Value-creation-capture-equilibrium in new product development alliances: A matter of coopetition,expert power,and alliance importance

Alliances are often thought to be longer lasting and lead to better results when they are perceived as equal and fair in terms of how efforts and rewards are distributed. This study conceptualizes the value-creation-capture-equilibrium (VCCE) as the relative inputs and efforts made by alliance partners to create and capture innovation-related value. We seek to better understand the determinants of the VCCE in dyadic new product development (NPD) alliances. We focus on three factors from a focal firm's perspective: (1) the coopetition intensity with the alliance partner (i.e. simultaneous competition and collaboration), (2) the expert power of the alliance partner, and (3) the relative importance of the particular NPD alliance. We hypothesize that coopetition intensity stabilizes the VCCE. Furthermore, we assume that the partner's expert power and the focal firm's relative alliance importance negatively moderate the relationship between coopetition intensity and the VCCE. Based on a dataset of N = 471 NPD alliances of high-tech firms, we find partial support for our hypotheses and contribute towards a better understanding of the factors influencing the VCCE in NPD alliances.     

Does brand partnership create a happy marriage? The role of brand value on brand alliance outcomes of partners

In this paper, we investigate an under-researched issue by examining the financial performances of both partner firms in a brand alliance. We find that a participating firm's brand value and other brand characteristics are associated with not only its own financial performance but also its partner's financial gains from the collaboration. Our results show that the participating firm gains higher stock returns when its partner's brand value is higher. However, brand value differential reduces the positive effect of brand value on the partner firm's financial performance. In addition, the primary partner's brand alliance experience helps increase the positive effect of primary partner's brand value on the stock returns of the secondary partner. The secondary partner's brand exploitation attenuates the positive effect of secondary partner's brand value on the stock returns of the primary brand firm.     

Alliance portfolios and firm performance: A study of value creation and appropriation in the U.S. software industry

This study reveals the multifaceted contribution of alliance portfolios to firms' market performance. Extending prior research that has stressed the value‐creation effect of network resources, it uncovers how prominent partners may undermine a firm's capacity to appropriate value from its alliance portfolio. Analysis of a comprehensive panel dataset of 367 software firms and their 20,779 alliances suggests that the contribution of network resources to value creation varies with the complementarity of those resources. Furthermore, the relative bargaining power of partners in the alliance portfolio constrains the firm's appropriation capacity, especially when many of these partners compete in the focal firm's industry. In turn, the firm's market performance improves with the intensity of competition among partners in its alliance portfolio. These findings advance network research by highlighting the trade‐offs that alliance portfolios impose on firms that seek to manage and leverage their alliances. Copyright © 2007 John Wiley & Sons, Ltd.     

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.     

The role of short-term contracts and subsidies in licensing

An innovator without production facilities owns a patented invention that lasts two periods, and looks for the best licensing arrangement with a producer that has private information about the market value of the invention. The license is either a single long-term contract in force over both periods or a series of short-term contracts, one per period. Under short-term contracts, the licensee can strategically signal the value of the invention with its level of production in the first period and thus influence the terms of the contract in the second period. We show that the licensor prefers successive short-term contracts rather than a single long-term contract for intermediate-level probabilities of dealing with an efficient licensee, while the first-period contract may optimally include a per-unit subsidy (a negative royalty rate) in order to correct signaling distortions in the licensee’s production for this period. We also show that prohibiting such subsidies can lead to welfare losses.     

The effect of strategic alliance resource accumulation and process characteristics on new product success: Exploration of international high-tech strategic alliances in China

This paper examines two research questions: (1) how do strategic alliance resources influence new product outcomes, and (2) how do these effects differ under different NPD process characteristics. By integrating resource-based view and coordination literature, the authors argue that both marketing and technology resources demonstrate independent and interactive effects on new product innovativeness, speed to market, and market performance. Further, the individual effects of marketing and technology resources are moderated by the process characteristics of partner interdependence, while the interactive effect between marketing and technology resources is moderated by the development process characteristic of task interdependence. Using primary dyadic data collected from 142 international high-tech strategic alliances in China, we test and find general support for these arguments. The results provide significant theoretical implications for a variety of research streams, as well as managerial implications for strategic alliances with Chinese firms.     

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.     

Stock Market Response to Strategic Technical Alliances between Drug and Biotechnology Firms

Traditionally, firms in the pharmaceutical industry have depended on their internal research and development (R&D) capabilities to maintain a productive new product pipeline. During the past two decades, however, the industry's pipeline productivity has decreased compromising the industry's ability to meet shareholder expectations. As a strategy to invigorate pipeline productivity, and impact financial performance, pharmaceutical firms have increased utilization of strategic technical alliances. Earlier research shows that the degree of financial impact resulting from strategic technical alliances varies in terms of partnership type and differences between client and partner firms. This research studies strategic technical alliances between pharmaceutical and biotechnology firms from 1985 to 2012. Event study methodology is used to determine the relationship between stock market response to alliance announcements, measured as cumulative abnormal returns, and factors representing the absorptive capacity of the pharmaceutical firms in the sample. Then, variables indicating the development stage of the drugs included in the alliances are added to assess the effect of project risk on the market response. The study finds that, in general, the stock market responds in a positive manner to strategic technical alliances in the pharmaceutical industry reflecting the market's immediate response, and expectations of future firm value, resulting from the alliance. The degree of the market's response varies in terms of the client firms’ absorptive capacity with new product introductions being the strongest driver. The market responds similarly to alliances across different drug development stages, however, a stronger response is observed in preclinical and extension stages.     

