The effect of alliance portfolio configuration on innovative performance of entrepreneurial firms: a study of dedicated biotechnology firms

Abstract

Alliance portfolio is the full set of alliances that a firm undertakes with different partners. Previous research has shifted the focus from the drivers and outcomes of individual alliances to the effects of alliance portfolio on firm-level outcomes. However, current research on alliance portfolio is inadequate in several aspects. First, different dimensions of alliance portfolio have been randomly chosen and inconclusively studied. Second, it is unclear whether alliance portfolio exerts its effect on innovation through tangible or intangible resources, or both. Third, it is unclear whether external resources obtained from alliances complement or are a substitute for the internal resources of the top management team. To address these gaps, I identified three key dimensions – size, diversity and intensity – of an alliance portfolio, and developed a theoretical model based on the resource-based view and firm capability perspective to examine the interactive relationships among various dimensions of portfolio on the innovative outputs of an entrepreneurial firm. I hypothesized a mediating role of alliance capital and a moderating role of the top management team’s capability in the relationships between alliance portfolio and innovative outputs. The proposed theoretical model was tested on the archival data of 238 U.S. biotechnology firms who undertook 2501 alliances from their inception until 2009. Results based on negative binomial regressions showed that (1) portfolio size was positively related to innovative outputs, (2) portfolio diversity and portfolio intensity strengthened the positive relationship between portfolio size and innovative outputs, (3) the top management team’s capability strengthened the moderating effect of portfolio intensity, and (4) portfolio size had both direct and indirect effects through alliance capital on innovative outputs. This thesis contributes to the literature on alliance portfolio by examining whether different dimensions of alliance portfolio interactively affect innovation, whether alliance portfolio affects innovation both directly and indirectly through financial resources generated from the portfolio, and whether external portfolio resources complement internal top management team resources on innovation. The findings suggest that managers of entrepreneurial firms should actively manage their portfolio of alliances for diversity and intensity, and they should be aware of the complementarity of alliance and internal resources. (348 words)