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TRIGGERING STRATEGIC ALLIANCES IN ENTREPRENEURIAL FIRMS: THE CASE OF TECHNOLOGY-SHARING ALLIANCES

Kathleen M. Eisenhardt

Department of Industrial Engineering and Engineering Management
Stanford University
Stanford, California 94305

Telephone
415-723-1887

Fax
415-725-8799

Claudia Bird Schoonhoven
Amos Tuck School
Dartmouth College
Hanover, New Hampshire 03755

Telephone
603-646-3953

Fax
603-646-1308

Principal Topics
Strategic alliances are a central strategy for many, contemporary ventures.Such arrangements have many advantages such as conserving resources, risk-sharing, and learning new skills. But there are disadvantages as well such assharing profits, draining of key skills, and implementation difficulties. Thissuggests that young firms will form alliances at varying rates. This studyexplores the determinants of those rates. The paper focuses on two generalexplanations, strategic position and social networks. We argue that alliancesare formed when firms have a need to bolster strategic position or when theyhave the opportunity to do so by attracting partners through social contactsand status. Specifically, we examine market factors (e.g. , competition andmarket stage), technical strategy, and asset position which affect strategicposition and top management team factors (e.g. , size, industry connections,past jobs) which affect social position through a set of 6 hypotheses.

Method
The research sample is the population of semiconductor firms that werelaunched between 1978 and 1985. There are 102 firms in this population and oursample includes 98 of the them, The data run from founding to firm death or1988 whichever comes first. Market data (i.e., competition, market stage)were gathered from major market research firms (e.g., Dataquest, ICE) and areannual. Firm data (i.e., technical strategy, top management, assets,alliances) were gathered during on-site interviews and are monthly except forstrategy which is measured at founding. Founding date, and number of alliancesare the controls, The analytic technique is event history where the dependentvariable is the rate of alliance formation. Specifically, we use a Cox model.

Major Findings
The findings indicate that firms are more likely to form alliances when they are in growth stage markets and have moderately innovative technical strategies, limited assets, all of which are related to improving strategic position. Second, such alliances are also formed at higher rates when large, well-connected top management teams manage the focal firm.

Implications
The implications are that these alliances form when firms have pressures for rapid pace from growth stage markets and pressures to conserve resources. Moreover, there is a delicate balance between need and opportunity such that firms appear to shy away from such alliances when they have very sophisticated technologies. Yet, ironically, when they have mundane technologies, they appear unable to develop such alliances. Finally, well-connected, large top management teams appear to be more successful in gaining alliances whereas less well-endowed teams seem to be less able to attract partners despite perhaps needing them more. Thus, our results suggest that perhaps advantaged firms are able to gain even more advantages through improved opportunities for alliance formation.

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