Alliance Addiction: Do Alliances Create Real Benefits?

Abstract

Although their advantages are well known, technology alliances may not always positively affect innovative performance. Previous studies have found several explanations for this problem. Technology alliances often require excessive resources and capabilities to create and maintain relationships with partners. In addition, they divert managerial attention and functions from internal research and development (R&D) activities. In this study, we hypothesize that firms often execute inefficient technology alliance strategies, thus affecting their innovative capabilities negatively and consequently reducing their subsequent innovation performance. Specifically, we test whether firms with greater prior experience in technology alliance are more likely to execute inefficient technology alliance strategies. Second, we attempt to investigate the negative effects of technology alliances on firms' internal R&D capabilities. To test our hypotheses, we employ data from 1,036 technology alliances in the US nanobiotechnology sector. Implications from the analyses are offered for executives and technology alliance strategies. Specifically, we propose that firms should adopt technology alliance but with due consideration of its negative aspects and the firms' limited resources.