Alliance Partners and Firm Capability: Evidence from the Motion Picture Industry

Abstract

Interfirm alliances have long been identified as channels for learning and acquiring partners’ knowledge and capability. In this study, we offer a new perspective on the influence of alliance partners on a focal firm’s capability by focusing on “link” alliances that are motivated by the prospect of exploiting complementarities rather than acquiring partners’ capabilities. Specifically, we consider the case of alliances between resource-rich and resource-poor firms and examine the capability development opportunities and threats that face the resource-poor focal firm as by-products of a link alliance. We use data on the population of independent motion picture production studios in the United States and their alliances with the major studios during 1990–2010 to test our proposed theory. The results show that the number of major partners exhibits an inverted U-shaped effect on an independent studio’s capability. We also find contingent effects: both an independent studio’s alliance experience with major partners and its level of specialization intensify (positively moderate) this relationship. Contrary to our expectation, we find no support for the contingency of major partner turnover. In addition to offering a new perspective on the role of alliances in a firm’s capability development process, our study highlights some of the key contingencies surrounding the benefits resource-poor firms receive from their resource-rich partners.