategic alliances that it has entered. However, the relationship between strategic alliances and the rate of new product development may be nonlinear. Specifically, although strategic alliances may initially have positive effects on the rate of new product development, this relationship may exhibit diminishing returns. Moreover, past some point it is possible that negative returns may set in. Thus, the relationship between the number of alliances and the rate of new product development may be an inverted U-shape.Two reasons can be given to support such a relationship. First, not all alliances will make an equal contribution to increasing the rate of new product development. The economic “law” of diminishing returns suggests that the more alliances a firm engages in, the more likely it is to enter some alliances whose marginal contribution is relatively minor. Such a phenomenon on its own is enough to suggest diminishing returns.Second, gaining access to complementary assets through strategic alliances is not without risks. Malperformance may occur when the firm discovers that the complementary assets provided by the partner are a poor match, fail to live up to the promises made by the partner, or a partner may opportunistically exploit an alliance, expropriating the firm's know-how while providing little in return. These problems arise because the effectiveness with which the firm can select and manage alliance partners is likely to be negatively related to the number of alliances the firm is managing. Due to information processing requirements, the quality of partner search and the ability to monitor the partners' actions will decline as the firm increases the number of alliances in which it is involved. This reasoning leads to a prediction that past some point, alliances will be increasingly vulnerable to malperformance. This raises not only the possibility of diminishing returns to the number of alliances, but also negative returns as the number of alliances increases past some critical point.This proposed relationship between alliances and new product development was tested on a sample of 132 biotechnology firms. The results provide strong evidence to support the inverted U-shaped relationship between the number of strategic alliances and the rate of new product development. Therefore, at low levels strategic alliances are positively related to new product development, but as the number of alliances increases, the benefits begin to decrease, and at high levels the costs of an additional alliance actually outweigh the benefits.     

Innovating across boundaries: A portfolio perspective on innovation partnerships of multinational corporations

This paper examines how and under what conditions alliance portfolio diversity influences a firm's innovative performance, with special attention being given to potential performance differences between multinational corporations (MNCs) and domestic firms. Analyses of data from 1045 German firms, among which 598 MNCs, revealed an inverted U-shaped relationship between alliance portfolio diversity and MNCs’ innovative performance. Findings also indicate MNCs to be better positioned than their domestic counterparts with regards to translating alliance portfolio diversity into superior innovative performance. Importantly though, this only holds for MNCs equipped with strong internal R&D capabilities and, to some extent, high human capital.     

Market valuation of marketing alliances in East Asia: Korean evidence

This paper investigates firm value created by non-equity marketing alliance announcements of Korean listed firms in terms of stock price reactions to the announcements. We find evidence that on the Korean stock market, the announcements of marketing alliances produce significant positive abnormal returns, which reflect an increase in firm value, around the announcement date. This suggests that firm managers need to seek for various marketing alliances not only for an effective competition in competitive business environments but also for enhancement in shareholder wealth. The increase in firm value has inverse relationship with firm's size and growth opportunity. In particular, marketing alliances with firms based in G7-countries create greater firm value than ones with firms based in the home country. Our study provides investors, firm managers, and academics with valuable implications of an importance of marketing alliances for valuation of firms in other Asian countries as well as in Korea.     

International ambidexterity and firm performance in small emerging economies

Conventional IB theories stress the importance and implications of a firm's exploitative strategy. However, the unprecedented competitive nature of contemporary business necessitates firm “ambidexterity” — the simultaneous execution of exploitation and exploration activities. Using balanced panel data of 207 Taiwanese firms spanning six years, this research examines the effects of international ambidexterity on firm performance. Findings reveal that ambidexterity promotes a firm's performance. For firms from small emerging economies, international ambidexterity is highly vulnerable to environmental complexity and sensitive to previous international experience and the firm's capability to conduct international business. These factors significantly moderate firm performance.     

