How do Pre-entrants to the Industry Incubation Stage Choose Between Alliances and Acquisitions for Technical Capabilities and Specialized Complementary Assets?

Abstract

Focusing on the incubation stage of a potential new industry, this paper addresses a gap at the intersection of the external sourcing and market entry literatures by examining pre-entry external sourcing of new resources. Besides drawing on their legacy resources, pre-entrants during industry incubation commonly use alliances and acquisitions to obtain technical capabilities and complementary assets, thereby creating a portfolio of sourcing modes that collectively shapes the firms’ paths to potential market entry. We identify a key pattern at the intersection of type of sourcing mode and type of resource: pre-entrants to the incubation stage are more likely to use alliances to source technical capabilities and acquisitions to source specialized complementary assets. Our empirical context is the agricultural biotechnology industry.