Product Development Alliances Research Articles

Value-creation-capture-equilibrium in new product development alliances: A matter of coopetition, expert power, and alliance importance

Alliances are often thought to be longer lasting and lead to better results when they are perceived as equal and fair in terms of how efforts and rewards are distributed. This study conceptualizes the value-creation-capture-equilibrium (VCCE) as the relative inputs and efforts made by alliance partners to create and capture innovation-related value. We seek to better understand the determinants of the VCCE in dyadic new product development (NPD) alliances. We focus on three factors from a focal firm's perspective: (1) the coopetition intensity with the alliance partner (i.e. simultaneous competition and collaboration), (2) the expert power of the alliance partner, and (3) the relative importance of the particular NPD alliance. We hypothesize that coopetition intensity stabilizes the VCCE. Furthermore, we assume that the partner's expert power and the focal firm's relative alliance importance negatively moderate the relationship between coopetition intensity and the VCCE. Based on a dataset of N = 471 NPD alliances of high-tech firms, we find partial support for our hypotheses and contribute towards a better understanding of the factors influencing the VCCE in NPD alliances.

Effect of new product alliances on building cross-functional capability: cross-fertilisation or cannibalisation?

ABSTRACTThe extant literature has focused mainly on how establishing alliances helps firms develop their capabilities within focal functional areas, while paying limited attention to the cross-functional effects of alliances. Drawing on the knowledge-spillover literature and resource-dependence theory, this study investigates the effects of new product development (NPD) alliances on building cross-functional capabilities, testing the influences of important organisational, strategic, and environmental contingencies. Based on survey data collected from 212 Chinese firms, the findings reveal that, for resource-abundant firms, R&D-focused NPD alliances have cross-functional fertilisation effects on marketing capabilities; whereas for resource-constrained or highly innovative firms such alliances cannibalise marketing capabilities; in dynamic markets, marketing-focused NPD alliances cross-fertilise technological capabilities, but such an effect is weaker in firms adopting a highly incremental innovation orientation. Overall, this study sheds new light on how NPD alliances affect cross-functional capabilities under important contingencies.

Balancing Coopetitive Value Dynamics in New Product Development Alliances with Experts

Balancing Coopetitive Value Dynamics in New Product Development Alliances with Experts

Strategic Flexibility in New High‐Technology Ventures

AbstractStrategic flexibility is a vital capability for new ventures to update their strategies in a timely manner. However, the role of external knowledge sources in new ventures’ endeavours to develop strategic flexibility are unclear. Drawing on the knowledge‐based and relational views, we explore the effect of two sources of external knowledge: new product development (NPD) alliances, representing tightly coupled sources, and loosely coupled sources such as industry associations. Our field study of 148 high‐tech ventures found that the extent to which firms utilize knowledge from NPD alliances has a curvilinear relationship with strategic flexibility, whereas the extent to which firms utilize loosely coupled sources has a positive linear relationship with strategic flexibility. We also found that in new ventures, decentralization of decision‐making and institutional support enhance knowledge integration, positively moderating these relationships.

Ambidexterity in new ventures: The impact of new product development alliances and transactive memory systems

Unlike established firms, new ventures often lack the resources and structure necessary to simultaneously pursue exploration and exploitation activities in the process of developing and introducing new products into markets. Thus, it remains unclear whether and how ambidexterity (i.e., simultaneous pursuit of exploration and exploitation activities) can develop in new ventures. This study posits that product development alliances and the transactive memory systems of entrepreneurial teams contribute to new venture ambidexterity. Moreover, we propose that the two mechanisms reinforce one another. Data collected from 148 new Chinese ventures support these hypotheses.

Coopetition in New Product Development Alliances: Advantages and Tensions for Incremental and Radical Innovation

AbstractCoopetition (collaboration between competitors) can facilitate product innovation, but there is still debate about how it is suited to radical or incremental innovation. This paper argues that the early and later phases of coopetitive new product development (NPD) pose different benefits and risks for the innovation types. Building on the tensions approach to value creation and appropriation, we develop a series of hypotheses on the role of coopetition in NPD alliances and focal firm's innovation output. The hypotheses are tested on a quantitative data set of 1049 NPD alliances in the German medical and machinery sectors. The results show that, while coopetition is advantageous for incremental innovation in both pre‐launch and launch phases, radical innovation benefits from coopetition in the launch phase only.

