Knowledge that Transforms

Strategy scholars have asserted that a firm's alliance capability provides competitive advantage. As interest in alliance capability has grown, we see two streams of research emerge that address different, but equally important, issues related to this subject: one stream that focuses on how alliance capability develops in firms, and a second stream that investigates what elements specifically constitute a firm's alliance capability. In recent literature, the question of how firms develop alliance capability has received greater attention than the question of what elements actually comprise it; therefore, in this study we address the latter issue in great depth. We do this by building on prior research and on our fieldwork, to conceptualize alliance management capability as a multidimensional construct that comprises three distinct but related aspects or skills to address the following aspects in managing a given individual alliance after it is up and running: coordination, communication, and bonding. We then test our conceptualization in a framework that also links this capability to relevant outcomes at the alliance and firm level. We use survey and secondary data from a large sample of interfirm relationships between software service providers and three major global software vendors. We find general empirical support for our conceptualization of alliance management capability and for its predictive validity in impacting certain alliance outcomes.

This research focuses on relational and contractual mechanisms and examines their impact on foreign subsidiaries' acquisition of tacit and explicit knowledge from local suppliers. Using survey data from 168 foreign subsidiaries operating in China, this study finds broad support for the proposed analytical framework. When the foreign subsidiary and supplier share common goals, the foreign subsidiary acquires greater levels of both explicit and tacit knowledge; trust between the two parties promotes the acquisition of greater levels of tacit than explicit knowledge. However, access to the local supplier network through the focal supplier enables the foreign subsidiary to acquire greater levels of explicit but not tacit knowledge. Formal contracts play a complementary role in knowledge acquisition: contracts enhance the acquisition of explicit knowledge and further strengthen the effects of relational mechanisms on tacit and explicit knowledge acquisition. Overall, these findings provide important implications for foreign subsidiaries regarding how to acquire local knowledge in host countries through both formal and informal mechanisms.

In this study, we examine how the relationship between the level of strategic change in the pattern of resource allocation and firm performance differs between firms led by outside CEOs and those led by inside CEOs. Based on longitudinal data on the tenure histories of 193 CEOs who left office between 1993 and 1998, we find that the level of strategic change has an inverted U‐shaped relationship with firm performance. As the level of change increases from slight to moderate, performance increases; as the level of change increases from moderate to great, performance declines. Further, we find that this inverted U‐shaped relationship differs between firms led by outside CEOs and those led by inside CEOs. That is, both the positive effect of strategic change on firm performance when the level of change is relatively low and the negative effect of strategic change on firm performance when the level of change is relatively high are more pronounced for outside CEOs than for inside CEOs. Supplementary analyses also suggest that this difference between outside and inside CEOs exists in later years but not in the early years of CEO tenure.

Within the context of environmental voluntary agreements (VAs), this paper analyzes the determinants of the degree of participation by firms in collective corporate political strategies that aim to shape government policy. We demonstrate that substantive cooperative strategies are more likely to be pursued by firms that enter a VA close to its initiation, while symbolic cooperation is more likely behavior by late joiners. We show that late joiners and early joiners within VAs adopt different cooperative strategies because they face different institutional pressures. Our analysis is based on the strategies of firms participating in the Climate Challenge program (1995–2000) established by the U.S. Department of Energy and representatives of the national electric utilities to reduce greenhouse gas emissions. Our results show that early joiners were subjected to higher levels of political pressure at the state level and were more dependent on local and federal regulatory agencies than late joiners were. Early joiners were also better connected to the trade association and more visible. Late joiners had undertaken significantly less investment in environmental improvements than early joiners. Our paper also illustrates the difficulty involved in using VAs to try to induce improved environmental outcomes when there are no sanctioning mechanisms. Although early entrants reduced their emissions more than nonparticipants, our results show no significant difference overall between participants and nonparticipants in the reduction of their emissions.

