Valuation effects of alliance portfolio expansion speed and strength: Evidence from high-tech firms

Abstract

Speed and strength are two important but understudied dimensions of alliance portfolio (AP) expansion. AP expansion speed can expedite learning but also leads to time-compression diseconomies and escalating costs; AP expansion strength mitigates this effect but limits the benefits of faster expansion. We examined the effect of AP expansion speed on firm valuation and found that expansion speed has an inverted U-shaped effect for exploratory APs and a U-shaped effect for exploitative APs. We also found that expansion strength moderates the effect of expansion speed on firm valuation, causing both curves to flatten. These hypotheses are generally supported by a longitudinal investigation of 84 Indian technology firms from 2003 to 2014 (totaling 900 firm-year observations).