External and internal influences on R&D alliance formation: Evidence from German SMEs

Relying on relational capital theory and transaction cost economics (TCE), this study identifies factors that impede or promote alliance formation in small to medium-sized enterprises (SMEs). Environmental uncertainty and knowledge intensity impede firms' R&D alliance formation; the focal firm's overall trust in partners enhances alliance formation. Trust interacts positively with environmental uncertainty and knowledge intensity to affect alliance formation in SMEs. The findings reflect data from a longitudinal sample of 854 German SMEs, captured over eight years from 1999 to 2007.     

Exploration and exploitation in established small and medium-sized enterprises: The effect of CEOs' regulatory focus

Based on theory of regulatory focus and organizational ambidexterity, we hypothesize that the level of engagement in exploration and exploitation in a small or medium-sized enterprise (SME) is affected by the respective CEO's chronic regulatory focus. In our analysis of survey responses from CEOs in Switzerland, we find that the CEO's level of promotion focus positively affects the firm's engagement in both, exploration and exploitation, while the CEO's prevention focus is negatively associated with the firm's exploration but not significantly related to its exploitation. The positive associations between a CEO's promotion focus and the firm's exploration/exploitation activities are enhanced under conditions of intense competition.     

Multilateral R&D alliances by new ventures

We examine the antecedents and outcomes of new ventures' formation of multilateral R&D alliances. Our results show an inverted U-shaped relationship between market uncertainty and a new venture's likelihood of forming multilateral R&D alliances. Top management team's social capital and ventures' technological capabilities are critical for new ventures to identify and capture alliance opportunities. Moreover, our analysis reveals value creation effects of multilateral R&D alliances for new ventures despite the challenges and difficulties associated. We further show that the value creation effect is a function of the type of exchange relationship (i.e., net- vs. chain-based) in the multilateral R&D alliance and that governance structure moderates this relationship.     

Effect of Customers' and Suppliers' Perceptions of the Market Orientation of Manufacturing Firms on Channel Relationships and Financial Performance

ABSTRACT

This study is designed to investigate the effect of customers' and suppliers' perceptions of the market orientation of manufacturing firms on customers' and suppliers' trust in, cooperative norms in, and satisfaction with the relationship with the manufacturing firm. The findings from a sample of 72 matched sets of suppliers, manufacturing firms and customers in industrial channels in the Netherlands reveal that the perceived market orientation of manufacturing firms engaged in channel partnerships has a positive influence on customers' and suppliers' levels of trust in, cooperative norms in, and satisfaction with the relationship. This study further investigates the effect of the customers' and suppliers' trust in, cooperative norms in, and satisfaction with the relationship on the financial performance of the manufacturing firm. The results reveal that customers' and suppliers' cooperative norms in the relationship positively influence the manufacturing firm's financial performance. Customer's and supplier's trust in and satisfaction with the relationship have no effect on the manufacturing firm's financial performance.     

Alliance portfolios and shareholder value in post-IPO firms: The moderating roles of portfolio structure and firm-level uncertainty

Using longitudinal data for initial public offering (IPO) firms, we examine the role played by structural differences between different types of alliance portfolios in the relationship between IPO firm alliance portfolios and shareholder returns. We show that because of the different signals they send to the capital market, different types of alliance portfolios affect IPO firm performance differently. Namely, financial markets seem to reward firms whose alliance portfolio is diversified across different types of alliances (a portfolio high in functional diversity), but not those who align their alliance partners into multiple functional points in the value chain (a portfolio high in vertical scope). We also examine the signaling role of alliance portfolios under different IPO firm uncertainty conditions. We note that uncertainty about the IPO firm is not limited to pre-IPO quality uncertainty. Investors also face transition uncertainty, post-IPO uncertainty about the ability of the firm to adapt to the new managerial challenges it faces and succeed post-IPO. We find that these two types of uncertainties moderate alliance portfolio effects in different ways. The beneficial effects of alliance portfolios in mitigating liabilities of newness is of greater importance for firms associated with higher quality uncertainty and for those associated with lower transition uncertainty.     