In this study, we examine the relationships between new ventures' ties with service intermediaries (i.e., technology service firms, accounting and financial service firms, law firms, and talent search firms) and their product innovation in the context of a technology cluster. Because service intermediaries sit at the intersection of many firms, organizations and industries, they maintain extensive networks in a cluster. We propose that new ventures' ties with service intermediaries enable the ventures to plug into these networks and contribute to the ventures' product innovation by broadening the scope of their external innovation search and reducing their search cost. Moreover, we argue that the positive relationships between new ventures' ties with service intermediaries and their product innovation will become stronger when search in the networks in the cluster is more important to the ventures' product innovation. Based upon a sample of new ventures in a technology cluster in China, our results support these arguments.

This paper examines the role of technological capability in product innovation. Building on the absorptive capacity perspective and organizational inertia theory, the authors propose that technological capability has curvilinear and differential effects on exploitative and explorative innovations. The findings support the proposition that though technological capability fosters exploitation at an accelerating rate, it has an inverted U‐shaped relationship with exploration. That is, a high level of technological capability impedes explorative innovation. Strategic flexibility strengthens the positive effects of technological capability on exploration, such that when strategic flexibility is high, greater technological capability is associated with more explorative innovation.

What drives mergers and acquisitions (M&As) in different institutional environments? This article builds on the resource dependence perspective and argues that networks, learning, and institutions represent three building blocks that can enhance our understanding of the drivers behind M&As. Specifically, we consider firms as learning actors embedded in network relations and influenced by institutional development, and compare and contrast firms' acquisition activities across the United States and China. Our findings show that there are indeed important learning and network factors that lead to M&As. More interestingly, the impact of such learning and network factors varies sharply across countries with different market‐based institutions.

A considerable body of research utilizes large alliance databases (e.g., SDC, MERIT‐CATI, CORE, RECAP, and BIOSCAN) to study interorganizational relationships. Understanding the strengths and limitations of these databases is crucial for informing database selection and research design. In this study I conduct an analysis of five prominent alliance databases. Focusing on technology alliances (those formed for the purposes of joint research or cross‐technology transfer), I examine the databases' consistency of coverage and completeness, and assess whether different databases yield the same patterns in sectoral composition, temporal trends, and geographic patterns in alliance activity. I also replicate three previously published alliance studies to assess the impact of data limitations on research outcomes. The results suggest that the databases only report a fraction of formally announced alliances, which could have detrimental consequences for some types of research. However, the databases exhibit strong symmetries in patterns of sectoral composition, alliance activity over time, and geographic participation. Furthermore, the replications of previous studies yielded results that were highly similar to those obtained in the original studies. This study thus provides some reassurance that even though the databases only capture a sample of alliance activity, they may yield reliable results for many—if not all—research purposes. This information should help researchers make better‐informed decisions about their choice of database and research design.

We explore a well‐known instance of fast decision making under high uncertainty, venture capital (VC) opportunity screening. We analyze a sample of 722 funding requests submitted to an American VC firm and evaluate the influence of the form of the submission and content of business planning documents on VC funding decisions. We improve on prior literature by a) using a large sample of known representativeness, b) relating request characteristics to actual VC decisions, and c) developing an inferential logic that takes account of the multiple sources of information to which VCs have access. We find that the presence of planning documents and some information contained therein are weakly associated with VC funding decisions. Based on our inferential strategy, we find that this information is learned independently of its inclusion in the business planning documents.

Entrepreneurs in high‐technology industries often have prior experience at incumbent firms, but we know little about how knowledge obtained at the prior employer impacts entrepreneurial performance. Drawing on previous work from strategy, economics, and organizational sociology, I assess the impact of industry experience on entrepreneurial performance and innovation in medical device start‐ups. I find that spawns (ventures started by former employees of incumbent firms) perform better than other new entrants. Interestingly, my findings suggest that this superior performance is not driven by technological spillovers from parent to spawn, but rather by nontechnical knowledge related to regulatory strategy and marketing.