Examining Alliance Portfolios Beyond the Dyads: The Relevance of Redundancy and Nonuniformity Across and Between Partners

Abstract

In this research, we unpack how interdependencies affect not just individual dyads but also value creation across an alliance portfolio and ultimately a focal firm’s performance. Moving beyond the collection of dyadic relationships of individual alliances, we examine more holistically the distribution of power imbalances and mutual dependences within alliance portfolios, as well as the impact of redundancies in portfolio partners’ resources. Building on resource dependence theory, we develop and test arguments on a sample of 59 firms in the U.S. passenger airline industry during 1998–2011. We find that nonuniform distributions of power imbalances and mutual dependences within the alliance portfolio as well as redundancy affect firm performance in different ways, which has implications for the management of alliance portfolios.

Creating and taming discord: How firms manage embedded competition in alliance portfolios to limit alliance termination

“…For instance, task interdependencies between partners can shape the ability of the focal firm to terminate alliances. When there is greater interdependence, alliance value derives from a tightly knit chain of activities (Hoehn‐Weiss et al, ), where the sum of independent relationships is less than the total value of the alliance portfolio (Vassolo et al, ). In such portfolios, terminating a particular tie can have cascading effects that hinder and reduce the value of the interactions for the rest of the portfolio; this, in turn, reduces the flexibility of the focal firm to terminate the alliance, even if the dyadic tie has little value.…”

A behavioral theory of alliance portfolio reconfiguration: Evidence from pharmaceutical biotechnology

“…The core premise of the portfolio perspective on alliances is that, in addition to value obtained from individual alliances, firms can also derive value from their alliance portfolios by combining resources accessed through multiple simultaneous alliances (Hoehn‐Weiss et al, ; Lavie, ; Wassmer & Dussauge, ). A critical determinant of such additional value is the prevalence of portfolio interdependencies, that is, the synergies and conflicts in the portfolio which result from “the complex patterns of resource exchanges or flows between a focal firm and one alliance partner as well as the resource flows between a focal firm and other partners within its alliance portfolio” (Hoehn‐Weiss et al, , p. 57). Portfolio interdependencies determine a focal firm's value creation and appropriation from its alliance portfolio (Lavie, ).…”

“…First, the resource richness of an alliance portfolio—the breadth of portfolio resources available to a firm through its alliances—determines the scope for portfolio synergies (Gulati et al, ). As the breadth of portfolio resources increases, so does the scope for their synergistic combinations, implying greater value creation potential available to the firm (Hoehn‐Weiss et al, ; Lavie, ; Wassmer & Dussauge, ). Second, a firm's receptivity to portfolio resources—how effectively a firm can leverage these resources (Gulati et al, )—determines the extent to which the firm can realize potential synergies in the portfolio.…”

“…The portfolio perspective on interfirm alliances suggests that the benefits firms derive from their alliance portfolios can exceed the sum of the benefits obtained from each individual alliance (Hoehn‐Weiss, Karim, & Lee, ; Wassmer, ). Building on this insight, numerous studies have sought to identify alliance portfolio configurations that enhance firm performance (e.g., Bos, Faems, & Noseleit, ; Hoehn‐Weiss et al, ; Jiang, Tao, & Santoro, ; Lavie, ; Ozcan & Eisenhardt, ; Wassmer & Dussauge, ; Wassmer, Li, & Madhok, ) and related outcomes such as liquidity events (Hoehn‐Weiss & Karim, ), knowledge acquisition (Frankort, Hagedoorn, & Letterie, ), and product innovation (Wuyts & Dutta, ). While these studies contribute to understanding the consequences of portfolio configurations, little research has examined why firms decide to change the configuration of, or “reconfigure,” their alliance portfolios over time, and how they implement such decisions.…”

“…In this study, we develop a comprehensive model of alliance portfolio reconfiguration based on the behavioral theory of the firm (Cyert & March, ), a theory of decision making rooted in the notion that managers are boundedly rational. Our central line of argument consists of four parts: (a) Performance feedback and slack resources influence firms' preferences regarding value creation and appropriation from their alliance portfolios (Lavie, ); (b) portfolio‐level value creation and appropriation derive from synergies and conflicts in the alliance portfolio (Hoehn‐Weiss et al, ); (c) these synergies and conflicts are determined by portfolios' partner and resource characteristics (Gulati, Lavie, & Madhavan, ); and thus (d) firms accommodate their evolving value creation and appropriation preferences by reconfiguring their portfolios through simultaneous partner‐choice and resource‐focus decisions in newly formed alliances.…”