Exploration Alliances Research Articles

Racially Diverse Leadership and Sustainable Alliance Portfolios

In my research, the effects that the racial diversity of firms’ leadership has in deciding the sustainable composition of firms’ alliance portfolios is investigated, defined as the distribution of exploratory, exploitative, and mixed alliances. Grounded in social categorization, information elaboration, and social contact mechanisms, racially homogeneous leadership has a J-shaped relationship with sustainable alliance portfolio composition. Very racially homogeneous or heterogeneous leadership leads firms towards maintaining more exploratory alliances in their portfolio as opposed to moderately diverse leadership, which prefers the safety of exploitative alliances. Further, I explore how racially homogeneous leadership differs from racially heterogeneous leadership in that the former has a higher propensity to maintain more exploratory alliance portfolios compared to the latter. A two-stage analysis on a panel of 128 pharmaceutical and software firms, accompanied by response surface analysis, yields support for our theorizing. This study encourages scholars to further investigate the different weights that social categorization, information elaboration, and social contact exercise on leadership diversity and how they are elemental in firms’ sustainable alliance decision-making.

The interplay between product development failures and alliance portfolio properties in the formation of exploration versus exploitation alliances

We investigate the role of product development failure as an important behavioral driver of explorative (vs. exploitative) search in interfirm collaborations. We also suggest that the effect of product development failure on the level of exploration in subsequent alliances hinges on the properties of the firm’s existing alliance portfolio. We suggest and show that the positive association between a firm’s product development failures and the level of exploration alliances is mitigated when the firm faces a high level of relational embeddedness. We also demonstrate that the positive association is amplified when the firm has a low level of technological diversity in its current alliance portfolio. We test our hypotheses using established firms’ alliances in the biopharmaceutical industry and find evidence that supports our arguments.

Boundedly Rational Decisions on Exploration Versus Exploitation in Alliance Portfolios: Problemistic and Slack Searches Under CEO Overconfidence

AbstractHow do firms configure exploration versus exploitation in alliance portfolios under the premise of bounded rationality? From the behavioural perspective, problemistic and slack searches can be used as behavioural explanations for their configurations. Furthermore, the boundedly rational decision‐maker's limited cognitive capability in the form of CEO overconfidence also causes the subjective interpretation of information. This study investigates the links between below‐aspiration performance, slack, and firms’ boundedly rational decisions under the influence of CEO overconfidence in alliance portfolio configurations. A feasible generalized least‐squares regression is performed to test the model empirically using data from 224 publicly traded high‐tech firms in the United States. We find that below‐aspiration performance and slack both play roles in emphasizing exploration relative to exploitation in alliance portfolios. Further, CEO overconfidence intensifies the positive roles of below‐aspiration levels and slack in preference for exploration alliances. This study contributes to the bounded rationality literature by extending the implications of the behavioural theory of the firm to firms’ preference in alliance portfolio configurations in terms of the exploration‐to‐exploitation ratio. Furthermore, our findings deepen the understanding of the role of overconfidence in CEOs’ subjective interpretations, thus filling a critical research gap in extant behavioural research.

Opportunism, bounded rationality and governance choices in exploration alliances: the moderating role of boundary spanners' guanxi

PurposeBy distinguishing opportunism-based and bounded rationality-based transaction costs, the study examines how firms use equity/relational governance and boundary spanners' guanxi to govern their exploration alliances in a transaction cost economizing way.Design/methodology/approachThis study used a survey methodology for data collection, and the sample consists of 150 exploration alliances formed by large Taiwanese information and electronic firms.FindingsFindings of this study show that exploration alliances incur considerable transaction costs and require high-level equity control and relational governance. The positive exploration of alliance-equity ownership relationship will be weakened by boundary spanners' guanxi when guanxi serves to harmonize conflicts and mitigate opportunism-based transaction costs, thereby reducing the need for using costly equity ownership to govern exploration alliances. In contrast, the positive exploration alliance-relational governance relationship will be amplified when guanxi becomes a source of legitimacy in the Chinese guanxi institution. This relation-augmenting effect will drive more relational governance because guanxi and relational governance together allow alliance managers to obtain sufficient legitimacy in the formation of a common dominant frame, thereby mitigating bounded rationality-based transaction costs.Originality/valueBy distinguishing various moderating effects of boundary spanners' guanxi and separating transaction costs into two forms, this study contributes to the existing literature as well as advances our understanding of alliance governance decisions in the Chinese business environment.