Licensing‐in fosters rapid invention! the effect of the grant‐back clause and technological unfamiliarity

Drawing on contractual economics and innovation management, licensing‐in is hypothesized to accelerate licensees' invention process. Studying a matched dataset of licensees and non‐licensees, licensees are shown to be faster at inventing, but the effect is negated if the license includes a grant‐back clause, shifting incentives from licensee to licensor. Also, the effect is significantly reduced if the licensee is unfamiliar with the licensed technology. The effect of the grant‐back clause is offset if the licensee is unfamiliar with the licensed technology, suggesting that the licensee retains the incentives to invent under these circumstances. Copyright © 2012 John Wiley & Sons, Ltd.     

The intra‐alliance division of value created through collaboration

The differential benefits reaped by individual partners are a major determinant of the impact of strategic alliances on firm performance and an important (dis)incentive for alliance partners to collaborate in value creation. Theoretically, we lack an explicit theory of intra‐alliance value division; empirically, previous analysis has been hampered by methodological challenges. We propose a bargaining framework for intra‐alliance value appropriation, as well as a measure for capturing its variation. We test our hypotheses on a sample of 200 biotechnology R&D alliances, and are able to explain variation in value appropriation across alliance partners, partner types, and individual firms of each type. Copyright © 2010 John Wiley & Sons, Ltd.     

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.     

Exclusivity in licensing alliances: using hostages to support technology commercialization

We examine why exclusivity provisions are used in licensing alliances, and when restrictions in licensing scope (e.g., by product or geography) accompany these exclusivity provisions. We find broad support for the proposition that these features are associated with the contractual challenges of allying with licensees when they contribute valuable complementary capabilities toward the commercialization of licensed technologies. Evidence from our data suggests that exclusivity is used as a contractual hostage to safeguard licensee investments in complementary assets and to enable contracting over early stage technologies. Scope restrictions are employed to balance the tradeoffs between the value creation made possible by licensee complementary capabilities and the transactional hazards entailed in working exclusively with licensees. Our results also suggest that scope restrictions and other formal safeguards may be substitute mechanisms for managing similar transactional concerns in licensing alliances. Copyright © 2010 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.     

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.     

The licensing dilemma: understanding the determinants of the rate of technology licensing

The licensing of technology entails a trade‐off: licensing payments net of transaction costs (revenue effect) must be balanced against the lower price–cost margin and/or reduced market share implied by increased competition (profit dissipation effect) from the licensee. We argue that the presence of multiple technology holders, which compete in the market for technology, changes such a trade‐off and triggers more aggressive licensing behavior. To test our theory, we analyze technology licensing by large chemical firms during the period 1986–96 for 107 chemical products. We find that the rate of technology licensing displays an inverted U‐shaped relationship with the number of potential technology suppliers and is negatively related to the licensor's market share and to the degree of technology‐specific product differentiation. Copyright © 2006 John Wiley & Sons, Ltd.     

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 or Acquisition? A Mechanisms‐Based,Policy‐Capturing Analysis

Research summary : While alliance researchers view prior partner‐specific alliance experience as influencing firms' subsequent alliance or acquisition decisions, empirical evidence on the alliance versus acquisition decision is surprisingly mixed. We offer a reconciliation by proposing and testing an analytical framework that recognizes prior partner‐specific experiences as heterogeneous along three fundamental dimensions: partner‐specific trust, routines, and value certainty. This allows us to use a policy‐capturing methodology to rigorously operationalize and test our mechanism‐level predictions. We find that all three mechanisms can increase the likelihood of a subsequent alliance or acquisition, and in terms of the comparative choice between alliances versus acquisitions, partner‐specific trust pulls towards alliances, and value certainty pulls towards acquisitions. We conclude with a discussion of the theoretical and empirical implications of our approach and method . Managerial summary : This study focuses on an important corporate decision: When a firm has had an alliance with another firm, how would that experience affect the likelihood of a future alliance or acquisition with that same firm? We first suggest that it will depend on three factors: the level of trust that existed in that prior alliance, the extent to which specific work routines were developed, and the degree to which the firm was able to confidently assess the value of the partner firm's resources. We then find that trust is a particularly strong predictor of future alliances, while confidence regarding value more strongly predicts future acquisitions. In this way, we demonstrate more precisely how past corporate choices can affect (consciously or unconsciously) future ones . © 2017 The Authors. Strategic Management Journal Published by 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.     

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.     

Small fish,big fish: The performance effects of the relative standing in partners' affiliate portfolios

This study examines whether the value a venture derives from an affiliation depends on its relative standing in the portfolio of all affiliations held by its partner. Relative standing refers to how the venture ranks among other ventures in the partner's portfolio with respect to expected returns. The relative standing of a venture in its partner's portfolio influences the venture's access to the partner's resources and the venture's performance. We also argue that a venture's relative standing becomes more important to performance when the partner has a larger portfolio or higher status. In addition to a field study, we test the effect of a venture's relative standing in a venture capital portfolio on its exit likelihood, controlling for endogeneity. We find support for our hypotheses. Copyright © 2014 John Wiley & Sons, Ltd.