Resource congestion in alliance networks: How a firm's partners’ partners influence the benefits of collaboration

• DOI: http://doi.org/10.1002/smj.3109
• Published date: 01 April 2020
• Author: Vikas A. Aggarwal
• Date: 01 April 2020

RESEARCH ARTICLE

Resource congestion in alliance networks: How a

firm's partners’partners influence the benefits of

collaboration

Vikas A. Aggarwal

INSEAD, Boulevard de Constance, Fontainebleau, France

Correspondence

Vikas A. Aggarwal, INSEAD, Boulevard

de Constance, 77305 Fontainebleau, France.

Email: vikas.aggarwal@insead.edu

Abstract

Research summary:The network resources a firm can

access through its strategic alliances are critical precursors

to innovation: They provide the information and know-

how needed to generate new knowledge. Yet prior litera-

ture has not directly considered the congestion of network

resources stemming from constraints on their capacity to

be applied without loss of value across multiple settings. I

examine the degree to which this form of resource conges-

tion influences the innovation benefits a focal firm realizes

from its alliance portfolio. In a panel dataset of biopharma-

ceutical firms, I find that the knowledge-based resources

of a focal firm's alliance partners can be congested due to

multiple claims on these resources from the firm's part-

ners’partners. This insight bridges the network and

resource-based perspectives on alliances and innovation.

Managerial summary:Strategic alliances are an essential

tool for managers in knowledge-intensive settings: They

allow firms to access diverse information and know-how

which can be of critical importance as inputs to the innova-

tion process. What managers may overlook, however, is

that the knowledge-based resources of their alliance part-

ners can be congested due to competing claims on these

resources from the other alliances in which their partners

are engaged. In such cases, firms may end up competing

Received: 15 August 2014 Revised: 10 September 2019 Accepted: 12 September 2019 Published on: 13 December 2019

DOI: 10.1002/smj.3109

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in

any medium, provided the original work is properly cited.

© 2019 The Author. Strategic Management Journal published by Wiley & Sons, Ltd. on behalf of Strategic Management Society.

Strat Mgmt J. 2020;41:627–655. wileyonlinelibrary.com/journal/smj 627

for resources such as partner time and attention with their

partners’other partners. Consequently, when engaging in

alliances, managers should be attentive not only to the

knowledge resources an alliance partner may hold but also

to whether these partner knowledge resources may ultimately

be congested due to their partners’other relationships.

KEYWORDS

alliance portfolios, innovation, networks, resource congestion, resource-

based view

1|INTRODUCTION

Innovation is a central competitive concern for firms in knowledge-intensive settings. Prior literature

characterizes innovation as arising through the recombination of existing knowledge (Fleming, 2001;

Galunic & Rodan, 1998; Hargadon & Sutton, 1997; Katila & Ahuja, 2002). As such, innovation

requires access to diverse knowledge, which serves as a factor input to the process of new knowledge

production. Much of the information and know-how used to produce new knowledge, however,

resides outside firm boundaries (Ahuja, 2000; Rosenkopf & Nerkar, 2001). It is for this reason that

alliances are often pervasive in knowledge-intensive settings: They facilitate the acquisition of

knowledge and technological capabilities by firms from external sources (Mowery, Oxley, &

Silverman, 1996; Phelps, Heidl, & Wadhwa, 2012; Reuer, 2004; Stuart, 2000).

A network-level perspective has been influential in shaping our understanding of the link between

alliances and innovation (Ahuja, 2000; Gulati, 1998; Lavie, 2006; Schilling & Phelps, 2007). This per-

spective suggests that the network of alliances in which a firm is situated serves as the “locus of

innovation,”(Powell, Koput, & Smith-Doerr, 1996), allowing “knowledge, skills, and physical assets”

to be shared among partners (Ahuja, 2000, p. 427). Direct (first-degree) and indirect (second-degree)

ties allow firms access to knowledge and information from other firms in their network, with more cen-

tral network positions allowing for a richer inflow of information.

1

Empirical evidence points to tangi-

ble benefits of engaging in alliances and of being positioned centrally in knowledge networks (Baum,

Calabrese, & Silverman, 2000; Schilling & Phelps, 2007; Shan, Walker, & Kogut, 1994; Shipilov,

2009), and scholars have accordingly extended the resource-based view (Barney, 1991) to recognize

the role of network resources in competitive advantage (Gulati, 1999; Lavie, 2006).

Yet, while work bridging the network perspective on alliances with the resource-based perspective

has been influentialin directing attention to the role of networkresources (e.g., Lavie, 2007; Wassmer &

Dussauge, 2011), this work has sidestepped an important aspect of the resource-based view—namely,

that certain resources may face opportunity costs when applied across multiple contexts (Helfat &

Eisenhardt, 2004; Levinthal & Wu, 2010; Wu, 2013). Levinthal and Wu (2010), drawing on Penrose

(1959), categorize firm resources into those that are “scale-free”in the sense that they are not limited

1

The terms direct ties, indirect ties, network structure, and network centrality are commonly used in the networks literature

(e.g., Wasserman & Faust, 1994). Direct ties are the number of connections a focal firm has to other firms in the network

(e.g., the focal firm's alliance partners). Indirect ties are the connections of the firm's direct ties (the firm's partners’partners).

Network structure is the overall pattern of connections in the network. Network centrality is measured in various ways: For

example, “degree centrality”is the number of direct ties of a focal firm (Wasserman & Faust, 1994, p. 178).

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