Alliance portfolio and exploratory innovation performance: Evidence from the U.S. bio-pharmaceutical industry
Date Issued
2011
Date
2011
Author(s)
Li, Hsiu-Ling
Abstract
The trade-off between exploitation and exploration has been central to the organizational learning perspective, and how alliances affect such a trade-off merits more scholarly probes. In response to the call for more empirical inquiries into the outcome of alliances, this study aims to explore the impact of a portfolio of strategic alliances on the performance of a firm’s entry into new technological areas and to explore the moderating effects of absorptive capacity and competitive pressure.
This study conducts the empirical investigation of the bio-pharmaceutical industry in U.S. using a panel dataset covering the period from 1990 to 2000. The samples of allied firms in the bio-pharmaceutical industry are drawn from the SDC database, firm-level patent data are drawn from the USPTO database, and firm-level financial data are drawn from the COMPUSTAT database. Further, this study divides all samples into two subgroups (large and small firms) in order to contrast both large, established pharmaceutical companies and relatively small, entrepreneurial biotechnology firms and observe the difference between these two subgroups. Finally, this study identified 153 firm-years observations containing 26 focal firms for large firm size group and 345 firm-years observations containing 170 focal firms for small firm size group and conducted a subsample analysis.
The findings reveal that for large firms, specialized knowledge variation in an alliance portfolio is positively associated with the performance of a firm’s entry into new technological areas. For both large and small firms, general knowledge variation in an alliance portfolio is positively associated with the performance of a firm’s entry into new technological areas, but exhibiting diminishing marginal returns. Furthermore, this study conducts subgroup analyses to examine the moderating role of other contingency factors in the setting of the U.S. bio-pharmaceutical industry and finds that the contingency-based arguments are quite diverse between large and small firms. The findings for small firms indicate that knowledge depth, knowledge diversity and competitive pressure have significant impacts on the relationship between specialized knowledge variation and the performance of a firm’s entry into new technological areas, and general knowledge variation and the performance of a firm’s entry into new technological areas. Particularly, the findings also indicate that the interaction effects between these three contingency factors and general knowledge variation depend on the level of general knowledge variation. As for large firms, knowledge diversity has a significant effect on the relationship between general knowledge variation and the performance of a firm’s entry into new technological areas, although it is opposite to the expectation.
The study points to the importance of external knowledge sources and suggests that firms can trigger explorative learning through appropriate alliance portfolio management; this benefit, however, is contingent upon a firm’s knowledge base and the external environment the firm faces.
Subjects
Alliance portfolios
exploratory innovation performance
absorptive capacity
competitive pressure
the contingency view
Type
thesis
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