Effects of divergent communication schemes in new product development alliances

Purpose – Firms build new product development alliances to cope with the demands of continuous and rapid new product development. Such alliances allow surplus access to complementary capabilities and knowledge. However, the successful use of specialization advantages requires coordination and effective communication between alliance partners. Communication is vital to alliance success, as it allows a timely flow of information and resources across partners and supports the coordination within the alliance. The aim of this study is to research how divergent communication schemes influence firms’ new product development performance in alliances. Design/methodology/approach – A paper-and-pencil survey about firms’ collaborative new product development performance in the German medical device industry was conducted. Results are derived from a survey of n = 184 new product development alliances in the medical device industry. To test the hypotheses, structural equation modeling (SEM) using the Mplus 7.0 software was applied. Findings – The empirical results indicate that divergent communication schemes enhance product innovativeness and speed to market in new product development alliances. The development of new insights and solutions through joint sensemaking builds the theoretical fundament for the supportive effects of divergent communication schemes. Divergent communication schemes go hand in hand with ambiguity, that is, the source of joint dialogues and discussion through which alliance partners refine and adapt their different perspectives and interpretations. However, the supportive effect of divergent communication schemes on speed to market declines with increasing collaboration intensity. Research limitations/implications – The assessment of divergent communication schemes and new product development performance of the dyadic relationships in this survey is only based on one respondent. Furthermore, the study’s focus on a specific industry sector, albeit one fitting particularly well to the research question, may further limit the generalizability of the empirical findings. Future research should thus strive to take both firms of the dyadic relationship into account and moreover attempt to investigate mediating effects such as joint sensemaking or creativity. Practical implications – The results indicate that alliance managers should become aware that different ways of communication are not per se dysfunctional. To achieve beneficial effects, they should enhance dialogues and constructive discussions through which the alliance partners develop novel insights and solutions on the fundament of occurring misunderstandings that root in divergent communication schemes. Regular meetings and conferences as well as inter-organizational teams should be applied because they stimulate joint dialogues and discussions in alliances. These instruments also enable learning processes and the development of trust that are both crucial for sensemaking processes in alliances. Originality/value – Prior research has stressed the importance of interorganizational communication for the success of alliances. However, little is known about the effect of divergent communication schemes in alliances. This study shows theoretically and empirically that divergent communication schemes can improve new product development performance in alliances. The supportive effect of divergent communication schemes is contrary to the argumentation that communication problems and misinterpretations hamper alliance success.

Project suspensions and failures: Valuation Impact Upon New Product Development Alliances

Upstream biotech firms and downstream pharmaceutical firms often form alliances to explore discovery opportunities and exploit new product specificity in new product development. Although the perfo...

Biotechnology Commercialization Strategies: Risk and Return in Interfirm Cooperation

The management and exploitation of biotechnological product innovation have proven to be more difficult than initially expected because the number of currently marketed biotechnological products is far from sufficient to counter deficits in pharmaceutical innovation. This study provides insight into the role of governance structures in interfirm cooperation and their effects on biotechnological product innovation and company success. Most of the existing literature regarding alliances and mergers and acquisitions (M&A) examines their effects on technology recipients' innovation performance. Here, the effects of alliances and M&A on both the innovation success and financial performance of technology suppliers (i.e., sources) are examined. Drawing from a sample of 220 human therapeutic biotechnology and biopharmaceutical firms over a period of 32 years (1980–2011), an analysis of the effects of biotechnology clusters, strategic alliances, and acquisitions is provided. This study reveals the existence of a risk‐return trade‐off for strategic alliances between biotech companies and larger, more established firms. Increased biotech company involvement in product development alliances decreases risk by increasing the likelihood of future product introductions. The trade‐off, however, is that biotech companies earn lower returns when their products are developed through such alliances. A similar risk‐return trade‐off effect is found for clusters. However, acquisitions generally affect both product introductions and product returns in a negative way. These findings have strategic implications not only for managing the development of biotechnological product innovations and technology platforms but also for commercialization strategies with respect to interfirm cooperation and risk reduction.

