IJEBR Entrepreneurial firmsinsearch of established partners...
30
Entrepreneurial firms in search of established partners: review and recommendations T.K. Das and Irene Y. He Department of Management, Zicklin School of Business, Baruch College, City University of New York, New York, New York, USA Abstract Purpose – To review the alliance partner selection criteria research in order to shed light on how entrepreneurial firms should choose established firms as alliance partners. Design/methodology/approach – Critical differences between entrepreneurial and established firms are presented to emphasize the special risks in alliances between these two types of firms. Extant literature on partner selection criteria is reviewed to show that adequate research adopting the perspective of entrepreneurial firms is lacking. A list of recommendations is developed for entrepreneurial firms in their choice of established firms as alliance partners. Illustrative cases are presented of both successful and unsuccessful cases of strategic alliances between entrepreneurial and established firms. Findings – Provides evidence that entrepreneurial firms have not been adequately recognized in the research on partner selection criteria in strategic alliances. Based on a comprehensive review of the literature, the paper identifies 15 intrinsic and alliancing difference factors between entrepreneurial and established firms. Practical implications – Five key guidelines are developed to assist entrepreneurial firms in selecting established firms as alliance partners. Originality/value – This paper fills a gap in the two literatures on entrepreneurship and strategic alliances regarding research-based guidance available for entrepreneurial firms in the selection of established firms as partners in strategic alliances. Keywords Strategic alliances, Partnership, Entrepreneurialism, Small enterprises Paper type Conceptual paper Introduction Research on strategic alliances has been mostly focused on large companies. This focus is perhaps the result of the ready availability of relevant secondary data, which tend to ignore entrepreneurial and relatively unknown companies engaged in strategic alliances. There is now a rising interest in small and entrepreneurial firms engaging in strategic alliances, many of which are in the biotechnology, semiconductor, and computer industries. However, most researchers do not adequately distinguish between entrepreneurial and large firms, while others observe that strategic alliances between these two types of firms are especially problematic. Strategic alliances between entrepreneurial and established firms are different from traditional ones (i.e. alliances between large firms) because the partners differ in terms of bargaining power, learning ability, organizational compatibility, attention given to the alliances, and so on. They are also different from alliances in which both partners are small firms. Although alliances between entrepreneurial firms and established firms with compatible resources and strategic objectives have potential to prosper, the The current issue and full text archive of this journal is available at www.emeraldinsight.com/1355-2554.htm IJEBR 12,3 114 International Journal of Entrepreneurial Behaviour & Research Vol. 12 No. 3, 2006 pp. 114-143 q Emerald Group Publishing Limited 1355-2554 DOI 10.1108/13552550610667422
Transcript of IJEBR Entrepreneurial firmsinsearch of established partners...
Entrepreneurial firms in search ofestablished partners: review and
recommendationsT.K. Das and Irene Y. He
Department of Management, Zicklin School of Business, Baruch College,City University of New York, New York, New York, USA
Abstract
Purpose – To review the alliance partner selection criteria research in order to shed light on howentrepreneurial firms should choose established firms as alliance partners.
Design/methodology/approach – Critical differences between entrepreneurial and establishedfirms are presented to emphasize the special risks in alliances between these two types of firms. Extantliterature on partner selection criteria is reviewed to show that adequate research adopting theperspective of entrepreneurial firms is lacking. A list of recommendations is developed forentrepreneurial firms in their choice of established firms as alliance partners. Illustrative cases arepresented of both successful and unsuccessful cases of strategic alliances between entrepreneurial andestablished firms.
Findings – Provides evidence that entrepreneurial firms have not been adequately recognized in theresearch on partner selection criteria in strategic alliances. Based on a comprehensive review of theliterature, the paper identifies 15 intrinsic and alliancing difference factors between entrepreneurialand established firms.
Practical implications – Five key guidelines are developed to assist entrepreneurial firms inselecting established firms as alliance partners.
Originality/value – This paper fills a gap in the two literatures on entrepreneurship and strategicalliances regarding research-based guidance available for entrepreneurial firms in the selection ofestablished firms as partners in strategic alliances.
Keywords Strategic alliances, Partnership, Entrepreneurialism, Small enterprises
Paper type Conceptual paper
IntroductionResearch on strategic alliances has been mostly focused on large companies. This focusis perhaps the result of the ready availability of relevant secondary data, which tend toignore entrepreneurial and relatively unknown companies engaged in strategicalliances. There is now a rising interest in small and entrepreneurial firms engaging instrategic alliances, many of which are in the biotechnology, semiconductor, andcomputer industries. However, most researchers do not adequately distinguishbetween entrepreneurial and large firms, while others observe that strategic alliancesbetween these two types of firms are especially problematic.
Strategic alliances between entrepreneurial and established firms are different fromtraditional ones (i.e. alliances between large firms) because the partners differ in termsof bargaining power, learning ability, organizational compatibility, attention given tothe alliances, and so on. They are also different from alliances in which both partnersare small firms. Although alliances between entrepreneurial firms and establishedfirms with compatible resources and strategic objectives have potential to prosper, the
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1355-2554.htm
IJEBR12,3
114
International Journal ofEntrepreneurial Behaviour &ResearchVol. 12 No. 3, 2006pp. 114-143q Emerald Group Publishing Limited1355-2554DOI 10.1108/13552550610667422
sharp inequality in bargaining power often puts such alliances in peril. Also,entrepreneurial firms become less attractive as a partner after established firms absorbthe innovations or expertise of their entrepreneurial partners. In such cases, lacking thevaluable complementary resources (Das and Teng, 2000a, 2003), entrepreneurial firmsare left under-financed, and even become vulnerable to premature acquisition.
How can entrepreneurial firms succeed in strategic alliances with established firms?To better respond to this issue, we first look at how entrepreneurial firms differ fromestablished firms in terms of several factors: resources, innovativeness, status incompetition, legitimacy, history/track record, economic/political power, organizationalcharacteristics, business focus, planning horizon, control over technology, confidencein the technology, interorganizational interface, criticality of alliancing, strategicpurpose, and consistency of commitment. The literature on partner selection, which ismostly focused on alliances between large established firms, does not adequatelyreflect these differences between entrepreneurial and established firms. Based on thesedifference factors, we will propose a set of partner selection criteria suited specificallyto entrepreneurial firms when they consider forming alliances with established firms.
Differences between entrepreneurial and established firmsStrategic alliances have been forming at an increasing rate in the last few decades,especially in technology-intensive industries. In particular, alliances betweenentrepreneurial and established firms have been growing significantly in recentyears in the telecommunications, pharmaceutical, internet, electronics, and oil and gasindustries. In Table I we have summarized the studies on strategic alliances involvingentrepreneurial firms.
Large companies have generally been considered the main source of innovationbecause of their capability to invest heavily in R&D. However, although large firmsconsistently have been found to spend more on R&D, small firms have been found tohave higher rates of innovation compared to their share of sales or number ofemployees, especially in the early stages of major new technologies (Freeman andSoete, 1997; Powell and Brantley, 1992; Shefer and Frenkel, 2005). Specifically,Dougherty and Hardy (1996) found that very few large, mature firms have sustainedproduct innovation because they are not organized to facilitate innovation, andinnovators lack the power to connect occasional innovation with organizationalresources, processes and strategy. In fact, Larson (1992) defines entrepreneurial asadaptive and innovative, and characterizes entrepreneurial firms as small, successful,and high-growth.
There has been some effort to address the lack of innovativeness in establishedfirms, leading to the emergence of so-called intrapreneurship research in theentrepreneurship field. However, both anecdotal and statistical evidence shows thatlarge corporations have been unsuccessful in creating intrapreneurs or anentrepreneurial climate (Dougherty and Hardy, 1996) and many managers involvedin intrapreneurial ventures have had to leave large companies in frustration to starttheir own ventures.
Entrepreneurship research has long been intertwined with research on smallbusiness (e.g. Busenitz et al., 2003) and new technology-based firms (e.g. Hindle andYencken, 2004). In general, we do not find explicit definitions of entrepreneurial firmsin the published studies that deal with strategic alliances by such firms. These studies
Firms in searchof established
partners
115
Stu
dy
Res
earc
hq
ues
tion
Dat
aF
ind
ing
s/p
rop
osit
ion
s
Alm
eid
aet
al.
(200
3)T
his
stu
dy
exam
ines
the
pat
ent
cita
tion
pat
tern
sof
sem
icon
du
ctor
star
tup
sas
exte
rnal
lear
nin
g(p
.30
2)
Sec
ond
ary
dat
aw
ere
coll
ecte
don
71st
artu
pse
mic
ond
uct
orfi
rms
bet
wee
n19
80an
d19
95(p
p.3
08-9
)
Th
est
artu
ps
that
ente
red
into
alli
ance
sci
ted
pat
ents
mor
e(p
.31
0).
Bu
tth
ere
isn
oev
iden
ceth
atth
eli
kel
ihoo
dof
ast
artu
ple
arn
ing
(mea
sure
db
yth
en
um
ber
ofp
aten
tci
tati
on)f
rom
anal
lian
cev
arie
sw
ith
firm
s’si
ze,w
hil
eth
est
artu
ple
arn
sle
ssfr
omh
irin
gan
inv
ento
ror
from
co-l
ocat
ion
ina
reg
ion
asit
gro
ws
(p.
311)
Alv
arez
and
Bar
ney
(200
1)“T
his
arti
cle
offe
rsso
me
sug
ges
tion
sfo
rm
anag
ers
inen
trep
ren
euri
alfi
rms
toh
elp
them
app
rop
riat
em
ore
ofth
eec
onom
icv
alu
ecr
eate
db
yth
eir
alli
ance
sw
ith
larg
efi
rms”
(p.
140)
Inte
rvie
ws
wer
eco
nd
uct
edon
128
alli
ance
sb
etw
een
larg
ean
den
trep
ren
euri
alfi
rms
inth
ree
ind
ust
ries
–b
iote
chn
olog
y,
IT,
and
oil-
and
-gas
(p.
139)
“In
alm
ost
80p
erce
nt
ofth
ese
alli
ance
s,m
anag
ers
from
entr
epre
neu
rial
firm
sfe
ltu
nfa
irly
exp
loit
edb
yth
eir
larg
efi
rmp
artn
ers”
(p.1
40).
Th
ere
sear
chsh
ows
that
“th
eab
ilit
yof
larg
efi
rms
tole
arn
abou
tan
entr
epre
neu
rial
firm
’sn
ewte
chn
olog
yfa
ster
than
anen
trep
ren
euri
alp
artn
erca
nim
itat
ea
larg
efi
rm’s
org
aniz
atio
nal
reso
urc
esp
uts
the
entr
epre
neu
rial
firm
atri
sk”
(p.
142)
Th
eau
thor
sg
ive
fiv
eal
tern
ativ
esfo
ren
trep
ren
euri
alfi
rms:
goi
ng
ital
one,
slow
ing
the
larg
efi
rm’s
lear
nin
gra
te,
usi
ng
det
aile
dan
del
abor
ate
con
trac
tsto
defi
ne
the
alli
ance
rela
tion
ship
,bu
ild
ing
are
lati
onsh
ipof
tru
st,a
nd
bri
ng
ing
oth
erre
sou
rces
toth
eal
lian
ceb
esid
esa
sin
gle
tech
nol
ogy
(p.
143)
Bar
leyet
al.
(199
2)T
his
isa
ten
tati
ve
and
des
crip
tiv
est
ud
yon
the
stru
ctu
reof
the
bio
tech
nol
ogy
com
mu
nit
yan
dit
sal
lian
ces
(p.
319)
Dat
aw
ere
com
pil
edfr
omBioscan
(198
8)an
dot
her
dir
ecto
ries
onal
lian
ces
by
US
-bas
edor
gan
izat
ion
sth
atco
ntr
ibu
ted
toth
eco
mm
erci
aliz
atio
nof
bio
tech
nol
ogy
thro
ug
h19
87(p
.31
9)
“Am
ajor
ity
ofth
eor
gan
izat
ion
sth
atfo
rmal
lian
ces
wit
hd
edic
ated
bio
tech
nol
ogy
firm
s(D
BF
s)ar
ela
rge
div
ersi
fied
corp
orat
ion
s.M
any
are
amon
gth
em
ost
pow
erfu
lact
ors
inth
ep
har
mac
euti
cal,
chem
ical
,foo
d,e
ner
gy
,an
dag
ricu
ltu
rali
nd
ust
ries
”(p
.343
).“S
trat
egic
alli
ance
sin
bio
tech
nol
ogy
gen
eral
lyin
vol
ve
the
exch
ang
eof
kn
owle
dg
efo
rm
oney
.O
ften
the
exch
ang
ere
qu
ires
asm
alle
rfi
rmto
sacr
ifice
som
ed
egre
eof
auto
nom
y(f
orin
stan
ce,o
ver
det
erm
inin
git
sg
oals
for
rese
arch
and
dev
elop
men
t)to
gai
nac
cess
tom
ark
ets
wit
hh
igh
bar
rier
sto
entr
y.F
orm
any
bio
tech
nol
ogy
firm
s,th
eco
mp
rom
ise
may
fore
stal
lb
ank
rup
tcy
,mer
ger
,or
acq
uis
itio
n”
(pp
.343
-4).
On
ly6
per
cen
tof
the
free
stan
din
gd
edic
ated
bio
tech
nol
ogy
firm
sce
ased
oper
atin
gsi
nce
1975
,wh
ich
dem
onst
rate
san
exce
pti
onal
lylo
wm
orta
lity
rate
that
can
be
attr
ibu
ted
toth
ela
rge
nu
mb
erof
alli
ance
s(p
.324
).F
ord
iver
sifi
edco
rpor
atio
ns,
alli
anci
ng
wit
hsm
allb
iote
chn
olog
yp
rov
ides
“acc
ess
toan
dle
ver
age
over
ab
road
ran
ge
ofre
sear
ch”
(p.