Birds of the Same Feather? Exploration and Exploitation Alliances and Institutional Ownership

We examine 17,563 strategic alliance formations among 652 pharmaceutical firms from 1990-2012. We categorize each alliance as either exploitation or exploration, while categorizing institutional shareholders as either dedicated or transient. We find both types of institutional shareholders prefer exploitation over exploration strategic alliances. We also find evidence of a strategic fit between institutional owners, their portfolio firms, and their strategic alliances. We find dedicated institutional ownership correlates with higher sales and net revenue for portfolio firms engaging in exploration alliances.

Alliances and Survival of New Biopharmaceutical Ventures in the Wake of the Global Financial Crisis

Engaging in exploration and exploitation is essential to business survival and performance. While firms manage exploration and exploitation alliances for the long‐term, how prepared are they for sudden shocks in the short‐term? We address this question in the context of a unique and opportune natural experiment associated with the 2008 financial crisis. Our analysis of 155 new biopharmaceutical ventures over a seven‐year period suggests that exploration alliances—with a long‐term orientation—make a firm more vulnerable to external shocks. In contrast, exploitation alliances as well as a balance between exploration and exploitation alliances—which underlie short‐term performance—enable the firm to sustain external shocks.

Strategic choices of exploration and exploitation alliances under market uncertainty

PurposeThe purpose of this paper is to provide a better understanding of what drives firms’ choice between exploration alliances and exploitation alliances by examining the role of organizational slack and its interaction with market uncertainty.Design/methodology/approachAn empirical study is conducted based on 1,614 alliances formed by 581 US biotechnology firms, and the hypotheses are tested using a zero-inflated multilevel Poisson model.FindingsThe results indicate that firms’ strategic choice to pursue exploration or exploitation alliances is a reflection of organizational intention and adaptation to environmental turbulence. More specifically, firms with more financial slack tend to form more exploration alliances and fewer exploitation alliances. However, under high market uncertainty, firms with financial slack tend to establish more exploitative partnerships and avoid exploration collaborations.Originality/valueThis paper contributes to the literature on exploration–exploitation alliances, which tends to fall short of providing an understanding of why organizations pursue such alliances. By identifying the impact of organizational slack and its interaction with market uncertainty, this study shows that organizations are able to respond to environmental change, and those with capabilities are likely to craft their strategic choice configurations based on their own characteristics.

A double-edged sword? The antipodal effects of institutional distance on partner selection in cross-border alliances

Careful partner selection is a prerequisite for successful alliances. I posit that institutional distance will influence partner selection in international technological alliances negatively for exploitation, and positively for exploration alliances. A longitudinal dataset of firms in the global tire industry confirms firms’ preference for similar cognitive, normative, and regulatory partners in exploitation alliances, and a preference for dissimilar partners in exploration alliances. However, the latter is true for differences across the regulative and cognitive pillars rather than for normative differences. These findings attest to the antipodal role of institutional differences in the selection of prospective partners for cross-border technological alliances.

The Impact of Demand-Side Policies on Firms' Balance between Exploration and Exploitation Alliances

We examine how public demand-side policy incentives for technologies influence firms’ balance between exploration and exploitation alliances. Previous studies suggest that firms draw on alliances t...

Internationalization of exploitation alliance portfolios and firm performance

PurposeThe purpose of this paper is to analyze the impact of alliance portfolio internationalization (API) on firm performance in the context of exploitation alliances.Design/methodology/approachThe hypothesis is tested by applying a panel regression using a sample of 64 airlines over a nine years period.FindingsAs a result, the study finds a U-shaped relationship between API and firm performance.Research limitations/implicationsThe results are particularly relevant for firms using many exploitation (e.g. marketing) alliances.Practical implicationsIn the context of exploitation alliances, managers should focus either on local partners or to take advantage of partners with a high degree of foreignness. Stuck in the middle seems to be not advantageous.Originality/valuePrevious work found an S-shaped relationship between portfolio internationalization and firm performance while concentrating on exploration alliances. In contrast, this study shows that exploitation alliance portfolios do not experience a decline of firm performance at high levels of portfolio internationalization.

Attacking your partners: Strategic alliances and competition between partners in product markets

Research Summary: This study contributes to the literature on strategic alliances by examining the impact of collaboration on competition between partners in product markets. We integrate the alliance learning and social network perspectives to examine how different combinations of exploratory and exploitative alliances between a firm and its partner influence the firm’s competition against its partner in product markets. Using a longitudinal dataset collected in the U.S. pharmaceutical industry (1984–2003), we find an inverted U‐shaped relationship between relative exploration (i.e., the proportion of exploratory alliances in the collaborative portfolio between a firm and its partner) and the firm’s competition against its partner. This relationship is negatively moderated by firms’ relational and structural embeddedness, but positively moderated by their positional embeddedness. Managerial Summary: This study examines how different combinations of exploratory and exploitative alliances between two firms affect their competition in the product market. Using a 20‐year dataset collected in the U.S. pharmaceutical industry, we find that the proportion of exploratory alliances (i.e., joint development of critical innovations) in the alliance portfolio between a firm and its partner increases the firm’s competition against its partner, up to a tipping point at which such competition starts to decline. Given a certain combination of the two types of alliances, such competition is stronger if the firm has more alternative allies than its partner but weaker if the firm and its partner have previously collaborated or share common allies in their networks.

