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.     

Incremental and Radical Innovation in Coopetition—The Role of Absorptive Capacity and Appropriability

This study examines why some firms are better able than others to reap benefits from collaborating with their competitors in innovation. Whereas on the general level, collaborative innovation has been studied widely, and firm‐specific success factors in collaboration between competitors (i.e., coopetition) have not been exhaustively addressed. Earlier literature describes coopetition as a risky but potentially rewarding relationship in which sharing, learning, and protection of knowledge are recognized as the key issues determining the possible benefits and hazards. This study provides evidence of factors related to this, suggesting that the firm's ability to acquire knowledge from external sources (potential absorptive capacity) and to protect its innovations and core knowledge against imitation (appropriability regime) are relevant in increasing the innovation outcomes of collaborating with its competitors. This study also distinguishes between incremental and radical innovations as an outcome of coopetition, and provides differing implications for the two innovation types. The empirical evidence for the study was gathered from a cross‐industry survey conducted on Finnish markets. The data are analyzed with multivariate multiple regression analysis. The results of the analysis suggest that (1) potential absorptive capacity and appropriability regime of the firm both have a positive effect in the pursuit of incremental innovations in coopetition, and (2) in the case of radical innovations, appropriability regime has a positive effect, while the effect of absorptive capacity is not statistically significant. However, the results also indicate that there is a moderating relationship between these variables, in that the potential absorptive capacity is positively associated with creation of radical innovations within high levels of appropriability regime. These results yield important theoretical and managerial implications. As a whole, the results presented in this study provide new evidence on which types of firms can reap success in the challenging task of collaborative innovation with rivals. In the case of incremental innovation, a firm‐level emphasis on knowledge sharing and learning will positively affect the results of coopetition, as will an emphasis on knowledge protection. Thus, when incremental developments are pursued in coopetition, firms should not only seek to exchange knowledge to create value but also remember to secure the firm‐specific core knowledge within the firm's borders to stay competitive. On the other hand, when the firm is pursuing radical innovation with its rivals, the heaviest emphasis should be on protecting its existing core knowledge and also emerging novel innovations and market opportunities. Capabilities in knowledge acquisition are also beneficial in these cases, but the full benefits of knowledge exchange realize only when the firm's knowledge protection mechanisms are sufficiently strong, allowing for safe knowledge exchange between rivals.     

Development and return on execution of product innovation capabilities: The role of organizational structure

This paper conceptualizes and tests an integrated model that combines the dual-core and ambidextrous models of product innovation. The integrated model distinguishes the development and return on execution of radical and incremental product innovation capabilities. The authors argue that organizational structure plays an important dual role as an (a) antecedent to the development of radical and incremental product innovation capabilities and (b) as a moderator in determining the new product performance returns from executing such capabilities. Using a sample of high-tech firms, the study finds that organizational structure is more consistent in predicting the execution of product innovation capabilities into new product performance than in predicting the development of such capabilities. For example, the effect of radical product innovation capability on new product performance is negative but nonsignificant under a formal structure, while the same effect is positive under an informal structure. Conversely, the effect of incremental product innovation capability on new product performance is positive under a formal structure, while the same effect is negative under an informal structure. The implications for managing different types of product innovation capabilities under formal versus informal structures and their effects on new product performance are discussed.     

Alliance Concentration in Multinational Companies: Examining Alliance Portfolios,Firm Structure,and Firm Performance

Research summary: This article explores the distribution of alliances across firms' internal structure. Focusing on multinational companies, we examine the impact of alliance portfolio concentration—i.e., the extent to which alliances are concentrated within a limited number of geographic units—on focal firms' performance. Relying on Knowledge‐Based View (KBV) insights, we hypothesize that an increase in alliance portfolio concentration positively influences firm performance and that alliance portfolio size negatively moderates this relationship. Our empirical results enrich the emerging capability perspective on alliance portfolios, point to the relevance of conceptualizing focal firms in alliance portfolio research as polylithic entities instead of monolithic ones, and provide new insights into how firms create value by potentially recombining externally accessed knowledge. Managerial summary: In the setting of multinational companies, we examine whether alliance activities are concentrated in a limited number of subsidiaries or are highly dispersed across multiple subsidiaries. We find that, over time, firms exhibit different patterns in terms of alliance portfolio concentration. In addition, the results show that, for MNCs with a relatively small alliance portfolio, an increase in alliance portfolio concentration is positively related to their financial performance. However, when MNCs' alliance portfolios are relatively large, the relationship between alliance portfolio concentration and firm performance becomes negative. Jointly, these findings suggest that the distribution of alliances across firms' internal structure is an important factor in shaping potential knowledge recombination benefits from alliance portfolios. Copyright © 2017 John Wiley & Sons, Ltd.     

