The Impact of Collaborative Agreement on Firms' Performances: The Case of the IT Industry in the 1990s1

1. This research was partly performed when Bruno van Pottelsberghe was Visiting Professor at the Institute of Innovation Research, Hitotsubashi University, from July to December 2003.

Abstract

In the information technology (IT) industry, which confronted a major transition phase during the 1990s, partnerships became a strategic component of the new ‘divided technical leadership’ that emerged from the industry's vertical disintegration. This paper attempts to evaluate the impact of 1676 partnerships on the financial performance (revenue and profit) of 14 large firms and 725 of their partners. On average, there is a positive impact of collaborative agreements on large incumbents and their partners' financial performance. These results vary according to the type, form and content of the agreement and according to the partner's field of activity. Incumbents get the most benefit from broad informal alliances while smaller and more hierarchical forms of partnerships (consortia, joint-ventures) do profit to their partners. For large incumbents, partnerships are more effective with partners from the services industry than with partners from the IT industry.

Notes

1. This research was partly performed when Bruno van Pottelsberghe was Visiting Professor at the Institute of Innovation Research, Hitotsubashi University, from July to December 2003.

2. See S. Berg, J. Duncan & P. Friedman, Joint-venture Strategies and Corporate Innovation (Cambridge, MA: Oelgeschlager Gunn & Hain, 1982); S. Chan, J. Kensinger, A. Keown & J. Martin, Do strategic alliances create value?, Journal of Financial Economics, 46, 1997, pp. 199–221; P. Dussauge & B. Garette, Determinants of success in international strategic alliances: evidence from the global aerospace industry, Journal of International Business Studies London, 26(3), 1995, pp. 505–530; T. Stuart, Interorganizational alliances and the performance of firms: a study of growth and innovation rates in a high-technology industry, Strategic Management Journal, 21(8), 2000, pp. 791–811; J. Finnerty, J. Owers & R. Rogers, The valuation impact of joint ventures, Management International Review, 26, 1986, pp. 14–26.

3. Dussauge & Garette, op. cit., Ref. 2.

4. P. Kale, J. Dyer & H. Singh, Alliance capability, stock market response, and long-term alliance success: the role of the alliance function, Strategic Management Journal, 23, 2002, pp. 747–767.

5. Chan et al., op. cit., Ref. 2.

6. J. Baum J & C. Oliver, Institutional linkages and organizational mortality, Administrative Science Quarterly, 36, 1991, pp. 187–218.

7. W. Mitchell & K. Singh, Survival of businesses using collaborative relationships to commercialize complex goods, Strategic Management Journal, 17(3), 1996, pp. 169–196.

8. W. Powell, K. Koput & L. Smith-Doerr, Interorganizational collaboration and the locus of innovation: networks of learning in biotechnology, Administrative Science Quarterly, 41, 1996, pp. 116–145.

9. Stuart, op. cit., Ref. 2.

10. M. Sarkar, R. Echambadi & J. Harrison, Alliance entrepreneurship and firm market performance, Strategic Management Journal, 22(6–7), 2001, pp. 701–711.

11. J. Hagedoorn & J. Schakenraad, The effect of strategic technology alliances on company performance, Strategic Management Journal, 15(4), 1994, pp. 291–309.

12. Berg et al., op. cit., Ref. 2.

13. B. Anand & T. Khanna, Do firms learn to create value? The case of alliances, Strategic Management Journal, 21(3), 2000, pp. 295–315.

14. Chan et al., op. cit., Ref. 2.

15. W. Vanhaverbeke & G. Duysters, A longitudinal analysis of the choice between technology-based strategic alliances and acquisitions in high-tech industries: the case of the ASIC industry, University of Maastricht, Netherlands Institute of Business Organization and Strategy Research (NIBOR), 1997.

16. See J. Hagedoorn, J. & R. Narula, Choosing organizational modes of strategic technology partnering: international sectoral differences, Journal of International Business Studies, 27, 1996, pp. 265–284.

17. K. Harrigan, Strategies for Joint Venture (Lexington, MA: Lexington Books, 1985).

18. J. Allen & M. Phillips Gordon, Corporate equity ownership, strategic alliances and product market relationships, Journal of Finance—Southern Methodist University, 6, 2000, pp. 2791–2816.

19. J. Hagedoorn & G. Duysters, The effect of mergers and acquisitions on the technological performance of companies in a high-tech environment, University of Maastricht, 2000.

20. B. Kogut, The stability of joint ventures: reciprocity and competitive rivalry, Journal of Industrial Economics, 38(2), 1989, pp. 183–198.

21. J. Geringer & L. Hebert, Measuring performance of international joint ventures, Journal of International Business Studies, 22, 1991, pp. 249–264.

22. Finnerty et al., op. cit., Ref. 2.

23. I. Lee & S. Wyatt, The effects of international joint ventures on shareholder wealth, Financial Review, 25, 1990, pp. 641–649.

24. G. Hamel, Competition for competence and inter-partner learning within international strategic alliances, Strategic Management Journal, 12 (winter special issue), 1991, pp. 83–103.

25. O. Mortehan, The role of firms' collaborative agreements in the IT industry transformation, Technology Analysis & Strategic Management, 16(1), 2004, pp. 53–71.

26. G. Lorenzoni & A. Lipparini, The leveraging of interfirm relationships as a distinctive organizational capability: a longitudinal study, Strategic Management Journal, 20(4), 1999, pp. 317–338.

27. F. Rothaermel, Complementary assets, strategic alliances, and the incumbent's advantage: an empirical study of industry and firm effects in the biopharmaceutical industry, Research Policy, 30, 2001a, pp. 1235–1251; F. Rothaermel, Incumbent's advantage through exploiting complementary assets via interfirm cooperation, Strategic Management Journal, 22(6–7), 2001b, pp. 687–699.

28. R. Bettis & M. Hitt, The new competitive landscape, Strategic Management Journal, 16 (summer special issue), 1995, pp. 7–20.

29. See Mitchell & Singh, op. cit., Ref. 10.

30. Rothaermel (2001a), op. cit., Ref. 27.

31. R. Gulati, Alliances and networks, Strategic Management Journal, 19(4), 1998, pp. 293–317.

32. Mortehan, op. cit., Ref. 25.

33. M. Porter, Competitive Strategy (London: The Free Press, 1980).

34. T. Bresnahan & S. Greenstein, Technological competition and the structure of the computer industry, The Journal of Industrial Economics, 47(1), 1999, pp. 1–40.

35. Mortehan, op. cit., Ref. 25.

36. N. Vonortas, Research joint ventures in the US, Research Policy, 26, 1995, pp. 577–595.

37. Small firms being under-represented (the 14 firms of our target are all large enterprises), too much English oriented (most of the 14 firms are US based) or announcement requirements varying per country (most IT press coming from USA).

38. Mortehan, op. cit., Ref. 25.

39. Ibid.

40. Anand & Khanna, op. cit., Ref. 13.

41. Hagedoorn & Schakenraad, op. cit., Ref. 11.

42. Berg et al., op. cit., Ref. 2.

43. C. Christensen, The Innovator's Dilemma, 2nd edn (London: HarperBusiness Essentials, 2003).

44. P. S. Mohanram & A. Nanda, When do joint ventures create value?, SSRN Working Paper, 1998, available at http://ssrn.com/abstract = 7382.

45. Chan et al., op. cit., Ref. 2.

46. Vanhaverbeke & Duysters, op. cit., Ref. 15.

47. See Dussauge & Garette, op. cit., Ref. 2; Stuart, op. cit., Ref. 2; Sarkar et al., op. cit., Ref. 10.