Alliance-Based New Product Development Success: The Role of Formalization in Exploration and Exploitation Contexts

Purpose: Although alliances offer tremendous strategic potential, firms still struggle to successfully manage new product development alliances (NPD alliances). A prominent explanation for this is the institutional economics' view (see Williamson 1985) that, in general, a key disadvantage of alliances versus vertical integration is that administrative control mechanisms are weaker. Here, a key control mechanism is formalization (the use of explicit rules to govern business activities). However, regarding formalization's influence on both NPD and alliance performance, conceptual views and empirical findings are mixed, which suggest that unexamined variables moderate formalization's influence on NPD performance. Therefore, it is surprising that there is no research on whether formalization's influence differs in alliances pursuing an NPD exploration strategy versus an NPD exploitation strategy because both (1) require varying levels of freedom of action and adherence to procedural rules to achieve success, and (2) are extensively employed in NPD. Further, there is also surprisingly little intrafirm NPD and non-NPD alliance research on formalization in exploration and exploitation contexts because here as well formalization's influence on performance (1) is central, and (2) differs based on the project's innovative and learning intent. The purpose of this research is to begin to close important literature and industry practice knowledge gaps about formalization's influence on NPD alliance performance in exploitation versus exploration strategic contexts. Originality, value, and contribution: This research is the first examination ever of two key NPD strategies—exploration and exploitation—in an NPD alliance context. The research sheds light on conflicting views about formalization's NPD performance-enhancing and inhibiting aspects, and offers implications for industry best practices. Methodology/approach: Empirical examination of survey data from 151 NPD alliances via hierarchical regression and tests of group moderation. Findings: Results shed light on when and why formalization moderates the influence of key fundamental alliance success mechanisms on NPD alliance performance based on strategic context.

Trust formation in Korean new product alliances: How important are pre-existing social ties?

The focus of this study is on the nature and influence of social connections versus other relational mechanisms on trust formation in an emerging Asian economy. We examine the role of communication quality, perceived fairness, and pre-existing social relationships for the formation of trust in 47 vertical new product development alliances in South Korea. The empirical results indicate a relatively minor importance of pre-existing social ties vis-a-vis communication quality and fairness for the development of trust. Contrary to widespread perceptions, pre-existing social ties do not appear to directly contribute to establishing trust with external alliance partners in Korea. Multiple explanations are offered for this unexpected finding. Instead, existing social relationships moderate the importance of fairness for trust formation. When conducting partnerships with Korean firms, managers should focus more on a quality communication and fair behavior when trust formation is the objective, than on social connections.

Product development alliances: factors influencing formation and success

Purpose – The objective of this paper is to develop a framework, based on existing literature, for factors influencing the formation and success of product development alliances, and relate this specifically to the food industry.Design/methodology/approach – Case study of a product development alliance, with four partners and an interview survey, with 19 key informants in the Danish food industry.Findings – The nature of the differences between the developed framework for product development alliances in the food industry and theory on alliances in general, indeed seem to rest in the chosen specific context. Companies in the food industry are not forced by external conditions to enter into product development alliances. Therefore, compared to other industries, motivations have to be stronger or risks smaller for them to form such interorganisational relationships. However, once formed, results indicate that success factors are rather universal across industries and types of alliances.Research limitations/...

Influence of Tie Strength and Behavioural Factors on Effective Knowledge Acquisition: A Study of Korean New Product Alliances

We investigate the influence of tie strength and the mediating effect of behavioural factors on knowledge acquisition in new product development alliances in the Korean machinery and electronics industries. Tie strength on the operational level, as measured by interaction intensity and intimacy between partners' project managers, was found to enhance knowledge acquisition, whereas the depth and length of firm-level ties did not. Moreover, the influence of interaction intensity and intimacy on knowledge acquisition was mediated by communication quality and fairness, suggesting that operational-level tie strength becomes less relevant for knowledge acquisition when good communication and perceptions of fairness between alliance partners have been established. Taken together, when knowledge acquisition is the objective, behavioural factors seem to play a more prominent role than tie strength in Korean new product alliances.