Vertical integration,innovation, and alliance portfolio size: Implications for firm performance

We examine the consequences of alliance portfolio configuration by focusing on contingencies that affect the impact of alliance portfolio size on innovation and financial performance. While increasing alliance portfolio size is expected to positively impact innovation and financial performance, we propose that, at high levels of innovation of the focal firm, increasing alliance portfolio size dampens financial performance. We also propose that firm boundaries moderate the impact of alliance portfolio size on innovation and financial performance differently. Specifically, vertically integrated firms benefit less (more) than their vertically specialized counterparts in leveraging higher innovation (financial) performance with increasing alliance portfolio size. Our analysis suggests that both vertical scope and innovation levels of the firm play an important role in understanding how alliance portfolios impact performance. Copyright © 2013 John Wiley & Sons, Ltd.     

Technological Performance and Alliances Over the Industry Life Cycle: Evidence from the ASIC Industry

Technology development in firms is frequently based on a combination of internal and external technological learning. Consequently, firms need to develop both technological capital (a patent portfolio) and alliance capital (a portfolio of technology alliances). This paper examines the relationship between technological capital, alliance capital, and their joint impact on the technological performance of firms, with an application to the application‐specific integrated circuit industry. We find that positive marginal returns to alliance capital are decreasing at higher levels of alliance capital. Technological capital and alliance capital can either augment or reduce each others' influence on innovation performance depending on the stage of the technology life cycle in the industry. A reinforcing relationship related to absorptive capacity requirements and technological uncertainty is present in early stages, while technology leakage and market competition effects render the combination of high levels of technological and alliance capital counterproductive in later stages of the technology life cycle.     

Alliance proactiveness and firm performance in an emerging economy

Alliance proactiveness is a key contributor to the performance of firms engaging in strategic alliances in industrial markets. As a foundation of alliance management capability, alliance proactiveness enables firms to react faster to emergent opportunities and gain early mover advantages. We examine the relevance of this construct and its internal and external contingencies. Specifically, we argue that the impact of alliance proactiveness is enhanced by complementary technological and leadership capabilities, as well as market growth opportunities. We test hypotheses derived from these arguments using dual response survey data of firms in China and find empirical support.     

Complements or Substitutes? Internal Technological Strength,Competitor Alliance Participation,and Innovation Development

While a firm can choose to develop an innovation internally or externally, the internal knowledge development and external knowledge acquisition tend to interact with each other in the innovation process. The present study examines whether internal technological strength and external competitor alliance participation serve as complements or substitutes in innovation development. Built on the knowledge‐based view, this study offers a contingency perspective on the nature of knowledge integration between internal technological strength and external alliance relationships, and how they jointly influence radical and incremental innovation differently. Adopting a random effect negative binomial model specification, a panel data set of 64 pharmaceutical firms over a 15‐year period were used to test the hypothesized effects. The findings indicate that internal technological knowledge strength has an inverted U‐shaped relationship with radical and incremental innovation. More importantly, the findings also demonstrate that the combined effect of internal and external sources of innovation can have differential effects on radical and incremental innovation development. Specifically, competitor alliance participation strengthens the effect of internal technological strength on incremental product innovation while it weakens the above effect on radical product innovation. This suggests that internal and external sources of innovation may complement each other for incremental innovation while they may represent trade‐offs for radical innovation development. The above findings provide empirical evidence for the complexity of pursuing organizational ambidexterity in innovation generation and highlight the importance of balancing the internal and external knowledge sources in pursuing innovation.     