The evolution of alliance portfolio orientation: a niche theory perspective

Managers often use their alliance portfolios to learn. Learning generally involves balancing exploration and exploitation. However, within the alliance portfolio context, literature suggests that balancing exploration and exploitation alliances is problematic, and a focus in either exploration or exploitation alliances is more beneficial for learning. However, it is not clear which conditions favour one approach over the other, and how these conditions may change over time. Drawing from niche theory, I offer an evolutionary approach which suggests that, with respect to a focus on exploration or exploitation alliances, the correct choice depends on the environment. I propose two types of alliance portfolio orientations - generalist, where the firm develops general-alliance capabilities and engages in exploration and specialist, where the firm develops domain-specific capabilities and engages in exploitation. I compare the two orientations' strategic implications and theorise how and why an alliance portfolio orientation evolves over time.

Formal controls and alliance performance: The effects of alliance motivation and informal controls

In this research, we study the use of formal control types (outcome, behavior) across different alliance motivations (exploitation, exploration, ambidextrous) and the effects on alliance performance. This study further examines whether this relationship is moderated by the use of informal controls. Survey data from 236 organizations pursuing strategic alliances indicate that when firms opt for one primary strategic alliance motivation, firms’ emphasis on either outcome controls (in exploitation alliances) or behavior controls (in exploration alliances) increases alliance performance. Results also support a complementary relationship between outcome and behavior controls in explaining alliance performance in ambidextrous alliances. Furthermore, our findings reveal that while informal controls enhance the effectiveness of behavior controls in exploration alliances, the benefits of informal controls disappear in the context of outcome controls and exploitation alliances. In ambidextrous alliances, firms need to carefully proportion the informal control level because beyond a moderate level, informal controls seem to negatively affect a control configuration using outcome and behavior controls. Our analysis provides a more nuanced view on how organizations may successfully control alliances with different motivations.

Exploring the innovation strategies of young firms: Corporate venture capital and venture capital impact on alliance innovation strategy

We investigate how governance structure and power influence alliance exploration strategy. Adopting a real options perspective and the agency view, we suggest that innovation strategies differ based on the firm's governance authority. We find that the motivations of corporate venture capitalist firms, venture capitalists, and firm founders may have an impact on the formation of exploratory alliances among adolescent firms. Using a sample of 122 adolescent firms, we examine the influence that governance structure has on the firm's alliance portfolio and innovation potential. While the influence of corporate venture capitalist firms alone do affect alliance formation strategy, corporate venture-backed firms with founders having high influence (knowledge or ownership in the firm) are more likely to form innovation-focused alliances. In contrast, venture capitalist-backed firms tend to avoid innovation-focused alliances, preferring more exploitive ones, even when founders have high influence within the firm.

Alliance portfolio capability

Purpose – The purpose of this paper is to develop a conceptual framework and propositions on a capability-based view that examine the role of a firm’s primary type of alliances, i.e., exploration or exploitation, in the determinants and impact of alliance portfolio capability. Design/methodology/approach – This is a conceptual research paper, which builds on prior conceptual and empirical management research. Findings – Regarding determinants, capability-based arguments indicate that firms with an emphasis on exploration alliances have higher levels of alliance portfolio capability. However, a focus on exploration alliances aggravates the development of alliance portfolio capability through alliance experience and a dedicated alliance function. Regarding impact, alliance portfolio capability may positively affect a firm’s alliance, innovation, and financial performance. While alliance portfolio capability is assumed to have an equally positive effect on alliance performance for all types of alliance portfolios, a relative focus on exploration alliances is expected to limit the positive effects of alliance portfolio capability on innovation and subsequent financial performance. Originality/value – These new conceptual arguments help to reconcile inconsistent earlier findings, and they deepen the understanding of interfirm differences in alliance portfolio capability and performance.

