Alliance Portfolio Diversity and Innovation: The Interplay of Portfolio Coordination Capability and Proactive Partner Selection Capability

• Author: Suleika Bort,Indre Maurer,Philip Degener
• DOI: http://doi.org/10.1111/joms.12396
• Published date: 01 December 2018
• Date: 01 December 2018

© 2018 John Wiley & Sons Ltd and S ociety for the Advancement of Ma nagement Studies

Alliance Portfolio Diversity and Innovation: The Interplay

of Portfolio Coordination Capability and Proactive

Partner Selection Capability

Philip Degener, Indre Maurer and Suleika Bort

University of Göttingen;Chemnitz University of Technology

ABST RACT This study seeks to expla in how the innovation potential entailed in the

structur al characteri stics of a diverse al liance portfolio ca n be leveraged by two di ffer-

ent alliance management capabilit ies of a focal fir m: portfolio coordinat ion and

proactive partner selection. A n analysis of German biotechnology f irms, based on

database a nd survey data , indicates that each a lliance management capabilit y positively

interacts with p ortfolio diversity to fost er innovation. In addition, regard ing their joint

influence as cap ability bundle on the por tfolio diversity– innovation link, portfolio

coordination and proactive pa rtner selection seem to substitute r ather than comple-

ment each other. These results suggest that fir ms realize innovation benefits from a

diverse set of external a lliance part ners only when they focus on and apply internal

coordination or part ner selection routines to manage these a lliances, thus act ing as

either port folio coordinat ors or port folio configurator s.

Keywo rds: all iance portfolio diversity, alliance management capabilities, proactive

partner s election, por tfolio coord ination, innovation per formance

INTRODUCTION

Firms often maintain a portfolio of diverse inter-organizational alliances to en-

hance their competitive position (Lee et al., 2017). Accordingly, prior research

has examined the various performance outcomes related to a focal firm’s alli-

ance portfolio diversity (APD), commonly defined as the degree of variance in

alliance partners’ resources, capabilities, and knowledge (Jiang et al., 2010). In

addition to financial advantages (Baum et al., 2000), market value (Caner et al.,

Journal of Manageme nt Studies 55:8 December 2018

doi: 10.1111/j oms .12 39 6

Address for reprints: Philip Degener, Chair of Orga nization and Corporat e Development, University

of Göttingen, Plat z der Göttinger Sieben 3, 37073, G öttingen, Germ any (philip.degener@wiw i.

uni-goett ingen.de).

Alliance Portfolio Diversity and Innovation 13 87

© 2018 John Wiley & Sons Ltd and S ociety for the Advancement of Ma nagement Studies

2018), and organizational growth (De Leeuw et al., 2014; Powell et al., 1996),

APD fosters innovation performance (Hagedoorn et al., 2017; Wuyts et al., 2004).

The impact of APD on innovation seems especially relevant for high-technology

firms, such a s those in the semiconductor (Stuart, 2000), automotive (Jiang et al.,

2010), and biotechnology industries (George et al., 2001), in which a set of diverse

partners allows f irms to compensate for their own lack of resources and to keep

pace with technological development. In this context, alliance portfolios consist-

ing of diverse partner firms provide simultaneous access to heterogeneous and

non-redundant resources, capabilities, and knowledge, which can be combined

to stimulate innovation (Wassmer, 2010).

While a great number of previous studies have emphasized APD benefits and

empirically corroborated that increases in the diversity of a firm’s alliance portfo-

lio are related to increases in a firm’s innovation performance (Baum et al., 2000;

Phelps, 2010; Wuyts et al., 2004), some studies question the simple logic that more

always leads to more. Instead, they point to potential challenges arising from in-

creases in portfolio diversity: The management of diverse alliance portfolios is

complex. This circumstance may lead to high coordination costs (Goerzen and

Beamish, 2005) as well as difficulties in assimilating and making use of the het-

erogeneous resources and knowledge provided (Sampson, 2007), a combination

that reduces the benefits of APD from a certain point. Instead of a linear relation-

ship between APD and innovation performance, these studies hypothesized and

found an inverse U-shaped relationship (Duysters and Lokshin, 2011; Hagedoorn

et al., 2017; Sampson, 2007). Still other studies did not find a significant impact of

APD on innovation outcome (Cui and O’Connor, 2012; Eisingerich et al., 2009;

Faems et al., 2010).