Balancing the Two Knowledge Dimensions in Innovation Efforts: An Empirical Examination among Pharmaceutical Firms

This study investigates the relationships between the two knowledge dimensions (knowledge breadth and knowledge depth) and two types of innovations (radical innovation and incremental innovation). While existing literature identifies knowledge in general as an important driver of innovation, the exact relationships between knowledge breadth/depth and incremental/radical innovations are not clear. Drawing from the knowledge‐based view, this study advances the understanding of the relationships between knowledge dimensions and types of innovations by hypothesizing a nonlinear relationship between knowledge breadth and radical innovation as well as a nonlinear relationship between knowledge depth and incremental innovation. Furthermore, the moderating effects of the interaction between knowledge breadth and knowledge depth on the above‐mentioned relationships are also examined. Due to the different natures of the two types of innovations, it is hypothesized that knowledge depth positively moderates the relationship between knowledge breadth and radical innovation while knowledge breadth negatively moderates the relationship between knowledge depth and incremental innovation. To empirically test the hypotheses, secondary data from multiple sources were collected on 64 pharmaceutical firms over 15 years. Due to the panel data structure and observed dispersion issues in the dependent variables, negative binomial random effects models were formulated to test the hypotheses. The statistical results largely support the proposed hypotheses. The results demonstrate that while knowledge breadth positively contributes to the development of radical innovations and knowledge depth positively contributes to the development of incremental innovations, both relationships are subject to diminishing returns. Furthermore, while the finding did support the negative moderating effect of the knowledge breadth on incremental innovation, the positive moderating effect of knowledge depth on radical innovation is not supported. While the effect is not explicitly hypothesized, knowledge breadth seems to have a direct impact on incremental innovation as well.     

Designing alliance networks: the influence of network position,environmental change,and strategy on firm performance

Alliance networks are strategic decisions involving trade‐offs between two stylized structural design choices: prominent and entrepreneurial. Prominent alliance networks emphasize benefits arising out of multiple access and affiliation to other prominent firms in the network. An entrepreneurial position, on the other hand, emphasizes brokerage and diversity benefits arising out of access to nonredundant and diverse information. We demonstrate that the performance benefits of each type of alliance network are contingent on environmental change and strategy, and are thus time dependent. Following an environmental change event in the steel industry, alliance networks that were more entrepreneurial performed better, while those that were more prominent suffered performance decline. However, when the change was radical, both types of alliance networks were negatively related to performance. We suggest that following a radical change, industry alliance networks may not have the requisite information necessary for quick and effective strategic responses. Firms pursuing an analyzer strategy performed better when emphasizing a prominent, and to a lesser extent, entrepreneurial alliance network. However, firms that develop an alliance network high on both prominent and entrepreneurial structural positions had lower relative performance. Our results indicate the need for managers to assess their alliance portfolio over time and redesign it based on environmental and strategic contingencies. Copyright © 2008 John Wiley & Sons, Ltd.     

The Role of Suppliers in Market Intelligence Gathering for Radical and Incremental Innovation*

Drawing on transaction cost economics theory, this study addresses the following research questions: (1) Does supplier involvement in market intelligence gathering activities have a greater impact on innovation success in predesign or commercialization activities? and (2) Does supplier involvement in market intelligence gathering activities have a greater impact on success in radical or incremental product innovation? Hypotheses are tested using both subjective and objective measures of success from a study of 205 incremental and 110 radical new product development projects. Results from the estimation of a two‐group path model suggest that this theoretical framework is useful in providing guidance as to when product developers should emphasize the gathering of market intelligence through suppliers. Consistent with conventional wisdom, the findings suggest that supplier involvement in market intelligence gathering activities are positively related to success in incremental innovations across predesign and commercialization activities. However, supplier involvement in market intelligence gathering activities is found to have no significant impact on market share and is negatively associated with perceived product performance in radical innovations in predesign tasks. Also, while there was no significant difference in market share for supplier involvement in market intelligence gathering activities between radical and incremental innovation in commercialization activities, supplier involvement in these activities did have a greater impact on perceived product performance in radical innovation than it did in incremental innovation. Although current practice suggests that teams allocate fewer resources to the gathering of market intelligence through their suppliers during predesign activities in incremental innovation projects compared with radical innovation projects, the findings in this study suggest that they should do the opposite. Shifting resources allocated for engaging suppliers in market information gathering activities in predesign activities from radical innovation projects to incremental innovation projects could increase the return on these investments. Alternatively, these resources currently allocated to the gathering of market intelligence through suppliers in predesign activities of radical innovation projects could also provide greater benefits if allocated to commercialization activities of radical innovation projects, where they have the greatest positive impact.     