Belimumab

Belimumab is a fully human monoclonal antibody that specifically recognizes and inhibits the biological activity of B-lymphocyte stimulator, or BLyS. Belimumab is in phase III trials for the treatment of systemic lupus erythematosus (SLE) and has completed a phase II trial in rheumatoid arthritis (RA); the product may also have potential in the treatment of other autoimmune disorders. In May 2001, Cambridge Antibody Technology (now MedImmune) completed its discovery programme and Human Genome Sciences identified belimumab as a candidate for clinical development. More than 1000 distinct human antibodies specific to BLyS were characterized by the collaboration.B-lymphocyte stimulator is a naturally occurring protein discovered by Human Genome Sciences that stimulates B-lymphocytes to develop into mature B cells. Laboratory studies have indicated that higher than normal levels of B-lymphocyte stimulator may contribute to the pathogenesis of autoimmune diseases, such as SLE and RA. Human Genome Sciences (HGS) and Cambridge Antibody Technology signed a collaborative agreement in August 1999 to study the B-lymphocyte stimulator as a human protein target. HGS is also developing other BLyS products. In March 2000, HGS and Cambridge Antibody Technology expanded their agreement into a 10-year collaboration and product development alliance, providing Human Genome Sciences with the right to use the antibody technology of Cambridge Antibody Technology to fully develop human antibodies for therapeutic and diagnostic purposes. Cambridge Antibody Technology will receive royalty payments on product sales from HGS, as well as the development and milestone payments it has already received. Belimumab will be manufactured in Human Genome Sciences' manufacturing facility, located in Rockville, MD, USA. HGS holds commercial rights to the drug. In July 2005, GlaxoSmithKline (GSK) exercised its co-development and co-promotion option to belimumab. In an agreement made in June 1996, HGS had granted a 50/50 co-development and co-promotion option to GSK for certain therapies that complete phase IIa trials successfully. The companies subsequently entered into a definite worldwide, co-development and commercialization agreement in August 2006, under which HGS will be responsible for conducting phase III trials of the product, with assistance from GSK. The companies will share equally phase III/IV development costs, sales and marketing expenses, and profits. In October 2007, Cambridge Antibody Technology was integrated into MedImmune. Both companies were previously independent subsidiaries of AstraZeneca. MedImmune is now the operationally independent biologics business unit of AstraZeneca. Human Genome Sciences intends to initiate a phase II trial of subcutaneous belimumab by mid-2008. Results from a phase II trial in 449 patients with SLE demonstrated that belimumab improved or stabilized SLE over 2.5 years. The phase II trial was a double-blind, placebo-controlled, multicentre study that evaluated the safety, optimal dosing, and preliminary efficacy of belimumab in patients with active SLE over 52 weeks initially, followed by a continuation phase for a total of 2.5 years. Belimumab has received fast-track designation for the treatment of SLE from the US FDA and has also been selected for inclusion in the agency's continuous Marketing Application Pilot 2 programme.

Critical success factors in managing global supply chains

Since the last decade, effective supply chain management has been regarded as the source of cost reduction, improvement of services, and gaining competitive advantages. Some researchers have already investigated several methods that could be employed to manage supply chains as well. However, not all companies can afford to implement all these methods properly. It is because these methods may not be suitable to every company or industry, and it would take a great effort (i.e. money) in doing so. This paper aims to highlight some critical success factors for managing global supply chains, which are obtained by analysis of case studies and related survey results in the literature. The focus of this paper would be put on the vendors' management side. It includes how to select vendors in lean and mass productions, the skills of developing and maintaining relationship by using product development and strategic suppliers' alliance. Suggestions will be given based on the evaluation of the cases and reported literature.

Asymmetric New Product Development Alliances: Win-Win or Win-Lose Partnerships?