Recent research has begun to explore potential contingencies in order to ex-

plain such inconclusive findings. Based on an emerging capability perspective

on alliance portfolios, research started to accentuate internal firm capabilities as

decisive factors (Wuyts and Dutta, 2014). However, one hitherto largely neglected

explanation might be that some firms are endowed with a specific bundle of al-

liance management capabilities (AMCs) and are thus better able to cope with

the challenges of diverse alliance portfolios as well as to take advantage of the

benefits of these portfolios and turn them into innovative outcomes. Research

on AMCs is rooted in the logic of a resource-based view, which emphasizes vari-

ance in alliance capabilities across firms. These capabilities represent a firm’s ac-

cumulated alliance-related knowledge and therefore a shared belief about how

alliance-related activities should be performed (Heimeriks and Duysters, 2007).

They manifest in firm specific internal routines putting the firm in a superior

position to realize the potential embedded in the structural aspects of its alliance

portfolio by facilitating cooperation, supporting knowledge transfer and easing

conflicts (Schilke, 2014). Overall, AMCs are accountable for the performance

differences that firms are able to derive from their alliances and present a source

of competitive advantage (Ireland et al., 2002). This stream of research thus of-

fers a firm-internal managerial perspective on alliance portfolios as opposed to a

1388 P. Degener et al.

© 2018 John Wiley & Sons Ltd and S ociety for the Advancement of Ma nagement Studies

firm-external perspective on the characteristics of these portfolios (Faems et al.,

2012). Even though the concept of AMCs seems to complement the structural

perspective on alliance portfolios, and a wide range of prior studies have shown

that AMCs impact alliance success on the dyadic level (e.g., Kale and Singh, 2007;

Kale et al., 2002), research is only beginning to understand how AMCs can impact

the success of alliance portfolios. For example, Sarkar et al. (2009) found that

the usefulness of AMCs for generating value from alliance portfolios depends on

the structural characteristics of these portfolios. Similarly, Duysters et al. (2012)

showed that firms are able to improve the performance of their diverse alliance

portfolios by employing deliberate learning mechanisms that reflect their alli-

ance capability.

This study builds on these valuable insights and develops them further. Drawing

from resource-based view, we focus on two distinct AMCs – portfolio coordination

and proactive partner selection – and theorize the reinforcing or impeding inter-

play of these two capabilities for managing diverse alliance portfolios. These two

AMCs are considered to be particularly relevant for managing the complexity of

alliance portfolios because they ensure a constructive cooperation between differ-

ent partners (Sarkar et al., 2009; Schilke and Goerzen, 2010). At the same time,

they present two different approaches firms can take for managing alliance part-

nerships (Dekker, 2008). Whereas portfolio coordination capability (as reflected

by organizational routines to coordinate activities across alliance partners) allows

firms to govern the entire alliance portfolio in the post-formation stage, proactive

partner selection capability (as reflected by organizational routines to proactively

pursue alliance formation opportunities) allows firms to identify and enter into

compatible partnerships in the pre-formation stage. This study seeks to provide

a more fine-grained picture of the usefulness of these different approaches and

to shed more light on whether it is worthwhile for firms to invest simultaneously

in different AMCs or whether it is more efficient to focus exclusively on one

capability.

Accordingly, this study analyses the respective moderating effects of portfolio

coordination capability and proactive partner selection capability on the relation-

ship between APD and innovation outcome. In addition, this study goes one step

further and investigates whether the two different AMCs substitute or comple-

ment one another by examining the three-way interaction between APD and the

bundle of both capabilities. Figure 1 illustrates the theoretical model. Findings

are based on a combination of database and survey data from a large sample of

firms in the German biotechnology industry. These findings show that a firm’s

innovation performance depends not only on the set of resources and compe-

tencies held by external partners and embedded in a diverse alliance portfolio,

but also on the focal firm’s organizational capabilities and routines for manag-

ing portfolio diversity. More specifically, results regarding the interplay of port-

folio coordination capability and proactive partner selection capability indicate

that a capability bundle characterized by high levels of both AMCs diminishes