Managing alliance portfolio interdependencies for innovation: The role of governance choice in new alliances
Firms use contractual alliances when new resources resemble their portfolio, and equity JVs otherwise, shaping innovation outputs.
Summary
The study examines US-listed biotechnology firms to see how the choice of governance for a new alliance relates to the firm's existing alliance portfolio and to its later innovation. Firms choose a contractual agreement when the resources they are accessing resemble those already in their portfolio, and an equity joint venture when the new resources are complementary. The choice matters for results: contractual governance strengthens innovation in the similar-resource domains, while equity joint ventures strengthen it in the complementary domains. The authors conclude that governance is a way of managing the interdependencies between a firm's partnerships, and that it steers whether innovation deepens existing areas or extends into new ones.
Editor's opinion
How an alliance is structured should follow what it adds to the portfolio: a light contract works when the partner brings more of what the firm already has, while a deeper equity tie pays off when the partner brings something complementary. Firms that choose governance on that logic get their innovation in the right place, whereas the wrong structure leaves either duplicated effort or unrealised complementarity.
Key concepts
alliance portfolio · governance choice · equity joint ventures · interdependencies