Old technology meets new technology: complementarities,similarities, and alliance formation

Alliance formation is commonplace in many high‐technology industries experiencing radical technological change, where established firms use alliances with new entrants to adapt to technological change, while new entrants benefit from the ability of established players to commercialize the new technology. Despite the prevalence of these alliances, we know little about how these firms choose to ally with specific firms given the range of possible partners they may choose from. This study explores factors that lead to alliance formation between pharmaceutical and biotechnology companies. We focus on the alliance tie as the unit of analysis and argue that dyadic complementarities and similarities directly influence alliance formation. We then introduce a contingency model in which the positive effect of complementarities and similarities on alliance formation is moderated by the age of the new technology firm. We draw theoretical attention to the intersection between levels of analysis, in particular, the intersection between dyadic and firm‐level constructs. We find that a pharmaceutical and a biotechnology firm are more likely to enter an alliance based on complementarities when the biotechnology firm is younger. Another noteworthy finding is that proxies for broad capabilities appear to be at least as effective, if not more so, in predicting alliance formation compared to fine‐grained science and technology‐related indicators, like patent cross‐citations or patent common citations. We conclude by suggesting that future studies on alliance formation need to take into account interactions across levels; for example, how dyadic capabilities interact with firm‐level factors, and the advantages and disadvantages of more or less fine‐grained measures of organizational capabilities. Copyright © 2007 John Wiley & Sons, Ltd.     

Strategic Orientation and Product Innovation: Exploring a Decompositional Approach

While a considerable body of research examines the strategic orientation–innovation relationship, findings in that literature have been mixed. This article calls attention to an underinvestigated problem: the composite, multidimensional conceptualization and measurement of most strategic orientations, which likely contribute to the mixed findings in the literature. To address this issue, the researchers explore a decompositional approach to the strategic orientation–product innovation relationship. The authors utilize the stimulus‐organism‐response framework to select, decompose, and recast a set of strategic orientation components previously identified to be essential to product innovation. To produce more nuanced insights, the authors also decompose product innovation outcomes into breakthrough versus incremental. Furthermore, the sample is decomposed by product type to assess the generalizability of the conceptual model across manufactured goods and services firms. The authors test the conceptual model with a sample of 222 executives of services and manufacturing firms in Germany and Switzerland using partial least squares. By decomposing the strategic orientation effects into direct, indirect, total, and specific components, the detailed empirical analysis yields several new insights. Overall, the results suggest that the relationship between strategic orientation and product innovation is more complex than previously identified in the literature. For example, the results demonstrate that technology orientation works to augment innovation differently in services versus manufacturing firms. More specifically, a focus on technology boosts only breakthrough innovation in manufacturing firms, and only indirectly by enhancing an organization's open‐mindedness. In contrast, services firms extract additional benefits from investing in technology directly (and for both incremental and breakthrough innovation), as well as indirectly by increasing open‐mindedness. The authors also identify complementary as well as suppressing effects on product innovation outcomes from different strategic orientation components. Based on the findings in this study, future research avenues are identified, and managers are advised to consider each component of alternative strategic orientations individually and evaluate the capabilities aligned with components to assess their interdependencies.     