Technology strategy and software new ventures' performance: Exploring the moderating effect of the competitive environment

Technology strategy (TS) is one of the most important aspects of any firm's strategic posture especially in dynamic environments such as the computer software industry. Not only do new ventures face the pressures that accompany all young companies (e.g., shortages of capital), but they also have to keep up with a rapid rate of technological change. Consequently TS, the sum of a firm's choices on how to develop and exploit its technological resources, can profoundly affect a venture's performance and survival.This empirical study examines the relationships between TS and new venture performance (NVP). By focusing on TS variables and analyzing their performance outcomes, the study offers insights into the factors that can influence the success of new ventures in a fast-paced environment. This study also examines key environmental moderators, those external environmental forces, which can significantly impact the strength or direction of the relationship between a firm's TS and NVP.The study examines five TSs that can enhance NPV. The first is radicality, which means developing and introducing new products ahead of competitors. The second is the intensity of product upgrades, which refers to a venture's commitment to introducing more refinements and extensions of its products than its competition. The third is the level of R&D spending, which indicates a venture's strong investment in internal research and development activities. The fourth is the use of external technology sources (e.g., strategic alliances and licenses) to augment a firm's own R&D efforts. The final dimension is the use of     

An examination of opportunistic action within research alliances: Evidence from the biotechnology industry

Like a photographer trying to take a perfect picture, an entrepreneur trying to increase the odds of survival must learn very quickly that focus is everything. And what demands an entrepreneur’s immediate focus is the development of new products. Entrepreneurial ventures depend on the rapid creation of new products to gain access to early cash flows, create legitimacy, grab early market share, and increase their odds of survival (Schoonhoven, Eisenhardt, and Lymman 1990). However, the increasing costs and complexity of new product development are making it difficult for entrepreneurial ventures to contain the assets needed for successful R&D within their boundaries, forcing them to reach beyond their borders to access resources. Barley et al. (1992) document the use of more than 900 contractual research agreements within the biotechnology industry alone. Recent research has also found a positive relationship between the use of alliances in the R&D process and the rate of new product development Deeds and Hill 1996, Shan, Walker, and Kogut 1994.This particular study focuses on the use of relational contracts in the R&D process and extends the prior work on relational contracts to create an explanatory model of the deterrents to opportunism within a relational contract. The article begins with a discussion of the traditional modes of deterring opportunism and of modes of deterring opportunism based on the development of a strong cross-boundary relationship. From this discussion, hypotheses are derived that relate certain characteristics of the alliance (frequency of communication, strength of contractual deterrents, hostage investments, age of the relationship, etc.) to the level of opportunism within the relationship. These hypotheses are then tested on a sample of 109 research alliances in the biotechnology industry.We found significant evidence that a strong relationship between the partners serves as a much more effective deterrent to opportunistic action than the creation of hostage investments or contingent claims contracts. In particular, the results for frequency of communication and the background of the firm highlight the importance of the top management team’s understanding and involvement in the management of research alliances. The strong results for background congruence indicates the importance of shared expectations and understandings between the partners.The strong empirical results for the hypothesized U-shaped relationship between age and opportunism provide support for the existence of both a honeymoon period in the relationship and a liability of adolescence among research alliances. The data also suggest that the honeymoon period for an alliance will last about 4.6 years. We also find that the honeymoon period for alliances that are of little importance to the future of the firm is only 4.1 years, and in our sample of alliances that were important to the future of the firm, the honeymoon period extended from 4.6 years to 6.1 years.     

Different forms of corporate philanthropy,different effects: A multilevel analysis

This study investigates how different types of corporate philanthropy impact employees' life satisfaction. Grounded in signaling theory, we explore and clarify the nuances among three types of corporate philanthropy values: the absolute value of corporate philanthropy, the value of a firm's corporate philanthropy relative to its past level, and the value of corporate philanthropy relative to the firm size. Results of multilevel analyses on a large scale sample with 218 firms and 2,261 employees at two time points reveal that: the absolute value of corporate philanthropy positively influences employees' life satisfaction; the value of a firm's corporate philanthropy relative to its past philanthropy negatively impacts employees’ life satisfaction; and the value of corporate philanthropy relative to the firm size positively affects employees' life satisfaction. The results indicate that the influences of corporate philanthropy on employees' life satisfaction vary depending on the evaluation benchmarks. Firms may benefit by taking their size and past philanthropy into consideration when making corporate philanthropy investment decisions.     