343)
“Sin
ceth
eea
rly
1980
sth
ere
has
bee
na
sig
nifi
can
tsh
ift
away
from
form
ing
free
-sta
nd
ing
firm
sto
war
dfo
un
din
gor
gan
izat
ion
sw
ith
dir
ect
corp
orat
esp
onso
rsh
ip,
i.e.
sub
sid
iari
esan
djo
int
ven
ture
s(p
.32
4)B
arN
iran
dS
mit
h(2
002)
“Wh
atar
eth
ech
arac
teri
stic
sof
am
anag
er’s
net
wor
kth
atar
ep
arti
cula
rly
sup
por
tiv
eof
crea
tin
gin
terfi
rmal
lian
ces”
for
smal
lb
usi
nes
s?(p
.22
0)
Su
rvey
dat
aw
ere
coll
ecte
don
149
smal
lan
dm
id-s
ized
man
ufa
ctu
rin
gfi
rms
inel
ectr
onic
com
pon
ents
and
med
ical
inst
rum
ents
and
sup
pli
esin
du
stri
es(p
p.
223-
4)
“Ou
rfi
nd
ing
sin
dic
ate
that
the
over
all
nu
mb
erof
alli
ance
sa
firm
eng
ages
inis
exp
lain
edb
yth
ree
net
wor
kp
rop
erti
es:
pro
pen
sity
ton
etw
ork
,st
ren
gth
ofti
es,
and
pre
stig
eof
net
wor
km
emb
ers”
(p.
228)
Dif
fere
nt
net
wor
kp
rop
erti
esar
eas
soci
ated
wit
hd
iffe
ren
tty
pes
ofal
lian
ces:
tech
nol
ogy
/man
ufa
ctu
rin
gal
lian
ces
wer
eex
pla
ined
by
pre
stig
eof
net
wor
km
emb
ers,
wh
ile
sup
por
tal
lian
ces
wer
eex
pla
ined
by
pro
pen
sity
ton
etw
ork
and
the
stre
ng
thof
ties
(p.2
29).
Mor
eov
er,
scop
eof
net
wor
kin
gac
tiv
ity
was
neg
ativ
ely
asso
ciat
edw
ith
sup
por
tal
lian
ces
(p.
229)
Bau
met
al.
(200
0)T
his
stu
dy
inv
esti
gat
esth
eea
rly
per
form
ance
outc
omes
ofal
lian
cen
etw
ork
sth
atst
artu
ps
con
fig
ure
atth
eti
me
ofth
eir
fou
nd
ing
(p.
267)
Sec
ond
ary
dat
aw
ere
coll
ecte
don
142
star
tup
bio
tech
nol
ogy
firm
s(B
Fs)
fou
nd
edb
etw
een
1991
and
1996
and
471
incu
mb
ent
BF
sfo
un
ded
pri
orto
1991
inC
anad
a
“Sta
rtu
pb
iote
chn
olog
yfi
rms
(BF
s)th
at,
atth
eti
me
ofth
eir
fou
nd
ing
,fo
rmed
up
stre
aman
dd
own
stre
amal
lian
ces
(H1)
and
con
fig
ure
dth
emto
pro
vid
eac
cess
tom
ore
div
erse
info
rmat
ion
and
cap
abil
itie
sp
eral
lian
ce(H
2)g
ener
ally
exh
ibit
edst
ron
ger
init
ial
per
form
ance
.In
con
tras
t,st
artu
ps
that
init
iall
yfo
rmed
alli
ance
sw
ith
esta
bli
shed
pot
enti
alri
val
ste
nd
edto
exp
erie
nce
wea
ker
per
form
ance
,on
aver
age
(H3)
”(p
.28
7)“S
tart
up
sw
ith
bro
ader
mar
ket
dom
ain
sth
anp
oten
tial
riv
alB
Fs
wit
hw
hic
hth
eyar
eal
lied
are
less
lik
ely
toex
per
ien
ceh
arm
ful
effe
cts
ofst
ron
gp
artn
erle
arn
ing
ince
nti
ves
”(p
p.
283-
5)“S
tart
up
sw
ith
hig
hly
inn
ovat
ive
pot
enti
alri
val
par
tner
BF
sal
way
sh
ave
hig
her
pat
enti
ng
rate
sth
anst
artu
ps
wit
hou
tp
artn
erB
Fs
–ev
enw
hen
they
face
ase
ver
esc
ope
dis
adv
anta
ge
(p.
285)
Ch
enan
dL
i(1
999)
Th
isst
ud
yem
pir
ical
lyas
sess
esth
eim
pac
tof
stra
teg
ical
lian
ces
onn
ewp
rod
uct
dev
elop
men
t(p
.36
)
Lon
git
ud
inal
seco
nd
ary
dat
aw
ere
coll
ecte
don
US
sem
icon
du
ctor
star
tup
firm
sfr
om19
78to
1989
(p.
45)
Lea
rnin
gth
rou
gh
stra
teg
ical
lian
ces
has
two
sou
rces
.On
eis
lear
nin
gth
eca
pab
ilit
ies
ince
rtai
nfu
nct
ion
alar
eas,
incl
ud
ing
tech
nol
ogic
al,
man
ufa
ctu
rin
g,a
nd
mar
ket
ing
;th
isis
con
ten
tle
arn
ing
.Th
eot
her
isle
arn
ing
the
man
ager
ial
pro
cess
,in
clu
din
gp
roce
ssk
now
led
ge
rela
ted
tom
anag
ing
inte
rfirm
coop
erat
ion
and
pro
cess
kn
owle
dg
eth
atca
nb
eap
pli
edto
afi
rm’s
inte
rnal
acti
vit
ies;
this
isp
roce
ssle
arn
ing
(p.5
6)T
he
nu
mb
erof
stra
teg
ical
lian
ces
that
pro
vid
eac
cess
tote
chn
olog
y,a
nd
the
nu
mb
erof
fun
ctio
nal
area
sth
atar
ein
vol
ved
inth
eal
lian
ces
pos
itiv
ely
affe
ctp
rod
uct
dev
elop
men
tfo
rse
mic
ond
uct
orst
artu
pfi
rms.
Bu
tth
en
um
ber
ofst
rate
gic
alli
ance
sth
atp
rov
ide
acce
ssto
man
ufa
ctu
rin
gan
dm
ark
etin
gar
eas
has
no
imp
act
onp
rod
uct
dev
elop
men
t(p
p.
55-6
)D
eed
san
dH
ill
(199
6)T
his
stu
dy
exam
ines
the
rela
tion
ship
bet
wee
nth
en
um
ber
ofal
lian
ces
anen
trep
ren
euri
alfi
rmen
gag
esin
and
its
rate
ofn
ewp
rod
uct
dev
elop
men
t(p
.42
)
Sec
ond
ary
dat
aw
ere
coll
ecte
don
132
bio
tech
nol
ogy
firm
sin
viv
oth
erap
euti
csan
dd
iag
nos
tics
(p.
47)
Th
ere
is“a
nin
ver
ted
,U
-sh
aped
rela
tion
ship
bet
wee
nth
en
um
ber
ofal
lian
ces
afi
rmis
eng
aged
inan
dth
era
teof
new
pro
du
ctd
evel
opm
ent”
(pp
.52
-3)
“On
aver
age,
mal
per
form
ance
pro
ble
ms
star
tb
ecom
ing
seri
ous
wh
enfi
rms
incr
ease
thei
rn
um
ber
ofal
lian
ces
bey
ond
abou
t25
,alt
hou
gh
dim
inis
hin
gre
turn
sse
tin
mu
chea
rlie
r”(p
.53
)
Dee
ds
and
Hil
l(1
999)
Th
isst
ud
yco
mp
ares
the
effe
ctiv
enes
sof
pro
pos
edd
eter
ren
tsto
opp
ortu
nis
mb
ytw
ov
iew
s:tr
ansa
ctio
nco
stec
onom
ics
and
rela
tion
alco
ntr
acti
ng
(p.
144)
Cro
ss-s
ecti
onal
dat
aw
ere
coll
ecte
dth
rou
gh
stru
ctu
red
(p.
149)
per
son
alan
dp
hon
ein
terv
iew
sfo
r10
9al
lian
ces
by
57d
edic
ated
bio
tech
nol
ogy
firm
sin
fou
rg
eog
rap
hic
alar
eas
(p.
150)
Str
ong
rela
tion
ship
sb
etw
een
the
par
tner
s,su
chas
con
gru
ent
bac
kg
rou
nd
and
freq
uen
tco
mm
un
icat
ion
,se
rve
asa
mu
chm
ore
effe
ctiv
ed
eter
ren
tto
opp
ortu
nis
tic
acti
onth
anst
ruct
ura
ld
eter
ren
ts,
such
ash
osta
ge
inv
estm
ents
orco
nti
ng
ent
clai
ms
con
trac
t(p
.15
7)T
he
inv
erte
dU
-sh
aped
rela
tion
ship
bet
wee
nag
ean
dop
por
tun
ism
dem
onst
rate
san
exis
ten
ceof
ah
oney
moo
np
erio
din
the
rese
arch
alli
ance
s,w
hic
hla
sts
abou
t4.
6y
ears
,an
da
liab
ilit
yof
adol
esce
nce
amon
gsu
chal
lian
ces
(pp
.15
7-8)
(continued
)
Table I.Alliance studiesinvolving entrepreneurialfirms
IJEBR12,3
116
Table I.
Stu
dy
Res
earc
hq
ues
tion
Dat
aF
ind
ing
s/p
rop
osit
ion
s
Doz
(198
8)T
his
chap
ter
dea
lsw
ith
issu
esth
atar
ecr
itic
alto
succ
ess
ofte
chn
olog
yp
artn
ersh
ips
bet
wee
nla
rger
and
smal
ler
firm
s,an
dp
rop
oses
app
roac
hes
that
can
circ
um
ven
tth
ep
itfa
lls
(p.
319)
“Yet
,ev
ena
curs
ory
obse
rvat
ion
ofsu
chp
artn
ersh
ips
sug
ges
tsth
atm
any
are
ad
isap
poi
ntm
ent
top
artn
ers.
Th
eyd
on
otac
tual
lyy
ield
the
resu
lts
exp
ecte
db
yei
ther
orb
oth
par
tner
s,an
dev
enw
hen
am
easu
reof
succ
ess
isac
hie
ved
the
ten
sion
sin
mak
ing
par
tner
ship
sw
ork
som
etim
esd
war
fth
eir
succ
ess
inth
eey
esof
the
par
tici
pan
ts”
(p.
318)
Th
ree
sets
ofis
sues
are
crit
ical
tosu
cces
sof
par
tner
ship
sb
etw
een
larg
eran
dsm
alle
rfi
rms:
con
ver
gen
ceof
pu
rpos
e,co
nsi
sten
cyof
pos
itio
nw
ith
inth
ela
rge
firm
,an
din
terf
ace
(pp
.318
-9).
Th
eis
sue
ofco
nv
erg
ence
ofp
urp
ose
stem
sfr
omcu
ltu
rald
ista
nce
,un
cert
ain
tyan
dm
isu
nd
erst
and
ing
s,an
dh
idd
enag
end
as(p
p.
319-
24),
bu
tth
ese
pro
ble
ms
can
be
min
imiz
edb
yca
refu
lly
wor
kin
gou
tco
nce
pts
ofp
artn
ersh
ips
atth
efo
llow
ing
lev
els:
tech
nol
ogic
alco
mp
lem
enta
rity
,joi
nt
bu
sin
ess
syst
emco
mp
lem
enta
rity
and
via
bil
ity
,val
ue
ofou
tcom
ev
ersu
sco
stto
par
tner
s,fo
cus
and
bou
nd
arie
s,st
rate
gic
con
tin
uit
y,
and
pre
cisi
onof
agre
emen
t(p
p.
324-
6).
Th
eis
sue
ofco
nsi
sten
cyof
pos
itio
nw
ith
inth
ela
rge
firm
stem
sfr
omv
este
din
tere
sts
and
pol
itic
sof
reso
urc
eco
mm
itm
ents
(pp
.326
-31)
,an
dso
luti
ons
incl
ud
ecr
eati
ng
hor
izon
tal
gro
up
san
dta
skfo
rces
inth
ela
rge
firm
sra
ther
than
rely
ing
onth
eh
iera
rch
y,a
nd
com
mu
nic
atin
gre
gu
larl
yan
dfr
equ
entl
yat
the
top
(p.3
31).
For
the
issu
eof
inte
rfac
ean
db
oun
dar
ysp
ann
ing
,th
eso
luti
ons
incl
ud
eor
gan
izin
gjo
int
sess
ion
sb
etw
een
mem
ber
sof
bot
hfi
rms
(p.
332)
,ex
pan
din
gin
terf
ace
fun
ctio
nb
eyon
dR
&D
(p.
334)
,an
dse
ttin
gu
pco
ord
inat
ion
com
mit
tee
com
pri
sin
gal
lth
ein
terf
aces
(p.
336)
Eis
enh
ard
tan
dS
choo
nh
oven
(199
6)T
his
stu
dy
exam
ines
stra
teg
ican
dso
cial
fact
ors
that
lead
entr
epre
neu
rial
firm
sin
tofo
rmin
gal
lian
ces
(137
)
Dat
aw
ere
coll
ecte
dth
rou
gh
inte
rvie
ws
wit
hex
ecu
tiv
esof
pro
du
ctd
evel
opm
ent
alli
ance
sof
98n
ewse
mic
ond
uct
orfi
rms
that
wer
efo
un
ded
bet
wee
n19
78an
d19
85(p
p.
141-
2)
En
trep
ren
euri
alfi
rms
that
wer
ein
vu
lner
able
stra
teg
icp
osit
ion
,i.e
.in
emer
gen
tm
ark
ets
wit
hh
igh
com
pet
itio
nan
du
sin
gin
nov
ativ
ete
chn
olog
ies,
form
edm
ore
alli
ance
s(p
.14
6)E
ntr
epre
neu
rial
“firm
sw
ith
top
man
agem
ent
team
sth
atw
ere
larg
e,ex
per
ien
ced
,an
dw
ell-
con
nec
ted
thro
ug
hfo
rmer
emp
loy
ers
and
hig
h-l
evel
pre
vio
us
job
sfo
rmed
pro
du
ctd
evel
opm
ent
alli
ance
sat
hig
her
rate
s”(p
.146
).A
surp
risi
ng
fin
din
gis
that
“gro
wth
-sta
ge
mar
ket
sh
ave
the
low
est
rate
sof
alli
ance
form
atio
n”
(p.
146)
For
rest
and
Mar
tin
(199
2)T
his
stu
dy
inv
esti
gat
esth
eal
lian
ceex
per
ien
ces
and
the
fact
ors
that
mak
ete
chn
olog
yre
late
dal
lian
ces
bet
wee
nsm
all
bio
tech
nol
ogy
firm
san
dla
rge
ph
arm
aceu
tica
lan
dch
emic
alfi
rms
succ
essf
ul
(p.