Antecedents and consequence of organizational unlearning: Evidence from China

Radical innovation has significant impact on organizations. To develop radical innovation, firms need to change or discard their obsolete routines, beliefs, and knowledge, since radical innovation represents a clear departure from existing practices. Based on the organizational unlearning literature and contingency theory, the authors explore three issues: (1) the relationship between organizational unlearning and radical innovation; (2) two antecedents to organizational unlearning (environmental turbulence and entrepreneurial orientation); and (3) how firm size moderates the relationships between the antecedents and organizational unlearning. Survey data from 238 manufacturing firms in China indicated that both environmental turbulence and entrepreneurial orientation (EO) are positively related to organizational unlearning. Firm size plays a dual role, weakening the positive environmental turbulence−organizational unlearning relationship while strengthening the positive EO − organizational unlearning relationship. Further, organizational unlearning is found to be a critical driver of radical innovation.     

Leveraging micro‐ and macro‐structures of embeddedness in alliance networks for exploratory innovation in biotechnology

Researchers agree that alliance networks can be an important instrument in a firm's innovation process, but there is limited empirical evidence on actually how they facilitate the creation of new knowledge for exploratory innovation. The research question is what alliance network configuration is optimal for exploratory innovation. The present study investigated the interaction between a firm's alliance portfolio structure (the micro‐level) and the industry alliance network structure (the macro‐level), and it empirically tested how their interaction may be affecting the exploratory innovation outcome of network participating firms in the biotechnology industry. The paper uses data from exploratory patents filed by 455 dedicated biotechnology firms in 1986–1999 and an overall network comprising 2,933 technological alliances over the same period. The results indicate that, in the case of biotechnology, firms with high exploratory innovation output have short path indirect access to many other firms (micro‐level), and operate in dense industry alliance networks centralized around a few key firms (macro‐level), and that these effects are curvilinear.     

Differentiating Major and Incremental New Product Development: The Effects of Functional and Numerical Workforce Flexibility*

This study seeks to explain the differential effects of workforce flexibility on incremental and major new product development (NPD). Drawing on the resource‐based theory of the firm, human resource management research, and innovation management literature, the authors distinguish two types of workforce flexibility, functional and numerical, and hypothesize differential effects on NPD outcomes. A large‐scale sample of 284 Dutch firms across various manufacturing goods and business services industries serves to test these hypotheses. The results suggest that functional flexibility positively influences incremental NPD only, internal numerical flexibility negatively influences incremental NPD only, and external numerical flexibility positively influences major NPD only. Thus, differences between major and incremental NPD are grounded in the human resource flexibility of the firm. This complements research that found that such differences lie in critical development activities, learning processes, and capabilities. It also complements product innovation research on flexibility in NPD processes and on flexibility in organizational structures and routines. It extends the resource‐based theory of the firm suggesting that human resource flexibility is part of the dynamic capabilities that allow firms to reconfigure existing competencies. The conclusions imply that managers of manufacturing and service firms may use training and education and create a functional flexible workforce that can progressively enhance incremental NPD outcomes. They may want to avoid paying overtime, because such internal numerical flexibility hampers incremental NPD, but use fixed‐term contracts to expand external numerical flexibility to enhance major NPD.     

Radical innovation through internal corporate venturing: Degussa's commercialization of nanomaterials

Internal corporate venturing enables radical innovation within established firms in mature markets. Without effectively designed and managed internal corporate ventures, the organizational constraints of established firms will strongly favour incremental innovation over radical innovation. This paper investigates the evolution of a successful internal corporate venture within a large, incumbent chemical firm, now known as Evonik Degussa, to reveal the challenges, organizational design, and management strategies of their commercialization of radical nanomaterials technology. The commercialization of nanomaterials technology is of great interest to incumbent materials and chemical firms and to independent ventures, but the radical, generic, and capital intensive nature of nanomaterials technology requires organizational and managerial innovation. This case study demonstrates a model to enable growth through radical innovation in nanomaterials, while taking advantage of an incumbent firm's capabilities and complementary assets. Organizational strategies include incubation from a risk-adverse culture, relatively long timelines for evaluation, and a high-level steering committee. Managerial strategies focus on product development, risk reduction, and active risk management.     