Project Suspensions and Failures in New Product Development: Returns for Entrepreneurial Firms in Co‐Development Alliances

Entrepreneurial biotech and large pharmaceutical firms often form alliances to co‐develop new products. Yet, new product development (NPD) is fraught with challenges that often result in project suspensions and failures. Considering this, how can firms increase the chances that their co‐development alliances will create value? To answer this question, the authors build on insights from signaling theory to argue that prior project suspensions provide positive signals leading to an increase in value creation, while project failures have the opposite effect. In addition, drawing on insights from temporal construal theory, this research predicts that the strength of these effects is contingent on the stage along the exploration–exploitation continuum at which the alliance is formed. The authors undertook event study analyses of 248 alliances formed by 104 biotechnology firms from the United States and Europe listed on eight stock exchanges over an 8‐year period between 1996 and 2003. The results confirm that prior NPD project suspensions have a stronger value creation effect (or prior failures have a weaker value destruction effect) in the case of exploration alliances in the upstream of NPD processes than in the case of moderate‐scale exploitation alliances in the downstream of NPD. This study is among the first to examine how both prior NPD project suspensions and failures of firms affect the abnormal returns achieved from co‐development alliances. This research therefore contributes to the innovation literature by honing a better understanding of setbacks and failures in NPD. Moreover, the findings contribute to the literature on strategic alliances by identifying new conditions under which firms can create or preserve value. This research also contributes to signaling theory by providing evidence of the moderation effect caused by the signaling environment. Finally, this study contributes to the entrepreneurial literature on value creation for entrepreneurial firms in alliances following adverse events.

Antecedents for forming simultaneous alliances or one-by-one alliances

This article extends existing alliance portfolio studies by exploring differences of antecedents for forming simultaneous alliances and one-by-one alliances using data from 1,029 alliances in the global pharmaceutical industry. The research’s findings suggest that firms are inclined to form simultaneous alliances when they have more prior alliance experience, conduct exploration alliances, or are in high level of technological diversification. Second, although simultaneous alliance formation may decrease a firm’s performance, greater alliance experience and inter-industry alliances may mitigate such the negative effect of simultaneous alliance formation on firm performance. Low levels of technological diversification may increase firm performance as forming simultaneous alliances. Moreover, propensity to form simultaneous alliances is increased with the increased number of formed alliances as larger firm size, organizational experience, and alliance experience take place. This article contributes to the current strategic alliances and organizational learning literature by introducing the concept of simultaneous and one-by-one alliances.

The effects of ambidextrous alliances on product innovation

With increasing levels of industrial complexity and advantages of economies of scale, individual firms often find it difficult to deal with every aspect of their business activities. Consequently, firms form alliances with other organizations to overcome the barrier of limited resources. This article, employing the exploration and exploitation lens, classifies alliances according to their objectives and investigates their impacts on providing innovative products to customers. Using data from a nationwide innovation survey of Korean manufacturing firms, we show that exploratory alliances positively affect firms’ radical product innovation while exploitative alliances positively affect firms’ incremental product innovation. More importantly, we confirm the interaction effect between exploratory alliances and exploitative alliances, which contributes to both radical and incremental innovation. This study highlights the importance of ambidexterity in implementing alliances which contribute to new product development.

The role of diversification profiles and dyadic characteristics in the formation of technological alliances: Differences between exploitation and exploration in a low-tech industry

This paper posits that corporate and technological diversification of firms and their relatedness in terms of products and technologies will impact their propensity to form technological alliances. It argues that both higher levels of diversification and greater relatedness signal superior capabilities and available resources to prospective partners that will facilitate exploration and exploitation of technological assets in an alliance. These theoretical conjectures are tested using a dataset of all tire producers worldwide between 1985 and 1996 that combines detailed firm data on establishment, patenting, and alliance activities. The results indicate that complementarity in terms of corporate and technological diversification strategies, as well as partner characteristics (e.g., size, age, and technological capabilities) drive exploitation alliances. Moreover, firms with similar product portfolios are more likely to engage in exploitative interactions. In contrast, exploration alliances exhibit strong partner similarity across all firm characteristics. Both corporate and technological diversification have positive effects on firms’ propensity to engage in exploration, while technological distance has a negative nonlinear one.

Facilitating exploration alliances in multiple dimensions: the influences of firm technological knowledge breadth

Whereas prior studies suggest that strategic alliances offer powerful tools for firms to explore business opportunities and alliances may explore in technology and organization dimensions, firms tend to compensate for exploration in one dimension by engaging in exploitation in the other dimension. The question of how firms can explore at a higher level in multiple dimensions of alliances remains unanswered. This study proposes that a firm's broad technological knowledge base may help facilitate exploration alliances in multiple dimensions. Data from the biopharmaceutical industry reveal that not only does a broad technological knowledge base support exploration in the technology and organization dimensions individually, but it also relaxes the firm's resource constraints; thus, the firm is less likely to compensate for exploration in one dimension with exploitation in the other. Instead, it can explore at a higher level in both dimensions simultaneously. This insight is particularly important in light of the increasing research interest in the fundamental enablers of and barriers to exploring new technological opportunities.