42)
Su
rvey
dat
aw
ere
coll
ecte
don
42d
edic
ated
bio
tech
nol
ogy
com
pan
ies
(DB
Cs)
and
21la
rge
com
pan
ies
(p.
43)
“Th
ep
rim
ary
reas
ons
for
alli
ance
form
atio
nfo
rd
edic
ated
bio
tech
nol
ogy
com
pan
ies
(DB
Cs)
cou
ldb
eg
rou
ped
tog
eth
eran
dd
efin
edas
“see
kin
gin
pu
tof
cert
ain
reso
urc
es”
“,in
clu
din
gfi
nan
cial
reso
urc
es,
pro
du
ctd
evel
opm
ent
reso
urc
es,
reg
ula
tory
exp
erti
se,
mar
ket
ing
chan
nel
s,or
com
pet
itiv
ein
tell
igen
ce(p
p.4
4-5)
.In
con
tras
t,D
BC
sd
on
otn
eed
alli
ance
tog
ain
acce
ssto
gen
eral
man
agem
ent
skil
ls,t
ow
ard
off
acq
uis
itio
n,
orto
pre
-em
pt
com
pet
itio
n(p
.45
)T
he
top
reas
onfo
ral
lian
cefo
rmat
ion
by
larg
efi
rms
iste
chn
olog
yac
qu
isit
ion
(p.
48)
DB
Cs
rep
orte
dh
igh
erra
tes
ofsu
cces
s(8
3p
erce
nt)
than
larg
efi
rms
(47.
5p
erce
nt)
;“t
he
low
erp
erce
pti
onof
succ
ess
for
the
larg
efi
rms
app
ears
tob
ed
eriv
edfr
omth
eir
mor
eri
gor
ous
stan
dar
ds
ofac
cou
nta
bil
ity
”(p
.49
)D
BC
san
dla
rge
firm
sag
ree
onsi
mil
arre
ason
sfo
rsu
cces
sfu
lall
ian
ces:
“con
tin
uin
g,c
omp
atib
ilit
y,a
nd
com
mit
men
t”(p
.49)
.[It
seem
sth
at,
acco
rdin
gto
the
auth
or,t
he
entr
epre
neu
rial
firm
slo
okat
the
fin
anci
alre
sou
rces
ofth
ela
rge
firm
,bec
ause
“man
yD
BC
sse
eth
ela
rge
firm
sas
a“v
entu
reca
pit
also
urc
e”]
(p.
50)
Lar
ge
firm
sch
oose
smal
lal
lian
cep
artn
ers
on:
tech
nic
alan
dm
anag
eria
lca
pab
ilit
ies,
tru
st,
com
pat
ibil
ity
,sh
ared
ph
ilos
oph
ies
and
atti
tud
es,w
het
her
orn
otth
eD
BC
“was
tied
toot
her
larg
efi
rms
wh
ow
ere
curr
ent
orp
oten
tial
com
pet
itor
s”b
ecau
seof
pos
sib
lele
akag
eof
sen
siti
ve
info
rmat
ion
toco
mp
etit
ors
(p.
50)
Lar
ge
firm
sle
arn
edto
focu
son
the
bu
sin
ess,
the
pro
du
ct,
nee
dan
dco
mm
itm
ent,
rath
erth
anth
ete
chn
olog
ical
fit
(p.
50)
Har
rig
an(1
988)
Th
isst
ud
yin
ves
tig
ates
how
dif
fere
nce
s,i.e
.si
ze,
nat
ion
alor
igin
,an
dv
entu
rin
gex
per
ien
cele
vel
s(p
.20
6)am
ong
spon
sori
ng
firm
sw
ith
resp
ect
toot
her
anot
her
,in
flu
ence
the
effi
cacy
ofth
eir
stra
teg
ical
lian
ces
(p.
205)
Su
rvey
dat
aw
ere
coll
ecte
don
895
stra
teg
ical
lian
ces
com
pet
ing
in23
ind
ust
ries
du
rin
gth
ey
ears
1974
-198
5(p
.20
9)
“Th
eas
set-
size
var
iab
lead
ds
wea
kp
red
icti
ve
pow
erin
reg
ress
ion
mod
els
ofv
entu
resu
rviv
al,
du
rati
on,
orsu
cces
s”(p
.22
5),
that
is,
ven
ture
sb
etw
een
par
tner
sof
sim
ilar
size
inas
set
are
no
mor
esu
cces
sfu
lth
anth
ose
bet
wee
nd
issi
mil
arp
artn
ers
“Th
isre
sult
sug
ges
tsth
atsi
mp
ly“s
tick
ing
toon
e’s
kn
itti
ng
”al
one
–v
entu
rin
gin
acti
vit
ies
that
are
clos
eto
spon
sori
ng
firm
’sst
rate
gic
core
s–
isn
oten
oug
hto
insu
rev
entu
resu
cces
s”(p
.213
).O
nth
eot
her
han
d,“
ven
ture
su
nre
late
dto
bot
hsp
onso
rin
gfi
rms
are
less
lik
ely
than
oth
erto
be
succ
essf
ul”
(p.
217)
“Ven
ture
sth
atar
eh
oriz
onta
lly
rela
ted
tob
oth
spon
sori
ng
firm
sar
em
ore
lik
ely
than
oth
ers
tob
eju
dg
eda
succ
ess
by
bot
hsp
onso
rin
gfi
rms”
(p.
215)
,w
hil
e“v
entu
res
that
are
ver
tica
lly
rela
ted
tob
oth
spon
sori
ng
firm
sar
ele
ssli
kel
yto
be
oper
atin
gaf
ter
1985
”(p
.21
6)A
lth
oug
hcu
ltu
ral
dis
tan
cew
asn
otu
sed
inth
ean
aly
sis,
“com
men
tsfr
omin
terv
iew
edm
anag
ers
lead
me
tosu
spec
tth
atcu
ltu
ral
hom
ogen
eity
amon
gsp
onso
rsis
mor
eim
por
tan
tto
ven
ture
succ
ess
than
sym
met
ryin
thei
rn
atio
nal
orig
ins”
(p.
222)
Th
eim
pac
tof
dis
sim
ilar
ity
inv
entu
rin
gex
per
ien
cele
vel
son
ven
ture
succ
ess
isn
egat
ive,
bu
tn
otst
atis
tica
lly
sig
nifi
can
t(p
.22
3)H
offm
ann
and
Sch
loss
er(2
001)
Th
isst
ud
y“a
ims
toid
enti
fycr
itic
alsu
cces
sfa
ctor
sof
SM
Eal
lian
ces
asw
ell
asth
ep
erce
pti
onof
succ
ess
fact
ors
by
SM
Eow
ner
san
dm
anag
ers”
(p.
358)
Su
rvey
dat
aw
ere
coll
ecte
don
164
SM
Es
inA
ust
ria
(p.
365)
“Ou
rem
pir
ical
resu
lts
show
that
bot
hco
nte
nt-
orie
nte
dv
aria
ble
s,su
chas
“Pre
cise
defi
nit
ion
ofri
gh
tsan
dd
uti
es”
and
“Con
trib
uti
ng
spec
ific
stre
ng
ths,
and
pro
cess
-ori
ente
dv
aria
ble
s,su
chas
“Der
ivin
gal
lian
ceob
ject
ives
from
bu
sin
ess
stra
teg
y”
and
“Sp
eed
yim
ple
men
tati
onan
dfa
stre
sult
s,p
rov
ed
ecis
ive
for
alli
ance
ssu
cces
s”(p
.37
5)M
any
ofth
est
atis
tica
lly
crit
ical
succ
ess
fact
ors
are
not
per
ceiv
edb
yS
ME
man
ager
sas
imp
orta
nt,
such
as“E
stab
lish
ing
req
uir
edre
sou
rces
”an
d“D
eriv
ing
alli
ance
obje
ctiv
esfr
omb
usi
nes
sst
rate
gy
”(p
.375
).“T
he
crit
ical
succ
ess
fact
ors
wer
eu
nd
eres
tim
ated
mos
tly
by
the
un
succ
essf
ul
SM
Es”
(p.
375)
Pro
pos
edim
por
tan
tp
artn
erse
lect
ion
crit
eria
are:
esta
bli
shed
tru
st,
“str
eng
ths
inth
efi
eld
ofco
-op
erat
ion
,co
mp
lem
enta
ryre
sou
rces
and
stra
teg
ies,
and
cult
ura
lfi
t(p
.36
1).
Bu
tn
one
ofth
emis
anem
pir
ical
lycr
itic
alsu
cces
sfa
ctor
(p.
368)
.H
owev
er,
“com
ple
men
tary
con
trib
uti
ons,
“est
abli
shed
tru
st,a
nd
“ag
reem
ent
offu
nd
amen
talv
alu
es”
are
per
ceiv
edb
yS
ME
man
ager
sas
succ
ess
fact
ors,
alth
oug
hn
otth
em
ost
imp
orta
nt
ones
(p.
371)
On
the
oth
erh
and
,SM
Em
anag
ers
infa
iled
alli
ance
sp
erce
ived
“ex
cell
ence
infi
eld
ofco
oper
atio
n”
asv
ery
imp
orta
nt,
pro
bab
lyin
flu
ence
db
yth
eir
exp
erie
nce
offa
ilu
re(p
.37
3)
(continued
)
Firms in searchof established
partners
117
Stu
dy
Res
earc
hq
ues
tion
Dat
aF
ind
ing
s/p
rop
osit
ion
s
Hu
and
Kor
nel
iuss
en(1
997)
Th
isst
ud
yex
amin
esth
eim
pac
tof
soci
aln
orm
san
din
terp
erso
nal
rela
tion
ship
son
the
per
form
ance
ofsm
all
firm
sin
stra
teg
ical
lian
ces
(p.
160)
Su
rvey
dat
aw
ere
coll
ecte
don
90sm
all
and
med
ium
-siz
edfi
rms
from
Nor
weg
ian
fish
erie
s,w
ood
wor
kin
g,
furn
itu
re,
pla
stic
s,in
form
atio
nte
chn
olog
yan
dst
eel
ind
ust
ries
(pp
.16
4-5)
“Per
son
alti
esar
ep
osit
ivel
yre
late
dto
reci
pro
city
”,an
db
oth
per
son
alti
esan
dre
cip
roci
tyh
ave
ap
osit
ive
effe
cton
per
form
ance
(p.
168)
Hu
llet
al.
(198
8)T
his
stu
dy
com
par
es“t
he
app
roac
hes
tosm
all-
firm
-lar
ge-
firm
coop
erat
ion
inJa
pan
and
US
Ab
yev
alu
atin
gth
eex
ten
tto
wh
ich
coop
erat
ive
ven
ture
sar
ead
van
tag
eou
sb
etw
een
smal
lan
dla
rge
firm
sin
tech
nol
ogy
-bas
edin
du
stri
esan
dw
hic
hfa
ctor
saf
fect
the
con
dit
ion
sof
mu
tual
adv
anta
ge”
(p.
446)
Pre
lim
inar
ysu
rvey
dat
aw
ere
obta
ined
from
15la
rge
corp
orat
ion
sin
the
US
Aan
dsi
xin
Jap
an(p
.45
2)
“Org
aniz
atio
ns
inJa
pan
mix
mec
han
isti
can
dor
gan
icd
esig
nch
arac
teri
stic
s.In
som
ew
ays,
they
are
easi
erfo
ror
gan
icen
trep
ren
euri
alfi
rms
inth
eU
SA
tod
eal
wit
hto
the
exte
nt
that
Jap
anes
em
anag
emen
tta
kes
am
ore
evol
uti
onar
yan
dle
ssb
ure
aucr
atic
app
roac
hth
anA
mer
ican
Man
ager
s(K
agon
o,N
onak
a,S
akak
ibar
aan
dO
ku
mu
ra,
1985
)”(p
.45
1)“P
atie
nce
isre
qu
ired
for
succ
essf
ul
par
tner
ing
inh
igh
tech
nol
ogy
bec
ause
dev
elop
men
tsm
ayta
ke
con
sid
erab
leti
me
toco
me
tofr
uit
ion
”(p
.45
3)“G
ivin
gen
trep
ren
eurs
con
sid
erab
leau
ton
omy
seem
sto
be
ak
eyfa
ctor
inth
esu
cces
sof
par
tner
ship
sw
ith
larg
eco
rpor
atio
ns”
(p.
453)
.“T
he
pat
ien
ceJa
pan
ese
corp
orat
ion
sse
emto
show
wit
hth
eir
entr
epre
neu
rial
par
tner
sm
ayb
ein
par
td
ue
toth
ep
rob
abil
ity
that
,in
the
lon
gru
n,m
uch
ofth
em
anu
fact
uri
ng
pro
cess
req
uir
edto
succ
eed
wil
lb
ecom
ea
kin
dof
in-h
ouse
trad
ese
cret
,esp
ecia
lly
inel
ectr
onic
san
dto
ale
sser
exte
nt
inb
iop
roce
ss”
(p.
454)
“Pro
cess
tech
nol
ogy
and
man
ufa
ctu
rin
gca
pab
ilit
yn
eed
tore
ceiv
ein
crea
sed
app
reci
atio
n”
(p.4
54).
“If
par
tner
sfo
cus
imp
atie
ntl
yon
the
imm
edia
ted
ram
aof
new
pro
du
ctd
evel
opm
ent,
thei
rco
mp
etit
ive
pos
itio
nd
own
stre
amm
ayb
eri
sked
”(p
.45
4)K
elle
yet
al.
(200
1)T
his
stu
dy
’s“o
bje
ctiv
eis
tod
eter
min
ew
het
her
ther
eis
anas
soci
atio
nb
etw
een
afi
rm’s
tech
nol
ogy
-bas
edan
dp
rod
uct
-bas
edk
now
led
ge
and
its
form
atio
nof
alli
ance
s”(p
.14
5)
Alo
ng
itu
din
alse
con
dar
yd
ata
bet
wee
n19
85an
d19
96w
ere
coll
ecte
don
67fi
rms
from
com
pu
ter
and
tele
com
mu
nic
atio
ns
ind
ust
ries
(p.
148)
New
firm
sw
ith
exte
nsi
ve
tech
nol
ogy
-bas
edk
now
led
ge
are
mor
eli
kel
yto
form
alli
ance
s(p
.15
1).