Configurations of social media-enabled strategies for open innovation,firm performance,and their barriers to adoption

The use of social media offers tremendous innovation potential. Yet, while current research emphasizes success stories, little is known about how firms can leverage the full potential of their social media use for open innovation. In this paper, the authors address this gap by conducting a configurational analysis to develop an integrative taxonomy of social media-enabled strategies for open innovation. This analysis stems from the integration of internal and external variables such as social media communication activities, organizational innovation seekers, potential innovation providers, the stages of the open innovation process, and their relationship with different performance outcomes and barriers to social media adoption for open innovation. Through an empirical study of 337 firms based in eight countries, four clusters have been identified that are characterized as distinct strategies: “marketing semi-open innovators,” “cross-department semi-open innovators,” “cross-department full process semi-open innovators” and “broad adopters open innovators.” The findings reveal the trade-offs associated with different strategies for implementing social media for open innovation and provide insights of the use of these strategies. By doing so, they suggest a more nuanced approach that contrasts with the traditionally positive (or even rosy) depiction of the effects of social media on open innovation. Accordingly, managers are encouraged to contemplate their organizational competencies, capabilities, and their strategic intent when drafting social media strategies for open innovation. Selective approaches, along with greater adoption leading to greater benefits, are shown to be more rewarding than a middle way that spreads things too thin. Avenues for further research include qualitative explorations of the trajectories unfolding through implementing social media strategies for innovation activities and the use of objective performance measures rather than subjective perceptions from informants to understand the complex relationships between social media adoption and performance.     

Ties' repeatedness,partners' social value,and alliance portfolio performance in emerging economy: The moderating roles of firm-government linkages

Repeatedly collaborating with previous partners or following peers' decisions are two primary strategies employed by emerging economy firms in selecting their alliance partners. As a result, the alliance portfolios of firms often feature a high level of ties' repeatedness and partners' social value—the extensiveness of a firm's partners being selected by other players in the industry. However, few studies examine whether these two features can result in superior alliance portfolio performance. Leveraging data collected from 566 fund product distribution alliances initiated by 62 fund companies in a 5-year period (2007–2011), we find that ties' repeatedness does not significantly improve alliance portfolio performance. In fact, a high level of social value of the current partners produces a negative effect. However, firms' linkages to governments can change the performance consequences of these two features. As a category of formal government–firm linkages, state ownership improves the positive effect of ties' repeatedness on alliance portfolio performance, while it strengthens the negative effect of partners' social value. As a category of informal linkages, political ties weaken the positive effect of ties' repeatedness on alliance portfolio performance but cannot significantly alleviate the negative effect of the social value of current partners.     

Using R&D portfolio management to deal with dynamic risk

We develop a theoretical framework for understanding why firms adopt specific approaches for the management of innovation project portfolios. Our theory focuses on a key contingency factor for innovation, namely the dynamics of competitive environments. We use four dimensions to characterize the patterns of environmental dynamics: velocity, turbulence, growth and instability. The paper then proposes the concept of dynamic risk as a determinant of portfolio management processes. Dynamic risk results from second‐order learning by a firm confronted with a specific dynamic pattern in its environment. This learning concerns the likely nature of threats and the required updating of cognitive frameworks in such environments. Attempts to deal with dynamic risk enable various actors inside the firm to understand what kind of dynamic capabilities are needed in their innovation portfolio management processes. As a result of this diffuse learning, firms tend to favor certain common characteristics in their concrete portfolio management activities. To advance the theorizing of these characteristics, the paper also proposes four dimensions of portfolio management: structure, commitment, emergence and integration. Based on arguments inspired by the dynamic capability and related literatures, we advance a series of hypotheses, that relate environmental dynamics dimensions and portfolio management dimensions. These hypotheses are tested based on a survey of 795 firms in a variety of sectors and on four continents, using original scales and structural equation modeling methods. The results show, among other findings, that high‐velocity environments favor structured as well as integrated portfolio management approaches, while high‐growth environments favor approaches that are structured but commit significant resources to each project as well. Turbulent environments favor approaches that are emergent, but also, contrary to our expectations, have high resource commitment levels. Finally, firms in unstable environments have a marginal preference for emergent approaches. Results could help advance the dynamic contingency theoretical perspective on dynamic capabilities, as well as improve the practice of innovation portfolio management.