Effects of extent and diversity of alliancing on innovation: the moderating role of firm newness

The purpose of this paper is to show the varying effects of alliance portfolio size and heterogeneity on innovation in biotechnology firms. Previous literature has indicated that the number and heterogeneity of partners in an alliance portfolio might have positive effects on innovativeness. Yet, engaging in multiple and heterogeneous collaborations also raises managerial costs and complexity levels disproportionally, potentially causing detrimental performance effects. Analysis of a unique panel dataset suggests that engaging in many alliances generally has a positive influence on a firm’s innovation output. Furthermore, maintaining diverse alliance portfolios and a high extent of alliancing jointly affects a firm’s innovation output ?negatively. By additionally showing that younger firms benefit disproportionally from both alliance portfolio diversity and size, this study provides a more nuanced view of alliancing effects.     

Alliance-Based New Product Development Success: The Role of Formalization in Exploration and Exploitation Contexts

Purpose: Although alliances offer tremendous strategic potential, firms still struggle to successfully manage new product development alliances (NPD alliances). A prominent explanation for this is the institutional economics' view (see Williamson 1985 Williamson, O. E. 1985. The economic institutions of capitalism: Firms, markets, relational contracting, New York: The Free Press.  [Google Scholar]) that, in general, a key disadvantage of alliances versus vertical integration is that administrative control mechanisms are weaker. Here, a key control mechanism is formalization (the use of explicit rules to govern business activities).

However, regarding formalization's influence on both NPD and alliance performance, conceptual views and empirical findings are mixed, which suggest that unexamined variables moderate formalization's influence on NPD performance.

Therefore, it is surprising that there is no research on whether formalization's influence differs in alliances pursuing an NPD exploration strategy versus an NPD exploitation strategy because both (1) require varying levels of freedom of action and adherence to procedural rules to achieve success, and (2) are extensively employed in NPD.

Further, there is also surprisingly little intrafirm NPD and non-NPD alliance research on formalization in exploration and exploitation contexts because here as well formalization's influence on performance (1) is central, and (2) differs based on the project's innovative and learning intent.

The purpose of this research is to begin to close important literature and industry practice knowledge gaps about formalization's influence on NPD alliance performance in exploitation versus exploration strategic contexts.

Originality, value, and contribution: This research is the first examination ever of two key NPD strategies—exploration and exploitation—in an NPD alliance context. The research sheds light on conflicting views about formalization's NPD performance-enhancing and inhibiting aspects, and offers implications for industry best practices.

Methodology/approach: Empirical examination of survey data from 151 NPD alliances via hierarchical regression and tests of group moderation.

Findings: Results shed light on when and why formalization moderates the influence of key fundamental alliance success mechanisms on NPD alliance performance based on strategic context.     

The Virtues of Green Strategies: Some Empirical Support from the Alliance Context

Whilst strategic alliance performance has been extensively researched through the resource-based lens, it has yet to be examined under the natural-resource-based view (NRBV) of the firm. Building on the NRBV, this article argues that a firm’s level of environmental proactiveness affects its level of alliance satisfaction. The argument is tested by surveying Norwegian CEOs, and the results confirm a positive relationship. Moreover, the partner’s environmental proactiveness equally influences the focal firm’s satisfaction with the alliance, in consistent with related studies. In addition to providing new empirical evidence in support of the NRBV, and extending the alliance performance literature, the findings add to the corporate environmentalism literature by offering insights on the virtues of green strategies in an underexplored context.     

Alliances and Survival of New Biopharmaceutical Ventures in the Wake of the Global Financial Crisis

Engaging in exploration and exploitation is essential to business survival and performance. While firms manage exploration and exploitation alliances for the long‐term, how prepared are they for sudden shocks in the short‐term? We address this question in the context of a unique and opportune natural experiment associated with the 2008 financial crisis. Our analysis of 155 new biopharmaceutical ventures over a seven‐year period suggests that exploration alliances—with a long‐term orientation—make a firm more vulnerable to external shocks. In contrast, exploitation alliances as well as a balance between exploration and exploitation alliances—which underlie short‐term performance—enable the firm to sustain external shocks.