Pro
du
ct-b
ased
kn
owle
dg
eis
also
corr
elat
edw
ith
alli
ance
form
atio
n,
bu
tth
ed
ata,
coll
ecte
dat
the
sam
eti
me,
can
not
det
erm
ine
the
dir
ecti
onof
the
rela
tion
ship
(p.
152)
Lar
son
(199
2)T
his
isan
exp
lora
tory
eth
nog
rap
hic
stu
dy
tou
nd
erst
and
the
pro
cess
esth
atco
oper
ativ
eal
lian
ces
exer
cise
con
trol
,es
pec
iall
yso
cial
con
trol
(pp
.78
-9)
Inte
rvie
ws
wer
eco
nd
uct
edon
sev
end
yad
icre
lati
onsh
ips
offo
ur
entr
epre
neu
rial
firm
sth
ath
adex
per
ien
ced
rap
idg
row
thb
etw
een
1980
and
1986
(pp
.79
,98
)
Th
isst
ud
yp
rop
oses
ath
ree-
ph
ase
pro
cess
mod
elof
the
form
atio
nof
entr
epre
neu
rial
dy
ads:
pre
con
dit
ion
s,co
nd
itio
ns
tob
uil
dth
eex
chan
ge
stru
ctu
res,
and
the
fin
alp
has
eof
inte
gra
tion
and
con
trol
(pp
.97
-8)
Th
ere
lati
vel
yst
able
and
sust
ain
edre
lati
onsh
ips
“wer
eg
over
ned
inim
por
tan
tw
ays
by
soci
alco
ntr
ols
aris
ing
from
nor
ms
oftr
ust
and
reci
pro
city
,an
d“g
over
nan
cew
asex
pla
ined
inla
rge
par
tb
yu
nd
erst
and
ing
the
sub
tle
con
trol
ofin
terd
epen
den
tan
dse
lf-r
egu
late
dp
lay
ers
eng
aged
inan
dco
mm
itte
dto
mu
tual
gai
ns”
(p.
98)
Lee
etal.
(200
0)T
his
pap
erex
plo
res
wh
eth
erst
rate
gic
alli
ance
sca
nh
elp
SM
Es
ente
rm
ark
ets
that
are
alre
ady
wel
lest
abli
shed
and
dom
inat
edb
ym
ajor
corp
orat
ion
s(p
.44
)
Tw
oca
sest
ud
ies
are
use
dto
illu
stra
teth
eco
ncl
usi
ons
(p.
49)
Str
ateg
ical
lian
ces
can
hel
pS
ME
sov
erco
me
reso
urc
ed
isad
van
tag
eor
ach
iev
eco
stad
van
tag
e,th
eref
ore
gai
nco
mp
etit
ive
adv
anta
ges
over
its
big
ger
riv
als
(p.
46)
“Hen
ce,
asa
det
erre
nce
stra
teg
y,
cred
ible
com
mit
men
tto
stay
inth
em
ark
etb
yth
eS
ME
thro
ug
hst
rate
gic
alli
ance
isac
hie
ved
by
the
alli
ance
’sin
crea
sed
abil
ity
tosu
stai
na
pro
lon
ged
inte
nse
com
pet
itio
nw
ith
the
big
ger
firm
”(p
.49
)S
ME
ssh
ould
stra
teg
ical
lyse
lect
par
tner
sw
ho
pos
sess
com
ple
men
tary
stre
ng
ths
and
exp
erti
se,s
oth
atth
eal
lian
ceco
uld
ach
iev
eg
reat
ersy
ner
gis
tic
gai
ns
(p.
49)
Lu
and
Bea
mis
h(2
001)
Th
isst
ud
yex
plo
res
the
imp
act
ofv
ario
us
inte
rnat
ion
aliz
atio
nst
rate
gie
s,in
clu
din
glo
cal
stra
teg
ical
lian
ces,
use
db
yS
ME
son
thei
rp
erfo
rman
ce(p
.56
6)
Sec
ond
ary
dat
aw
ere
coll
ecte
don
164
Jap
anes
een
trep
ren
euri
alfi
rms
bet
wee
n19
86an
d19
97(p
p.
566,
572)
“Th
ese
resu
lts
dem
onst
rate
the
imp
orta
nce
ofal
lian
cep
artn
erse
lect
ion
and
sug
ges
tth
atlo
cal
par
tner
sp
rov
ide
mor
ev
alu
eto
SM
Es
than
par
tner
sfr
omth
eh
ome
cou
ntr
y”
(p.
578)
Mil
eset
al.
(199
9)T
his
stu
dy
exp
lore
sth
eu
seof
stra
teg
ical
lian
ces
by
earl
y-s
tag
ete
chn
olog
y-b
ased
firm
s(E
ST
BF
s)an
dfa
ctor
sth
atm
igh
tin
dic
ate
how
and
wh
enal
lian
ces
mig
ht
ben
efit
such
firm
s(p
.21
)
Su
rvey
dat
aw
ere
coll
ecte
don
112
ES
TB
Fs
that
par
tici
pat
edin
ap
rov
inci
alfu
nd
ing
pro
gra
min
Can
ada
(p.
23)
“Th
ere
was
no
dif
fere
nce
inp
erfo
rman
ceb
etw
een
thos
efi
rms
wh
ow
ere
inv
olv
edin
alli
ance
san
dth
ose
firm
sw
ho
wer
en
ot”
(p.2
7).“
On
lyw
hen
firm
su
sed
alli
ance
sou
tof
choi
cera
ther
than
tom
anag
ere
sou
rce
dep
end
enci
esw
ere
alli
ance
sas
soci
ated
wit
hfi
rmsu
cces
s”(p
.27)
“Th
ose
firm
sw
ho
felt
that
they
wer
ed
epen
den
ton
stra
teg
ical
lian
ces
wou
ldb
ele
ftin
anin
feri
orb
arg
ain
ing
pos
itio
nw
hen
itca
me
ton
egot
iati
ng
the
det
ails
ofth
eal
lian
ce.
As
such
,th
ese
firm
sw
ould
be
lik
ely
tog
ain
less
even
ifth
eal
lian
cetu
rned
out
tob
esu
cces
sfu
l”(p
.27
).A
lso,
“hav
ing
ali
mit
edch
oice
ofp
artn
ers
was
asso
ciat
edw
ith
poo
rer
per
form
ance
”(p
.27
)
Oli
ver
(200
1)T
his
stu
dy
exp
lore
sa
pat
tern
inth
efo
rmat
ion
ofst
rate
gic
alli
ance
sfo
rd
edic
ated
bio
tech
nol
ogy
firm
s(D
BF
s)ov
erti
me
(p.
473)
Sec
ond
ary
dat
aof
pu
bli
cci
tati
ons
ofb
iote
chn
olog
yag
reem
ents
bet
wee
n19
76an
d19
90(p
.47
4)
New
bio
tech
nol
ogy
firm
sin
crea
seal
lian
cefo
rmat
ion
du
rin
gth
eea
rly
yea
rs,w
hic
his
the
exp
lora
tion
stag
eof
the
org
aniz
atio
nal
lear
nin
gcy
cle,
and
then
red
uce
alli
ance
form
atio
nd
uri
ng
the
exp
loit
atio
nst
age
(p.
483)
.T
he
dat
ash
owed
that
DB
Fs
stea
dil
yfo
rmed
mor
en
ewal
lian
ces
inth
efi
rst
fou
ry
ears
,an
dth
enth
en
um
ber
ofn
ewal
lian
ces
dec
lin
edu
nti
lag
e11
;aft
erth
at,a
nin
con
clu
siv
ein
crea
seap
pea
red
atag
e14
(p.
483)
(continued
)
Table I.
IJEBR12,3
118
Stu
dy
Res
earc
hq
ues
tion
Dat
aF
ind
ing
s/p
rop
osit
ion
s
Pow
ell
and
Bra
ntl
ey(1
992)
Th
isst
ud
yis
toex
plo
re“t
he
typ
ean
dn
um
ber
ofin
tero
rgan
izat
ion
alre
lati
onsh
ips
pu
rsu
edb
yn
ewb
iote
chn
olog
yfi
rms”
(p.
372)
and
tod
ecid
ew
het
her
new
bio
tech
nol
ogy
firm
s“m
ust
be
exp
ert
atb
oth
in-h
ouse
rese
arch
and
coop
erat
ive
rese
arch
wit
hex
tern
alp
arti
es”
(p.
371)
Dat
aw
ere
coll
ecte
dfr
omth
ein
du
stri
ald
irec
tory
Bioscan
(199
0)on
smal
l,st
artu
pn
ewb
iote
chn
olog
yfi
rms
(NB
Fs,
p.3
69)
that
wer
ein
dep
end
entl
yow
ned
,w
ith
mor
eth
ante
nem
plo
yee
s,w
ith
ap
rod
uct
orie
nta
tion
pri
mar
ily
inth
erap
euti
csor
dia
gn
osti
cs,
and
wer
efo
un
ded
in19
87or
earl
ier
(p.3
73).
Alt
oget
her
ther
ew
ere
129
NB
Fs
eng
agin
gin
765
bil
ater
alag
reem
ents
(p.
374)
Inb
iote
chn
olog
yin
du
stry
,“t
he
rele
van
tk
now
-how
isb
road
lyd
isp
erse
dan
din
nov
atio
nd
epen
ds
onco
oper
ativ
ein
tera
ctio
nam
ong
dif
fere
nt
typ
esof
org
aniz
atio
ns”
(pp
.38
8-9)
,su
chas
fed
eral
lyfu
nd
edag
enci
es,
ph
arm
aceu
tica
lco
mp
anie
s,an
du
niv
ersi
ties
(p.
376)
Dif
fere
nt
typ
esof
alli
ance
agre
emen
tsar
est
ron
gly
com
ple
men
tary
rath
erth
ansu
bst
itu
tab
le(p
.37
9),
wh
ich
sug
ges
tsth
at“fi
rms
are
con
tin
uin
gto
stay
inv
olv
edin
exte
rnal
rela
tion
ship
sev
enas
they
bu
ild
up
inte
rnal
cap
abil
itie
s”(p
.38
9)A
sfo
rth
ed
eter
min
ants
for
the
nu
mb
erof
ties
,la
rger
(mor
eem
plo
yee
s),
old
er,
mor
ed
iver
sifi
ed(b
oth
dia
gn
osti
csan
dth
erap
euti
cs),
and
pu
bli
cly
own
edfi
rms
hav
em
ore
agre
emen
ts(p
.38
0)
Pre
eceet
al.
(199
9)T
his
stu
dy
exam
ines
wh
atef
fect
sst
rate
gic
alli
ance
sh
ave
for
earl
y-s
tag
ete
chn
olog
y-b
ased
firm
s”(E
ST
BF
s,p
.26
0)in
tern
atio
nal
sale
san
dth
ed
iver
sity
ofg
lob
alm
ark
ets
(p.2
61)
Su
rvey
dat
aw
ere
coll
ecte
don
75E
ST
BF
sth
atp
arti
cip
ated
ina
pro
vin
cial
fun
din
gp
rog
ram
inC
anad
a(p
.26
7)
“An
exp
ecte
dfi
nd
ing
was
the
fact
that
stra
teg
ical
lian
ces
wer
en
ota
fact
orin
exp
lain
ing
eith
erin
tern
atio
nal
inte
nsi
tyor
glo
bal
div
ersi
ty”
(p.
273)
.T
he
risk
sof
inte
rnat
ion
alal
lian
ces
“may
kee
pfi
rms
from
usi
ng
alli
ance
sas
am
ean
sof
inte
rnat
ion
aliz
ing
”(p
.27
3)
Sh
an(1
990)
Th
isst
ud
yem
pir
ical
lyin
ves
tig
ates
ast
atis
tic
mod
elof
the
det
erm
inan
tsof
entr
epre
neu
rial
hig
h-t
ech
nol
ogy
firm
sto
form
coop
erat
ive
rela
tion
ship
s(p
p.
129,
130)
Sec
ond
ary
dat
aw
ere
coll
ecte
don
coop
erat
ive
rela
tion
ship
san
dp
rod
uct
dev
elop
men
tac
tiv
itie
sof
new
bio
tech
nol
ogy
firm
s(N
BF
s)(p
.13
4).
New
bio
tech
nol
ogy
firm
sen
tere
dco
oper
ativ
eag
reem
ents
mor
eof
ten
ifth
eyar
em
ark
etfo
llow
ers
not
lead
ers
(p.1
36),
ifth
eyh
ave
few
erem
plo
yee
s(p
.13
6),
orif
they
are
com
mer
cial
izin
gn
ewb
iote
chn
olog
yp
rod
uct
sin
fore
ign
mar
ket
s(p
.13
7)P
rod
uct
div
ersi
ty(n
um
ber
ofb
iote
chn
olog
yp
rod
uct
s,p
.13
6)is
not
sig
nifi
can
tly
rela
ted
toal
lian
cefo
rmat
ion
(p.
137)
Sh
anet
al.
(199
4)T
his
stu
dy
exam
ines
the
rela
tion
ship
bet
wee
nin
nov
atio
nan
dco
oper
atio
nb
etw
een
smal
lst
artu
pan
dla
rge
esta
bli
shed
firm
sin
bio
tech
nol
ogy
ind
ust
ry(p
.38
7)
Sec
ond
ary
and
surv
eyd
ata
wer
eco
llec
ted
on11
4st
artu
pb
iote
chn
olog
yfi
rms
that
had
coop
erat
ive
agre
emen
tsb
efor
e19
89(p
.39
0)
“Sta
rtu
pin
nov
atio
nou
tpu
t,w
hic
his
mea
sure
db
yth
en
um
ber
ofp
aten
tg
ran
ted
,“d
oes
not
attr
act
larg
efi
rmre
lati
onsh
ips
bu
tra
ther
dep
end
son
them
”(p
.39
3)“L
arg
est
artu
ps
do
not
attr
act
mor
ees
tab
lish
edfi
rmp
artn
ers
than
smal
lst
artu
ps”
(p.
393)
“Th
efi
nd
ing
for
PU
BL
ICF
UN
DIN
Gsu
gg
ests
that
anes
tab
lish
edfi
rmlo
oks
for
con
firm
atio
nof
ast
artu
p’s
pot
enti
alin
the
cap
ital
mar
ket
bef
ore
ente
rin
gin
toan
agre
emen
tw
ith
it.S
tart
up
par
tici
pat
ion
ineq
uit
ym
ark
ets
doe
sn
otsu
bst
itu
tefo
rco
oper
atio
nb
ut
enco
ura
ges
it”
(p.