Interorganizational alliances are widely recognized as critical to product innovation, particularly in high-technology markets. Many new product development (NPD) alliances tend to be asymmetric, that is, they are formed between a larger firm and a smaller firm. As is the case with alliances in general, asymmetric alliances also typically result in changes in the shareholder values of the partner firms. Are the changes in shareholder values of the partner firms significant? Are asymmetric NPD alliances win-win or win-lose partnerships? Are the gains or losses symmetric for the larger and smaller partner firms? What factors drive the changes in shareholder values of the partner firms? These important questions remain largely unexplored as evidenced by the dearth of empirical research on the effect of asymmetric NPD alliances on shareholder value and on the apportionment of this value between the partner firms. We develop and empirically test a model of short-term changes in shareholder values of larger and smaller firms involved in NPD alliances, using the event study methodology on data covering 167 asymmetric alliances in the information technology and communication industries. In this model, we examine alliance, firm, and partner characteristics as potential determinants of the changes in shareholder values of the partner firms due to an NPD alliance announcement. Our model accounts for selection correction, potential cross-correlation across the residuals from the models of firm value changes for the larger and smaller firms, and unobserved heterogeneity. The results suggest that both the partners experience significant short-term financial gains, but there are considerable asymmetries between the larger and smaller firms with regard to the effects of alliance, partner, and firm characteristics on the gains of the partner firms. The results relating to alliance characteristics suggest that while a broad scope alliance enhances the financial gains for the larger firm, a scale R&D alliance (relative to a link alliance) contributes positively to the financial gains for the smaller firm. With regard to partner characteristics, while partner alliance experience positively influences the financial gains for the larger firm, it has no significant effect on the financial returns for the smaller firm. Further, partner innovativeness is positively associated with the financial gains for the larger firm, but partner reputation is unrelated to the financial gains of the smaller firm. Regarding firm characteristics, the magnitude of the financial gains accruing from a firm’s own alliance experience is considerably higher for the smaller firm than it is for the larger firm. We outline the implications of the research findings for future research and management practice.

Knowledge management in production alliances

This paper develops a managerial model of production network organizations (PNOs), inter-firm alliances for product development and delivery, in which inter-firm network structure and knowledge management practices play a major role in venture performance. The paper addresses the issue of alignment between the adopted network structure, the scope of the joint production task, and consequent inter-firm information flow require- ments, hypothesizing that venture performance is a joint function of network structure and task integration scope. In situations with a difficult alignment between the chosen network structure, joint task scope, and information flow requirements, knowledge management investments across the PNO are proposed as a moderating factor leading to improved venture performance. The paper demonstrates the proposed model with three case studies, providing preliminary verification of the key proposition that knowledge management interventions can mediate the impact of loose integrating structures for joint production ventures that are undertaking complex joint tasks.

Outsourcing and strategic alliances for product development: a case of Banta Digital Group

Banta Digital Group (BDG) is a pre media company needing to fill a void in the market it serves. This need could be met by an application that consisted of software and database development. A problem arose due to two conditions. First, the company was late getting to the market with this product. Second, the company did not have dedicated resources to work on this project. BDG needed to adopt a solution that comprised of outsourcing and strategic alliances to fill this market need. The study reports how the company selected and managed strategic alliances through the creation of a virtual team. It also reviews details of the new business operating system instituted to foster an environment for further product and process innovation. Finally, the proposed approach used in this unique type of product development is described, which is also applicable in many business situations.

Coordinating new product development in an international joint venture

This is a case study of the problems in coordinating business functions (R&D and manufacturing) among firms engaged in a joint venture for new product development (NPD). The study focused on relationships across organisational boundaries, that is among the joint venture organisation and the two partner companies. A conceptual framework, based on the new product development and strategic alliance literatures, served as a guide in developing specific propositions from the interview data. The findings indicate that a partnership's task and task environment, specifically cross-company subunit interdependencies, produce requirements for inter-functional coordination between firms. Certain partner characteristics, however, hamper attaining the required coordination. These characteristics include the relative degree of concurrency of the partners' NPD processes and a partner's difficulty in establishing external information technology linkages. Aspects of the partners' relationship, specifically perceived appropriability risks, also hinder achieving the necessary coordination. The relative degree to which each partner has management control over the relationship influences perceived risks. These findings are put into perspective through a comparison of new product development in a partnership and in a single business unit.

Product Innovation Strategy and the Performance of New Technology Ventures in China

Investigating the effect of product innovation strategy on the performance of new technology ventures in China, we found the innovation-performance link was contingent on both environmental factors, including environmental turbulence and institutional support, and the relationship-based strategies of the ventures, such as strategic alliances for product development and political networking. Our results suggest the need for simultaneous consideration of environment- and relationship-based strategy factors as moderators in the discourse on product innovation strategy among new technology ventures.