393)
(No
par
tner
sele
ctio
ncr
iter
ia.B
ut
the
fin
din
gs
may
imp
lyth
atth
eex
isti
ng
nu
mb
erof
pat
ents
asin
nov
atio
nou
tpu
tof
star
tup
firm
sis
not
vie
wed
asa
par
tner
sele
ctio
ncr
iter
ion
for
larg
ees
tab
lish
edfi
rms.
Nor
issi
ze.
An
dp
ub
lic
fun
din
gis
use
das
acr
iter
ion
and
enco
ura
ges
esta
bli
shed
firm
sto
form
coop
erat
ive
agre
emen
tsw
ith
star
tup
firm
s)S
teen
smaet
al.
(200
0)T
his
stu
dy
inv
esti
gat
esh
owcu
ltu
ral
val
ues
infl
uen
ceth
eli
kel
ihoo
dth
aten
trep
ren
euri
alm
anu
fact
uri
ng
firm
sw
ill
pu
rsu
ete
chn
olog
yal
lian
ces
and
the
use
ofeq
uit
yti
esw
hen
tech
nol
ogy
alli
ance
sar
ep
urs
ed(p
.95
2)
Su
rvey
dat
aw
ere
coll
ecte
don
494
smal
l-to
-med
ium
-siz
edm
anu
fact
uri
ng
firm
sin
Au
stra
lia,
Ind
ones
ia,
Mex
ico,
Nor
way
,an
dS
wed
en(p
p.
958-
9)
“SM
Es
inu
nce
rtai
nty
-av
oid
ing
nat
ion
s(f
orin
stan
ce,M
exic
o)h
ada
low
erth
resh
old
for
tech
nol
ogic
alu
nce
rtai
nty
and
wer
em
ore
lik
ely
top
urs
ue
tech
nol
ogy
alli
ance
sw
hen
such
un
cert
ain
tyin
crea
sed
than
wer
eS
ME
sin
cou
ntr
ies
mor
eto
lera
nt
ofu
nce
rtai
nty
(Sw
eden
,fo
rex
amp
le)”
(p.
966)
“Ov
eral
l,S
ME
sin
cou
ntr
ies
wit
hh
igh
lev
els
ofm
ascu
lin
ity
(su
chas
Au
stra
lia)
wer
ele
ssli
kel
yto
pu
rsu
ete
chn
olog
yal
lian
ces
than
SM
Es
inso
ciet
ies
that
are
mor
efe
min
ine
and
coop
erat
ive
(lik
eS
wed
enan
dN
orw
ay)”
(p.
966)
“SM
Es
inco
un
trie
sw
ith
coll
ecti
vis
tv
alu
es(s
uch
asIn
don
esia
and
Mex
ico)
wer
em
ore
lik
ely
tofo
rmte
chn
olog
yal
lian
ces
inv
olv
ing
equ
ity
ties
than
SM
Es
inin
div
idu
alis
tic
cou
ntr
ies
(su
chas
Au
stra
lia)
”(p
p.
966-
7)“H
owev
er,w
efo
un
dth
atS
ME
sin
ind
ivid
ual
isti
cso
ciet
ies
wer
em
ore
lik
ely
tou
seeq
uit
yti
esas
tech
nol
ogic
alu
nce
rtai
nty
incr
ease
dth
anw
ere
SM
Es
inco
llec
tiv
eso
ciet
ies”
(p.
967)
Stu
artet
al.
(199
9)T
his
stu
dy
exam
ines
how
per
cep
tion
sof
the
val
ue
ofen
trep
ren
euri
alfi
rms
are
affe
cted
by
inte
rorg
aniz
atio
nal
rela
tion
ship
wit
hp
rom
inen
tp
artn
ers
(p.
317)
Sec
ond
ary
dat
aon
301
pri
vat
ed
edic
ated
bio
tech
nol
ogy
firm
sth
atw
ere
inth
ed
evel
opm
ent
ofh
um
and
iag
nos
tics
and
ther
apeu
tics
from
1978
to19
91an
dth
atw
ere
fun
ded
by
ven
ture
cap
ital
s(p
p.
323-
4)
Inu
nce
rtai
nco
nte
xts
,i.e
.w
hen
the
entr
epre
neu
rial
firm
sw
ere
you
ng
and
had
rais
edle
ssam
oun
tsof
pri
vat
efu
nd
ing
(p.
342)
,th
ep
rom
inen
ceof
thei
rex
chan
ge
par
tner
s–
alli
ance
par
tner
s,eq
uit
yin
ves
tors
,an
din
ves
tmen
tb
ank
s–
enh
ance
sth
eir
abil
ity
toat
trac
tre
sou
rces
(p.
344)
,an
dth
eyw
ent
toin
itia
lp
ub
lic
offe
rin
g(I
PO
)fa
ster
and
earn
gre
ater
val
uat
ion
sat
IPO
(p.
315)
Table I.
Firms in searchof established
partners
119
generally use “start-ups” and “small start-ups” and “entrepreneurial firms”interchangeably, and use data collected from young and small firms in high techindustries to address entrepreneurial issues (e.g. Deeds and Hill, 1999; Hull, 1988; Shanet al., 1994; Stuart et al., 1999). In keeping with this tradition in the entrepreneurshipfield, we define entrepreneurial firms as generally young, small and highly innovativefirms in industries with rapidly developing technologies.
Being new and small, entrepreneurial firms are associated with manycharacteristics that are essentially different from established firms, including limitedinternal resources and external relations, a lack of legitimacy, and unfamiliarity withnew roles and norms created within itself. These disadvantages have contributed to a“liability of newness” (Stinchcombe, 1965). Doz (1988) looked at disappointingpartnerships between smaller and larger firms, and identified three sets of criticalissues: convergence of purpose, consistency of position within the large firm, andinterface. However, small and large firms in a partnership may also differ in otherways. For example, entrepreneurial and established firms are different in terms ofresources, economic power, legitimacy, and innovative abilities. The resultinginterdependency makes strategic alliances between small and large firms not onlydesirable but also risky. Moreover, small and large firms are potentially competitorsbecause small, technologically innovative firms challenge the existing products andbusinesses of established firms. Partnerships between them are especially unstable asthey race to learn from each other. Finally, the lack of a track record makes allianceswith large established firms especially desirable for entrepreneurial firms in order togain ready legitimacy in the marketplace.
We identified 15 key difference factors and grouped them into two categories:intrinsic factors and alliance making factors (see Table II). Intrinsic factors capture thedifferences between an entrepreneurial firm and an established firm when they areexamined as single organizations. Interfirm alliancing factors cover the differencesbetween them when they are engaged in strategic alliances with each other. In otherwords, interfirm factors are relevant only when a partnership between anentrepreneurial firm and an established firm exists or is under consideration.
Differences in intrinsic factorsIntrinsic difference factors, just defined, include resources, innovativeness, status incompetition, legitimacy, history/track record, power, organizational characteristics,business focus, and planning horizon (see Table II).
Resources. Entrepreneurial firms typically have limited financial, manufacturing, andmarketing resources. Investors are unsure about the prospect of commercialization of thenew products, and therefore hesitate to invest large amounts of capital in new companies.Compared to established and large companies, which have multiple sources of cash flowfrom different lines of businesses to compensate temporarily unprofitable ones, newcompanies do not have rich internal sources of capital to finance their sole business.
Alliances provide entrepreneurial firms access to the resources they need, especiallyaccess to the large firms” financial resources, manufacturing capabilities, andmarketing expertise. Shan et al. (1994, p. 390, p. 100) report that biotechnology startups,which typically lack financial, marketing and distribution resources, have cooperativerelationships primarily with established firms. They also report that alliancing withestablished firms leads to more innovative outputs, in the form of patents, for startup
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firms. Larson’s (1992, p. 100) field study of dyadic alliances finds that “limited butdense networks of formal and informal exchange relationships” are the source ofgrowth for “resource-poor entrepreneurial organizations”.
Innovativeness. The literature shows consistently that entrepreneurial and smallfirms have higher rates of innovation. Powell and Brantley (1992) report that inscience-based industries, such as computer, semiconductors, and biotechnology,established firms have lagged behind entrepreneurial firms in innovativeness duringeach industry’s early stages. Very often, an innovation or a novel modification of an oldproduct or service is the driver for the establishment of a new company. Indeed, smallhigh technology ventures rely on the commercialization and marketing of innovativeproducts to survive and grow (Poutziouris, 2003, p. 202). Established firms, in turn, areknown to take advantage of the innovativeness of entrepreneurial firms bycollaborating with them. For example, Pfizer has alliances with more than 400companies, over 250 of which are devoted to R&D, and its alliance partners are often
Entrepreneurial firms Established firms
Intrinsic factors1. Resources Short of financial, manufacturing,
and marketing resourcesAffluent in financial,manufacturing, and marketingresources
2. Innovativeness More innovative Less innovative3. Status in competition Challengers in competition Defenders, vulnerable to
competition from newcomers4. Legitimacy Less More5. History/track record Scarce Sufficient6. Economic/political power Little influence over the
environmentMore economic and politicalpower
7. Organizationalcharacteristics
Structure: clan, informalCommunication: fewer levels,frequent, informal, morehorizontalDecision making: speedy, flexible,informal, centralized from the top,keeping options open, opportunist
Structure: bureaucratic, formal,fragmentedCommunication: more levels,slower, infrequent, open todistortion, barely horizontalDecision making: slow,consensual, decentralized at theintermediate levels, long-termstrategies
8. Business focus Products and services Expansion in scale and scope9. Planning horizon Speedy development Not in a hurry
Alliancing factors1. Control over technology Retain control over its technology Capture the technology2. Confidence in technology Confident, overly committed Skeptical3. Interorganizational
interfacingDecisions makers are theexecutors
Decision makers are not theexecutors
4. Criticality of alliancing The alliance is a matter ofsurvival
The alliance is not a matter ofsurvival
5. Strategic objective Survival, growth Sometimes only as a blockingstrategy
6. Consistency ofcommitment
Subject to change Consistent
Table II.Intrinsic and alliance
differences inentrepreneurial and
established firms
Firms in searchof established
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121
smaller pharmaceutical companies and biotech labs working on promising “late-stagecompounds” (Muson, 2002, p. 21).
Status in competition. Entrepreneurial firms challenge established firms withinnovations, making the existing products or services obsolete, attracting newcustomers, or taking away patrons from the established firms. As firms get older, theybecome increasingly vulnerable to competition from newcomers in the market. Facingentrepreneurial firms” challenge, established firms could of course take a variety ofactions. Some established firms stay put until they are convinced of a real threat from achallenger. Others take proactive actions when potentially threatening ideas orfindings are still in their preliminary stages. Strategic alliances are an example of aproactive option that established firms could take to thwart the challenges posed byentrepreneurial firms. For example, in the competitive pharmaceutical industry, whereinnovation is the major driving force of performance, established firms such as Eli Lillyroutinely enter into strategic alliances with smaller biotechnology firms to strengthentheir drug development efforts (Futrell et al., 2001).
Legitimacy. Legitimacy is “a social judgment of acceptance, appropriateness, anddesirability” (Zimmerman and Zeitz, 2002, p. 414). Organizations can derive legitimacyfrom regulative, normative, cognitive and industrial norms, rules, values, and models(Scott, 1995). To gain legitimacy, entrepreneurial firms can conform, select, manipulateand create norms and practices, such as registering with the SEC, hiring experiencedtop managers, locating in the Silicon Valley, emphasizing potential technologicalbreakthrough rather than existing profitability, and cultivating a new consumptionmode of internet shopping (Zimmerman and Zeitz, 2002, p. 423). Singh et al. (1986)found that the propensity of young voluntary social service organizations to dissolvewas significantly reduced by activities leading to external legitimacy, such as beinglisted in the community directory, having a charitable organization registrationnumber, and creating a large board of directors.
History/track record. Being new also means a lack of history and track record forentrepreneurial firms. The short duration of existence of an entrepreneurial firmcreates uncertainty about its quality for investors, customers, distributors, andsuppliers. In contrast, established firms have a history, and also perhaps a good trackrecord, that enhances their legitimacy and attractiveness. The lack of both legitimacyand track record in small firms can be compensated by forming strategic alliances withestablished firms that have both these attributes. A study by Goldberg et al. (2003,pp. 183-4) in the Israeli software industry confirms that strategic alliances withimportant partners, among other efforts such as strengthening internal corecompetencies, contribute toward a high corporate reputation of small firms.
Economic/political power. Large established companies may dominate the marketsand are able to influence the evolution of their environment, both economically andpolitically. In contrast, small entrepreneurial firms can exercise little influence overtheir environment. Such a lack of power compels entrepreneurial firms to be highlyflexible and responsive to environmental changes.
Organizational characteristics. Entrepreneurial firms and established firms havedifferent organizational characteristics in terms of structure, communication, anddecision making. In the early stages of the organizational life cycle, entrepreneurialfirms are generally informal, whereas large established firms are bureaucratic andmost often fragmented internally. Entrepreneurial firms are agile and nimble in
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decision making, and alliance-related decisions are made from the top, whileestablished firms have a certain influence over their environment and have, therefore,the luxury of being able to stick to their long-term strategies.
Business focus. Entrepreneurial companies are founded to exploit new businessopportunities, usually in relation to manifested or potential needs of customers forcertain products or services. In order to survive, a new company needs to createmarkets, and the consumption of its products and services becomes the focus of theirbusiness. In comparison, established firms, especially those that already have a stablehold on their market shares, are eager in their pursuit of growth. In order to keep upwith a high rate of expansion, established firms are unsatisfied with just extending theexisting product lines. They are more likely to engage in acquiring other businesses,whether related or unrelated, and grow through diversification. Compared to therisk-taking entrepreneurial firms, established firms are cautious about entering intoemerging technical subfields, worried about product cannibalization and uncertaininvestment payoffs.
Planning horizon. Entrepreneurial and established firms may possess differentplanning horizons. Large established firms usually enjoy the benefits of relativestability and can implement strategies and activities with a long-term planning horizon(Das, 1991, 2004a). Entrepreneurial firms, on contrary, are pressed for financialresources and face threats of dissolution all the time. Moreover, large established firmscan afford long periods of stagnant or even poor performance by reducing their scale ofoperations if necessary. Constant dire threats do not allow entrepreneurial firms toeasily manage the risks inherent in long-term planning (Das, 2004b, 2005; Das andTeng, 1997a). Such differences in the planning horizon between an entrepreneurial firmand an established firm have significant impact on their strategy and behavior whenthey enter into a partnership. For example, speedy development of a product is usuallypursued urgently and vigorously by an entrepreneurial firm, while its establishedpartner only wants to get access and keep updated with the new technology and is notusually in a hurry to replace its own mature products. On some occasions, theestablished firm may intend to use the partnership to control the new technology andnew products so that its own existing profitable products will not be replaced too soon.
Differences in alliance-making factorsAlliance making (alliancing) difference factors, when considering a partnershipbetween an entrepreneurial firm and an established firm, include control overtechnology, confidence in the technology, interorganizational interfacing, criticality ofalliancing, strategic purpose, and consistency of commitment (see Table II).
Control over technology. When a new technology is involved in a partnershipbetween an entrepreneurial firm and an established firm, which is most often the case,a struggle over the control of technology is more or less present between the partners.The established firm, which is usually the one which is seeking the innovativetechnology from the entrepreneurial partner, often attempts to capture the technology,transfer it to its own operations, and, ultimately, appropriate it. At the other end of thecompetition is the entrepreneurial firm, which always tries to retain control over itstechnology. Such competition for the control over the technology usually results intensions between the partners, and is a constant challenge for both the established firmand entrepreneurial firm in strategic alliances. This is especially important in the case
Firms in searchof established
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123
of technology firms because, as Narula (2004) observes, a small firm’s control over itstechnology and consequently its technology competence can be easily lost if thealliance with a large firm fails.
Confidence in technology. The established firm and the entrepreneurial partner maydiffer at the level of confidence about the technology that is involved in the alliance.Whether a new technology is feasible or a new product is promising is always difficultto precisely predict. Entrepreneurial firms obviously are confident with theirtechnologies, and sometimes overly committed, so that its established partner may wellbe skeptical. Moreover, it is unwise for the entrepreneurial firm to fully disclose thetechnology for the sake of convincing the potential partner, because of the risk ofleakage of proprietary knowledge. Therefore, an entrepreneurial firm seeking astrategic alliance partner should pay attention to the skepticism of the established firm.A skeptical partner will hesitate to fully commit and, even when committed, will belikely to withdraw the support when satisfactory results are not achieved quickly.
Interorganizational interfacing. The strategic alliance interface refers to thepersonnel from each side of the partnership that continuously interacts with the otherside throughout the alliances. Because of the multiple hierarchical levels in largeestablished firms, the decision to establish a partnership is usually made by the topmanagement but implemented by middle managers and technical specialists. Inentrepreneurial firms, in contrast, the decision makers regarding formation of strategicalliances are usually the same as those who manage the alliances. The discontinuitiesin personnel interfaces while moving from the formation stage to the operational stagein large established firms is complicated by the ambiguity of the simultaneouslycollaborative and competitive nature of relations in strategic alliances (Das and Teng,1997b, 2000b), and leads to difficulties for the middle managers in implementationactivities. Sometimes even sabotage at the operational level will ruin the partnershipthat was hastily formed by the top management. The interfacing difficulties aresometimes rooted in conflicting personalities from the partnering companies,especially if the companies are at different stages of the corporate lifecycle. It isreported, for example, that Lotus does not partner with start-ups as a general rule, toavoid the clash of egos (Segil, 1998).
Criticality of alliancing. Strategic criticality refers to the importance of a partnershipto the continued viability of a firm. An entrepreneurial firm, which is restrained byfinancial, marketing, and manufacturing resources, legitimacy, and track record,would be in some need for a partnership with an established firm. In the case of thebiotech industry, small firms are especially dependent on strategic researchpartnerships with large firms for overcoming their disadvantage of limitedresources (Audretsch and Feldman, 2003, p. 285). While a particular alliance may bea matter of survival for a startup, established firms have the resources to engage inmultiple alliances, so that one failed alliance will not lead to the collapse of the wholecompany. With a larger scale and multiple areas of operation, established firms aremore likely to survive a single failed alliance. Such a substantive difference in strategiccriticality between an established firm and an entrepreneurial firm in a partnership caneasily become a relational source of opportunism if the established firm is notcommitted to the alliance. Entrepreneurial firms should be vigilant in selecting areliable and committed partner. Indeed, Narula’s (2004) research with small andmedium technology firms in electronic hardware industries confirms that these firms
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have to be extremely careful about picking alliance partners, given the reality of highrates of R&D alliance failures (Narula, 2004, p. 160). In contrast, large firms often haveredundant, back-up agreements with several firms so that they can easily findalternative avenues for needed resources (Narula, 2004, p. 160).
Strategic purpose. With almost no exceptions, entrepreneurial firms enter strategicalliances in order to survive and grow. Even if they aim to become an acquisitioncandidate for the established partner later on, it is still better if they first reach certainmaturation and gain sufficient bargaining power. In fact, selling a company after italready has become part of an alliance maybe particularly disadvantageous. Astrategic alliance with an entrepreneurial firm (with a promising technology) maysometimes be used by an established firm to prevent it from entering into an alliancewith another established firm, especially a rival. Entrepreneurial firms need to beaware of such possibilities and carefully select an established firm that believes indeveloping its junior partner.
Consistency of commitment. The commitment of member firms in an alliance hasbeen emphasized by both academics and practitioners as critical to the success ofpartnerships. Large established firms are multiple-unit and complex organizations,and an alliance, while it benefits some people or units, almost inevitably poses threatsto other units of the organizations. For example, an alliance with an entrepreneurialfirm with superior technologies and product development potentials will be welcomedby the top management and the marketing department, but will pose a threat to theinternal research personnel. Therefore, it is important that an entrepreneurial firm beaware of such possibility of inconsistent commitment on the part of an establishedfirm, and select the most reliable partner in terms of its ability to effectively deal withinternal changes.
Research on partner selection by entrepreneurial firmsOur examination of the extant literature on partner selection criteria revealed severalcharacteristics, which include a focus on established firms, a focus on internationalalliances, a dominant framework, certain contextual factors, and some common criteria:
(1) A focus on established firms. Not surprisingly, the literature on alliance partnerselection criteria is focused on large and established firms, with very fewexceptions (Adler and Hlavacek, 1976; Forrest and Martin, 1992).
(2) A focus on international alliances. The literature is also focused on internationalalliances, a majority of which are international joint ventures. Since smallentrepreneurial firms rarely have the resources, capabilities, or even interest inexpanding into international markets, they are understandably left unnoticed bymost researchers on partner selection criteria. Moreover, major alliances,involving well-known large firms, are much more likely to be reported in thepress (see, e.g. Glaister and Buckley, 1997). Therefore, large firms are likely to beover-represented in those studies that compiled their data set primarily frompress resources. Moreover, small entrepreneurial firms are especially cautiousabout potential hazards of entering international strategic alliances. A study byPreece et al. (1999, p. 273) found that the risks of international alliances mighthave kept early-stage technology-based firms “from using alliances as a means ofinternationalizing”. Therefore, it is not surprising that small entrepreneurialfirms are seldom included in international strategic alliances studies, and thus
Firms in searchof established
partners
125
also in partner selection criteria research. An exception is Supphellen et al.’s(2002, p. 789) survey of Scandinavian small- and medium-sized businessesengaged in international strategic alliances, although they used only personalinformation sources in evaluating potential partners.
(3) A dominant framework. The categorization of task-related and partner-relatedcriteria (Geringer,1988,1991) iswidelyaccepted inempirical studies.However, theitems under each category vary from study to study, and some task-related itemsin one study became partner-related in another. For example, reputation, financialresources, and marketing system, are task-related criteria in Geringer (1991), butpartner-related inGlaister (1996).Addingto theconfusion, “distribution channels”is a task-related criterion (Glaister, 1996, p. 17) while “established marketing anddistribution system” is partner-related (p. 21) in the same study.
(4) Contextual factors. Some researchers have considered contextual factors indetermining the importance of individual selection criteria in different situations.In one of the early studies, Tomlinson (1970) found that parent firms of differentsize (larger and smaller), in different industries (e.g. oil, electricals, vehicles,tobacco/food), and with different reasons for entering into a joint venture, usedifferent partner selection criteria. Other contextual factors studied includeGeringer’s (1988) “perceived task environment uncertainty” and “diversity of linefunctions, Bailey et al.’s (1998) form of agreement, objectives of the project, type ofcollaborator, and the characteristics of the selecting company, and Al-Khalifa andPeterson’s (1999) size and experience of the company and the education andexperience of the CEO. Both Glaister (1996) and Luo (1998) found significantinfluence of alliance motives on the selection criteria. However, Glaister andBuckley’s (1997) study, based on a sample slightly different from Glaister (1996),found that thepurposeof theventure, aswellaspartnernationality, industryof thejoint venture, and the relative partner size, do not influence the relative importanceof different selection criteria.
(5) Common criteria. The following is a list of the common criteria that have beendeemed as important in the alliance partner selection criteria literature:. Task-related criteria: complementary products or skills; financial resources;
technology capabilities or uniqueness; location; marketing or distributionsystems, or established customer base; reputation and image; managerialcapabilities; government relationship, including regulatory requirements andgovernment sales; help in faster entry into the target market; and industryattractiveness.
. Partner-related criteria: strategic fit or interdependence, or compatible goals;compatible or cooperative culture and ethics; prior ties and successful priorassociation; trust between top managers; strong commitment; similar status,including size and structure; reciprocal relationship; commensurate risk; andease of communication.
Analysis of partner selection criteriaThe topic of partner selection criteria covers almost every aspect of a firm, fromfinancing, marketing, manufacturing, technology, and product, to goals, commitment,size, culture, management, and past ties with partners. In Table III we group the
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126
Par
tner
sele
ctio
ncr
iter
iaL
arg
e-la
rge
Lar
ge-
smal
lS
mal
l-sm
all
Sm
all-
larg
eM
ixed
and
un
spec
ified
size
typ
e
1.Com
mitment
(a)
Com
mit
men
tto
the
join
tv
entu
reG
erin
ger
(198
8)(b
)C
omm
itm
ent
toth
ep
roje
ctF
orre
stan
dM
arti
n(1
992)
Al-
Kh
alif
aan
dP
eter
son
(199
9)
(c)
Hon
esty
and
seri
ousn
ess
Ari
noet
al.
(199
7)(d
)P
erso
nal
com
mit
men
tL
arso
n(1
992)
2.Cost
(a)
Low
est
cost
Bai
leyet
al.
(199
8)(b
)L
owco
stla
bor
Ger
ing
er(1
988)
,G
lais
ter
(199
6),
Gla
iste
ran
dB
uck
ley
(199
7),
Tat
oglu
(200
0)
3.Culture
(a)
Sim
ilar
/com
pat
ible
nat
ion
alor
corp
orat
ecu
ltu
reB
aile
yet
al.
(199
8)(b
)K
now
led
ge
oflo
cal
cult
ure
Gla
iste
r(1
996)
,Gla
iste
ran
dB
uck
ley
(199
7),T
atog
lu(2
000)
(c)
Kn
owle
dg
eof
wes
tern
cult
ure
Ku
mar
(199
5)(d
)C
oop
erat
ive/
coll
abor
ati
ve
cult
ure
Bro
uth
erset
al.
(199
5)(e
)W
illi
ng
nes
sto
shar
eex
per
tise
Dac
inet
al.
(199
7)
4.Finance
(a)
Fin
anci
alre
sou
rces
orso
un
dn
ess
For
rest
and
Mar
tin
(199
2)A
l-K
hal
ifa
and
Pet
erso
n(1
999)
,B
aile
yet
al.
(199
8),
Dac
inet
al.
(199
7),
Ger
ing
er(1
988,
1991
),G
lais
ter
(199
6),
Gla
iste
ran
dB
uck
ley
(199
7),
Hit
tet
al.
(200
0),
Lu
o(1
998)
,T
atog
lu(2
000)
,T
omli
nso
n(1
970)
,W
anget
al.
(199
9)(b
)D
iffe
ren
cein
liq
uid
ity
Gu
lati
(199
5)(c
)P
ub
lic
fun
din
gS
han
,W
alk
eran
dK
ogu
t(1
994)
Pow
ell
and
Bra
ntl
ey(1
992)
5.Goals
(a)
Com
pat
ible
/com
ple
men
tary
goa
ls,
nee
ds,
ph
ilos
oph
y,
atti
tud
es,
orst
rate
gic
inte
nti
ons
Las
serr
e(1
984)
For
rest
and
Mar
tin
(199
2)A
l-K
hal
ifa
and
Pet
erso
n(1
999)
,B
aile
yet
al.(
1998
),B
rou
ther
set
al.
(199
5),
Hak
anso
nan
dL
oran
ge
(199
1),
Hof
fman
nan
dS
chlo
sser
(200
1),
Lu
o(1
998)
,W
anget
al.
(199
9)(b
)S
trat
egic
inte
rdep
end
ence
Gu
lati
(199
5)
6.Government
(a)
Com
pli
ance
wit
hg
over
nm
ent
req
uir
emen
ts,
pre
ssu
re,
sup
por
tor
sub
sid
ies,
etc.
Ger
ing
er(1
988,
1991
)
(b)
Ab
ilit
yto
neg
otia
tew
ith
loca
lg
over
nm
ent
Gla
iste
r(1
996)
,Gla
iste
ran
dB
uck
ley
(199
7),T
atog
lu(2
000)
,T
omli
nso
n(1
970)
(c)
Sal
esto
gov
ern
men
tG
erin
ger
(198
8,19
91
(continued
)
Table III.Partner selection criteria
found in different types ofalliances
Firms in searchof established
partners
127
Par
tner
sele
ctio
ncr
iter
iaL
arg
e-la
rge
Lar
ge-
smal
lS
mal
l-sm
all
Sm
all-
larg
eM
ixed
and
un
spec
ified
size
typ
e
7.Industry/business
(a)
Ind
ust
ryat
trac
tiv
enes
sD
acin
etal.
(199
7)(b
)In
du
stri
alex
per
ien
ceK
um
ar(1
995)
,L
uo
(199
7,19
98)
(c)
Rel
ated
nes
sof
bu
sin
esse
s,re
lev
ant
exp
erie
nce
Li
and
Row
ley
(200
2)
Gla
iste
r(1
996)
,Gla
iste
ran
dB
uck
ley
(199
7),T
atog
lu(2
000)
(d)
Pos
itio
nw
ith
inth
ein
du
stry
Ari
noet
al.
(199
7),
Bai
leyet
al.
(199
8)
8.Internationalization
(a)
Ex
por
top
por
tun
itie
sG
erin
ger
(198
8)(b
)L
ocal
/nat
ion
alid
enti
tyG
erin
ger
(198
8,19
91)
(c)
For
eig
nex
per
ien
ceK
um
ar(1
995)
,L
uo
(199
7),
Sh
an(1
990)
(d)
Inte
rnat
ion
alex
per
ien
ceG
lais
ter
(199
6),G
lais
ter
and
Bu
ckle
y(1
997)
,Tat
oglu
(200
0)(e
)C
onn
ecti
onin
loca
lco
mm
un
ity
Ku
mar
(199
5)
9.Learning
(a)
Ab
sorp
tiv
eca
pac
ity
orle
arn
ing
abil
ity
Lu
o(1
997,
1998
)(b
)A
bil
ity
toac
qu
ire
skil
lsD
acin
,H
itt
and
Lev
itas
(199
7)(c
)L
ong
-ter
mle
arn
ing
opp
ortu
nit
ies
Lar
son
(199
2)
10.Location
(a)
Fav
orab
lelo
cati
onG
erin
ger
(198
8,19
91)
(b)
Geo
gra
ph
ical
clos
enes
sG
erin
ger
(198
8)
11.Management
(a)
Ex
per
ien
ced
man
agem
ent,
man
ager
ial
cap
abil
itie
sF
orre
stan
dM
arti
n(1
992)
Bai
leyet
al.
(199
8)
(b)
Com
pat
ible
top
man
agem
ent
Ari
noet
al.
(199
7),
Ger
ing
er(1
988)
,T
atog
lu(2
000)
(c)
Con
gru
ent
bac
kg
rou
nd
Dee
ds
and
Hil
l(1
999)
(d)
Com
pat
ible
man
agem
ent
sty
le,
ease
ofco
mm
un
icat
ion
and
wor
kin
gre
lati
onsh
ips
For
rest
and
Mar
tin
(199
2)D
eed
san
dH
ill
(199
9),
Lar
son
(199
2)
Ty
ler
and
Ste
ensm
a(1
995)
(e)
Les
sm
ech
anis
tic
and
mor
eor
gan
icin
org
aniz
atio
nal
stru
ctu
reH
ullet
al.
(198
8)(f
)P
atie
nt
man
agem
ent
giv
ing
mor
eau
ton
omy
Hu
llet
al.
(198
8)(g
)T
rust
bet
wee
nth
eto
pm
anag
emen
tte
ams
For
rest
and
Mar
tin
(199
2)L
arso
n(1
992)
Gla
iste
r(1
996)
,Gla
iste
ran
dB
uck
ley
(199
7),H
offm
ann
and
Sch
loss
er(2
001)
,T
atog
lu(2
000)
(h)
Pro
fess
ion
alis
mA
rin
oet
al.
(199
7)(i
)H
um
anre
sou
rce
skil
lsL
uo
(199
8)(j
)O
rgan
izat
ion
alle
ader
ship
Lu
o(1
998)
(continued
)
Table III.
IJEBR12,3
128
Par
tner
sele
ctio
ncr
iter
iaL
arg
e-la
rge
Lar
ge-
smal
lS
mal
l-sm
all
Sm
all-
larg
eM
ixed
and
un
spec
ified
size
typ
e
(k)
Org
aniz
atio
nal
ran
kL
uo
(199
8)(l
)E
ssen
tial
chem
istr
yF
orre
stan
dM
arti
n(1
992)
For
rest
and
Mar
tin
(199
2)(m
)P
erso
nal
cap
abil
itie
sL
arso
n(1
992)
(n)
Wel
l-co
nn
ecte
dto
pm
anag
emen
tB
arN
iran
dS
mit
h(2
002)
,E
isen
har
dt
and
Sch
oon
hov
en(1
996)
12.Manufacturing
(a)
Man
ufa
ctu
rin
gfa
cili
ties
,re
sou
rces
,an
dp
erso
nn
elG
erin
ger
(198
8),
Ku
mar
(199
5),
Tom
lin
son
(197
0),
Wan
g,
Wee
and
Koh
(199
9)(b
)K
now
led
ge
ofp
rod
uct
ion
pro
cess
esG
lais
ter
(199
6),
Gla
iste
ran
dB
uck
ley
(199
7)(c
)A
cces
sto
raw
mat
eria
lsor
com
pon
ents
Ger
ing
er(1
988)
,G
lais
ter
(199
6),
Gla
iste
ran
dB
uck
ley
(199
7),
Tat
oglu
(200
0),
Tom
lin
son
(197
0),
Wan
g,
Wee
and
Koh
(199
9)
13.Market
(a)
Mar
ket
ing
,d
istr
ibu
tion
,an
dse
rvic
efa
cili
ties
and
com
pet
ence
Al-
Kh
alif
aan
dP
eter
son
(199
9),
Ger
ing
er(1
988,
1991
),G
lais
ter
(199
6),
Gla
iste
ran
dB
uck
ley
(199
7),
Ku
mar
(199
5),
Lu
o(1
998)
,T
atog
lu(2
000)
,T
omli
nso
n(1
970)
,W
anget
al.
(199
9)(b
)M
ark
etsh
are,
mar
ket
pow
erK
um
ar(1
995)
,L
uo
(199
7,19
98),
Tom
lin
son
(197
0)(c
)N
arro
wer
mar
ket
dom
ain
Bau
m,
Cal
abre
sean
dS
ilv
erm
an(2
000)
(d)
Fas
ter
entr
yin
toth
eta
rget
mar
ket
Dac
inet
al.
(199
7)(e
)K
now
led
ge
oflo
cal
mar
ket
Al-
Kh
alif
aan
dP
eter
son
(199
9),A
rin
oetal.
(199
7),G
erin
ger
(198
8),G
lais
ter
(199
6),G
lais
ter
and
Bu
ckle
y(1
997)
,Hit
tetal.
(200
0),
Tat
oglu
(200
0)
14.Pastties
(a)
Sat
isfa
ctor
yp
rior
asso
ciat
ion
/tie
s/tr
ansa
ctio
ns
Ch
un
get
al.
(200
0),
Gu
lati
(199
5),
Li
and
Row
ley
(200
2),
Pod
oln
y(1
994)
Lar
son
(199
2)A
l-K
hal
ifa
and
Pet
erso
n(1
999)
,Bai
leyetal.
(199
8),G
erin
ger
(198
8),G
lais
ter
(199
6),G
lais
ter
and
Bu
ckle
y(1
997)
,Hit
tetal.
(200
0),
Ku
mar
(199
5),
Tat
oglu
(200
0),
Tom
lin
son
(197
0),
Ty
ler
and
Ste
ensm
a(1
995)
,W
anget
al.
(199
9)
(b)
Av
oid
too
man
yti
esG
ula
ti(1
995)
(c)
Com
mon
thir
d-p
arty
and
ind
irec
tti
esG
ula
ti(1
995)
(d)
Tim
eel
apse
dsi
nce
last
tie
Gu
lati
(199
5)
(continued
)
Table III.
Firms in searchof established
partners
129
Par
tner
sele
ctio
ncr
iter
iaL
arg
e-la
rge
Lar
ge-
smal
lS
mal
l-sm
all
Sm
all-
larg
eM
ixed
and
un
spec
ified
size
typ
e
(e)
Tie
sw
ith
com
pet
itor
sF
orre
stan
dM
arti
n(1
992)
(f)
Ind
ivid
ual
frie
nd
ship
san
dot
her
per
son
also
urc
esof
info
rmat
ion
Lar
son
(199
2)S
up
ph
elle
net
al.(
2002
)
15.Product
(a)
Fu
llli
ne
ofp
rod
uct
sG
erin
ger
(198
8,19
91)
(b)
Acc
ess
top
rod
uct
Ger
ing
er(1
988)
,T
atog
lu(2
000)
(c)
Pro
du
ctq
ual
ity
Dac
inet
al.
(199
7)(d
)P
rod
uct
rela
ted
nes
sL
uo
(199
7)(e
)D
iver
sifi
cati
onin
pro
du
cts
Pow
ell
and
Bra
ntl
ey(1
992)
(f)
Div
ersi
fica
tion
inp
rod
uct
s(n
ota
crit
erio
n)
Sh
an(1
990)
16.Reciprocity
(a)
Rec
ipro
cal
exch
ang
esof
alli
ance
opp
ortu
nit
ies,
mu
tual
ben
efits
Ch
un
get
al.
(200
0)L
arso
n(1
992)
(b)
Rec
ipro
cal
beh
avio
rL
ian
dR
owle
y(2
002)
17.Reputation
(a)
Tra
de
mar
k,
rep
uta
tion
,or
corp
orat
eim
age,
inta
ng
ible
asse
tsL
arso
n(1
992)
Al-
Kh
alif
aan
dP
eter
son
(199
9),
Ari
noet
al.
(199
7),
Dac
inet
al.
(199
7),
Ger
ing
er(1
988,
1991
),G
lais
ter
(199
6),
Gla
iste
ran
dB
uck
ley
(199
7),
Hit
tet
al.
(200
0),
Lu
o(1
998)
,T
atog
lu(2
000)
(b)
Per
son
alre
pu
tati
onL
arso
n(1
992)
(c)
Ag
e(o
lder
)P
owel
lan
dB
ran
tley
(199
2)
18.Risk
(a)
Ris
kre
du
ctio
nT
yle
ran
dS
teen
sma
(199
5)(b
)L
evel
ofas
set-
spec
ific
inv
estm
ents
req
uir
edT
yle
ran
dS
teen
sma
(199
5)(c
)C
omm
ensu
rate
risk
Bro
uth
erset
al.
(199
5)(d
)In
form
atio
nav
aila
bil
ity
rela
tiv
eto
par
tner
Ty
ler
and
Ste
ensm
a(1
995)
19.Size
(a)
Sim
ilar
size
/sta
tus
orco
rpor
ate
stru
ctu
reC
hu
nget
al.
(200
0),
Dan
iels
(197
1),
Pod
oln
y(1
994)
Ger
ing
er(1
988)
,G
lais
ter
(199
6),
Gla
iste
ran
dB
uck
ley
(199
7),
Lu
o(1
997)
,T
atog
lu(2
000)
(b)
Pro
min
ent
stat
us
Stu
artet
al.
(199
9)
(continued
)
Table III.
IJEBR12,3
130
Par
tner
sele
ctio
ncr
iter
iaL
arg
e-la
rge
Lar
ge-
smal
lS
mal
l-sm
all
Sm
all-
larg
eM
ixed
and
un
spec
ified
size
typ
e
(c)
Siz
e(n
ota
crit
erio
n)
Sh
anet
al.
(199
4)H
arri
gan
(198
8)
(d)
Dif
fere
nt
size
Gu
lati
(199
5)(e
)L
arg
er(m
ore
emp
loy
ees)
Pow
ell
and
Bra
ntl
ey(1
992)
(f)
Sm
alle
r(l
ess
emp
loy
ees)
Sh
an(1
990)
20.Technology
(a)
Tec
hn
ical
com
pet
ence
/un
iqu
enes
sF
orre
stan
dM
arti
n(1
992)
Al-
Kh
alif
aan
dP
eter
son
(199
9),
Bai
leyet
al.
(199
8),
Dac
inet
al.
(199
7),
Ger
ing
er(1
988,
1991
),G
lais
ter
(199
6),
Gla
iste
ran
dB
uck
ley
(199
7),
Hit
tet
al.
(200
0),
Hak
anso
nan
dL
oran
ge
(199
1),
Tat
oglu
(200
0),
Tom
lin
son
(197
0)(b
)L
ife
cycl
ep
has
eof
the
tech
nol
ogy
Ty
ler
and
Ste
ensm
a(1
995)
(c)
Str
ateg
icim
por
tan
ceof
the
tech
nol
ogy
Ty
ler
and
Ste
ensm
a(1
995)
(d)
Lic
ense
s,p
aten
ts,
kn
ow-h
ow,
etc.
Ger
ing
er(1
988,
1991
(e)
Dev
elop
men
tsp
eed
Bai
leyet
al.
(199
8)(f
)E
xp
erie
nce
inte
chn
olog
yap
pli
cati
onG
lais
ter
(199
6),G
lais
ter
and
Bu
ckle
y(1
997)
,Tat
oglu
(200
0)(g
)H
igh
lyin
nov
ativ
eB
aum
etal.
(200
0)(h
)In
nov
ativ
eou
tpu
t(n
ota
crit
erio
n)
Sh
anet
al.
(199
4)(i
)Im
itat
ive
orin
nov
ativ
ete
chn
olog
yS
han
(199
0),
Eis
enh
ard
tan
dS
choo
nh
oven
(199
6)(j
)In
ves
tsu
ffici
entl
yin
pro
cess
tech
nol
ogy
and
man
ufa
ctu
rin
gca
pab
ilit
yH
ullet
al.
(198
8)(k
)C
omp
lem
enta
rity
ofsk
ills
bro
ug
ht
toth
efu
rth
erd
evel
opm
ent
ofth
ete
chn
olog
ies
Doz
(198
8)D
oz(1
988)
21.Other
(multipleareas)
(a)
Com
ple
men
tary
cap
abil
itie
s/re
sou
rces
/con
trib
uti
ons
Ch
un
get
al.
(200
0),
Dan
iels
(197
1),
Las
serr
e(1
984)
Bro
uth
erset
al.
(199
5)
(b)
Str
eng
ths
inth
efi
eld
ofco
-op
erat
ion
Hof
fman
nan
dS
chlo
sser
(200
1)
Table III.
Firms in searchof established
partners
131
criteria studied into 21 categories: (in alphabetical order) Commitment, Cost, Culture,Finance, Goals, Government, Industry, Internationalization, Learning, Location,Management, Manufacturing, Market, Past ties, Product, Reciprocity, Reputation,Risk, Size, Technology, and “Other” (a multi-area criterion that refers tocomplementary capabilities, resources, and strengths in cooperative activities).
The studies on partner selection criteria are placed in different columns in Table IIIaccording to the nature of the alliance samples S namely, large-large alliances,large-small alliances, small-small alliances, and small-large alliances S with the firstterm in the pair denoting the focal firm and the second its partner. Most of the studiesfall in the last column labeled “mixed and unspecified size,” which include studies thatdo not specify the size of the partners in the alliances studied, or only specify the size ofone party in an alliance while ignoring the relative size of its partners. For example,Geringer (1988, 1991), Glaister (1996), Glaister and Buckley (1997), Al-Khalifa andPeterson (1999), and Kumar (1995) do not specify the size of any of the partners in thealliances. Beamish (1987), Dacin et al. (1997), Hakanson and Lorange (1991), Hittet al.(2000), Tatoglu (2000), Tomlinson (1970), and Tyler and Steensma (1995) specifythat the selecting party (focal firm) is a large firm, and the selected partners are eitherunspecified in size or specified as mixtures of large and small firms. Arino et al. (1997)and Wang et al. (1999) include both small and large firms as the selectors but do notspecify the relative size of their partners. Bailey et al. (1998) and Brouthers et al. (1995)specify that they have small and large firms both as selectors and selected firms. Luo(1997, 1998) specifies that the selected partners are all large firms but does not specifythe size of the selectors. Supphellen et al. (2002) specify that the selectors are small- andmedium-sized companies but are silent on the status of their partners.
As Table III shows, very few studies (only six of them) have small-large alliances astheir research subjects. Only one of them (Forrest and Martin, 1992) investigates theselection criteria small firms used to select their larger partner. The conclusions ofthree other studies may suggest some of the attributes of large firms that the smallfirms might be looking for (see Doz, 1988; Hull et al., 1988; Stuart et al., 1999). Ourexamination of the studies on strategic alliances of entrepreneurial or small firmsreveals that most of the studies do not look at partner selection criteria used by theentrepreneurial firms or their partners (see Table I). However, the results of many ofthe studies provide important information on what partner selection criteria could be.
Forrest and Martin (1992) investigated the alliance experiences and factors thatmake technology related alliances between small biotechnology firms and largepharmaceutical and chemical firms successful. Their study found that largepharmaceutical and chemical firms chose entrepreneurial firms based on technicaland managerial capabilities, trust, compatibility, shared philosophies and attitudes,ties of the entrepreneurial firm with potential competitors, and commitment. Althoughnot much information is given concerning the partner selection criteria used by thesmall firms, the authors implied that the small firms look at the financial resources ofthe large firm. An intangible factor, having to do with the gut feelings of the partners(“essential chemistry”), was found by Forrest and Martin (1992) to be important forboth small and large partners.
Although Forrest and Martin (1992) reported a higher success rate for dedicatedbiotechnology alliance firms in alliances than their larger partners (83 percent versus47.5 percent), it has also been found that startup biotechnology firms that initially
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allied with established potential rivals performed worse on average (Baum et al., 2000).In contrast, Harrigan (1988) found that size did not predict the success of strategicalliances, that is, alliances between partners of similar size are not more successful, interms of venture survival, duration, or subjective assessments of success by thepartners, than those between dissimilar partners. In addition, similarity in status, suchas size, has been emphasized in many studies (e.g. Chung et al., 2000; Daniels, 1971;Geringer, 1991; Li and Rowley, 2002; Podolny, 1994) on partner selection criteria forestablished firms as an important and effective criterion. Thus, there is no consistencyin the results concerning the dissimilarity of size that always exists in alliancesbetween entrepreneurial firms and established firms.
Larson’s (1992) case studies of four entrepreneurial firms engaged in sevencooperative alliances proposed several criteria that should be considered forentrepreneurial firms in the selection of partners: personal reputations and priorrelations, including histories, individual friendships, capabilities, commitment, andmutual benefits; firm’s reputation, including long-term learning opportunities ofexpertise and innovative capabilities of key suppliers and customers, ease ofcommunication and working relationships, enhancement of reputation, and potentialimpact on growth; mutual economic advantage; and trust developed in the trial period(Larson, 1992, pp. 84-8). Some of these criteria have received empirical support in otherstudies. For example, Hu and Korneliussen (1997, p. 168) found that personal ties havea positive effect on the performance of small firms in strategic alliances. BarNir andSmith (2002, p. 228) also found that personal ties of managers in small businesses leadto more interfirm alliances. The importance of ease of communication has beenconfirmed by Deeds and Hill (1999) in an investigation on the effectiveness ofopportunism deterrence in dedicated biotechnology firms. They found that strongrelationships between the partners, such as congruent backgrounds and frequentcommunication, serve as a much more effective deterrent to opportunistic actions thanalliance-specific investments or contingent claims contracts, suggesting that theseshould be used as selection criteria by entrepreneurial firms.
The exploration of the determinants of involvement in strategic alliances forentrepreneurial firms represents another research avenue. Kelley et al. (2001) foundthat technology-based and product-based knowledge are both positively related to thenumber of alliances formed. Powell and Brantley (1992) found that relatively larger,older, more diversified, and publicly-owned entrepreneurial firms have moreagreements, suggesting that the partners of entrepreneurial firms used size, age,product diversification, and public funding as the selection criteria. However, Shan et al.(1994) found that larger startup biotechnology firms, with more existing innovationoutput, did not attract more large firms into cooperative relationships. Only publicfunding was related to alliance formation, suggesting that perhaps neither innovativeoutput nor size were used by established firms in choosing startup firms as partners. Infact, Shan’s (1990) study of a similar sample found that those new biotechnology firmsthat were smaller and used imitative rather than innovative technology entered intomore cooperative agreements.
Chen and Li (1999) found that the number of strategic alliances that provideaccess to technology, not to manufacturing and marketing areas, has a positiveimpact on product development for US semiconductor startup firms. This resultsuggests that entrepreneurial firms should choose partners that can provide access
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to technology, not necessarily manufacturing or marketing, if they are focused onnew product development. However, an exclusive focus on new productdevelopment may not be enough for the long-term survival and growth ofentrepreneurial firms. An emphasis on access to process and manufacturinglearning is often needed for an entrepreneurial firm to grow out of thetechnology-only stage, so that alliance partners with potential contributions tomanufacturing and marketing should be preferable.
It is apparent that some of contextual factors that have been identified in the partnerselection criteria literature, such as motivation of the partnership and partner’s size andother characteristics, distinguish strategic alliances between entrepreneurial andestablished firms from those between established firms only. For both entrepreneurialfirms and established firms, the differences of size, status, and other characteristicsshould provide sufficient justification for extra caution when considering the formationof strategic alliances, starting from the selection of the partner.
Guidelines for partner selection by entrepreneurial firmsStudies have generally proposed or found empirically that partner selection criteria areinfluenced by the motivations for entering into alliances as well as the characteristicsof the firms, such as size, organizational type, industry, and organizational culture.When an entrepreneurial firm teams up with an established firm or even anotherentrepreneurial firm, it is likely that the partners in both scenarios differ in size,motivation, and organizational culture. Entrepreneurial firms and established firms arequite different from each other (see Table II). Such differences usually result in conflictsbetween them. As our earlier discussion shows, entrepreneurial firms should not followthe conventional partner selection criteria without a great degree of caution.
When alliancing with an established firm, the entrepreneurial firm should keep inmind that the partner is different from itself in structure, communication, decisionmaking, and so on, and be aware of possible conflicts or risks that may arise from thesedifferences. We propose the following list of partner selection criteria that anentrepreneurial firm should adopt when it considers forming strategic alliances withestablished firms.
Compatible motivationsSometimes established firms form strategic alliances with entrepreneurial firms thatpossess promising technology just to preempt possible partnerships between theentrepreneurial firms with their competitors, or to forestall the potential threats to theirown mature products posed by the new technology. Such self-interested motivationswould not of course be overtly a part of the negotiations. The entrepreneurial firmshave to pay attention to other cues of whether or not the established firms’ realmotivations to form strategic alliances with them are to develop new products, so thatthere would be compatible objectives for survival and growth. The existence of a fewmajor competitors (of the established firm) that are also actively seeking to developnew products using the same new technology through interfirm alliances is usually asign that a blocking strategy is being attempted. Such signs are even stronger whenthe entrepreneurial firm is leading the technological development. A lack of a detailedaction schedule for the alliance is another cue that the established firm is not reallyinterested in developing the technology but in diverting the immediate threats.
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An example is the alliance between Telefonica S.A. and Bidland Systems. Becausethe valuable resources of technology startups are often intangible knowledge orinformation, learning races can actually finish even before the alliances enter into theoperation stage. Established firms’ possible motivations are especially important forentrepreneurial firms. The hidden motivation of Telefonica made it almost impossiblefor Bidland Systems, a San Diego-based startup, to survive at all (Peterson, 2001).Bidland Systems was a leading provider of easy and affordable online auctionsolutions (Business Wire, 2000). It was enticed into strategic alliance talks withTelefonica S.A., the Spanish telecommunication giant, and its American subsidiary,Telefonica B2B, which reached a joint venture and investment agreement with Bidlandin August 2000 (Business Wire, 2000). However, several months later, Telefonicarefused to abide by the agreement. Bidland then filed a lawsuit contending thatTelefonica launched its own venture after having “obtained complete access toBidland’s proprietary business-to-business auction and dynamic e-commerce businessinformation and technology” (Business Wire, 2000). Telefonica apparently had anopportunistic motivation towards Bidland’s attractive technology, which was at thesame time relatively easy to appropriate.
Access to manufacturing and marketing functionsLong-term survival and growth objectives necessitate entrepreneurial firms to obtainmanufacturing and marketing facilities to exploit their innovative capabilities intechnology. That would improve their chances for transforming themselves from afragile organization into a stable one. However, one of the weaknesses oftechnology-based entrepreneurial firms is the lack of attention paid to marketingstrategies (Jones-Evans and Westhead, 1996), and the literature on marketing andtechnology-based entrepreneurship has not done a good job in explaining howtechnology-based entrepreneurs take on marketing their innovations successfully(Boussouara and Deakins, 1999, p. 207). We propose that forming strategic allianceswith established firms can be one avenue for entrepreneurial firms to learn aboutmarkets and build up marketing resources and experience. Hence, entrepreneurialfirms should choose established firms that are willing to offer access to manufacturingand marketing resources.
As an illustration, consider the successful partnership between Glaxo Holdings PLCand ICOS Corp. This alliance marked a major transition in alliance making betweenentrepreneurial biotechnology firms and established pharmaceutical firms during theearly 1990s, a transition from “mere money-for-ideas or money-for-products swaps”(Axinn, 1992, p. SR10) to marketing agreements in which the entrepreneurial firms aremore involved. Based on the complementary strengths of ICOS’s molecular biologyexpertise and Glaxo’s drug discovery expertise, a shared R&D and co-promotionagreement was signed in 1991 (Biotech Patent News, 1991) for developing therapeuticagents for cardiovascular disease and asthma (Preece et al., 1999). Two years after thecompounds they jointly developed entered Phase 1 testing (PR Newswire, 1995), ICOSgained all commercial rights to the compounds, and was well-positioned for furtherresearch and commercialization independently (Worldwide Biotech, 1997). In alliancesthat go beyond mere technology or product transfer, startups like ICOS can learn fromtheir partners’ technology expertise and get involved in interacting with consumers,thereby strengthening their capability to survive and grow by themselves.
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Involvement and commitment of middle managersAlthough alliance deals are made between the top managers of both partnering firms,the middle managers in established firms are the ones who usually carry out theoperations. In order to avoid alienation or even sabotage by the middle managers, whosometimes do not understand the opportunities of alliances but rather feel threatenedby outsiders, the entrepreneurial firms need to emphasize the importance of involvingmiddle managers from the very beginning. Whether the middle managers from theestablished firms are involved and committed to the alliance should be one of theimportant criteria that entrepreneurial firms should use in selecting partners.
Consider the case of the partnership between Alza and Ciba-Geigy, now terminated.This research alliance between Alza Corp., a California-based entrepreneurial companywhich has been a subsidiary of Johnson & Johnson since 2001, and Ciba-Geigy ofSwitzerland, which is now part of Novartis AG after it merged with Sandoz Inc. in1996, showcases the clash of organizational cultures between an entrepreneurialcompany and an established pharmaceutical giant and the resulting resentment of themiddle managers (Doz, 1996, pp. 65-6). The real reason for the dissolution, however, asrevealed in Doz’s (1996) interview with executives from both companies, is the fact thatAlza personnel were deeply frustrated by the bureaucratic structures and lengthy andformal procedures in Ciba-Geigy. When inter-firm cooperation was needed between topmanagers or lab scientists, it was seldom possible without middle managers beinginvolved. The lack of involvement by middle managers in Ciba-Geigy apparentlythwarted the interaction attempts of Alza’s personnel, despite the enthusiasm of the topmanagement. The separation of middle managers from the top management in largeestablished firms makes it crucial to involve middle managers in the negotiation stageand, thereafter, the operation of alliances. Whether the established firm can takemeasures to make its middle managers accessible for its entrepreneurial partner shouldbe a vital criterion that a startup firm should emphasize in selecting its alliance partner.
Dedicated task forcesIn addition to committed middle managers, the prospect that a task force dedicated tothe coordination of the alliance partners will be set up should also receive emphasis.The reason is that even if the middle managers are committed, the slow, multi-levelcommunication within the established firms is very often the source of frustrations andconflicts. The importance of a dedicated alliance task force has already beendemonstrated by the fact that many companies have set up separate departments thatdeal with strategic alliances. When such a department is not set up, at least a dedicatedtask force should be envisioned by the established firm. The entrepreneurial firm,therefore, should keep this in mind as a selection criterion.
A good example here is the success of the partnership between, again, Alza Corp(now a subsidiary of Johnson & Johnson) and Theratechnologies Inc. (a Canadianbiopharmaceutical company) since 2001. This success can be attributed to Alza’sdedicated task force comprised of personnel across the various stages of thecooperation, and the additional support of the alliance management department,according to Theratechnologies’ Chief Scientific Officer, Dr Abribat (Delivery Times:An Alza Publication, 2003). These dedicated task forces have enabled Alza to tailortheir approach to each partner and respond quickly to their needs. Only three monthsafter their first meeting in a conference, the two companies reached a cooperative
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agreement with a clearly defined strategy, detailed R&D activities, and time frames.Now three development projects between the two companies are progressing“extremely well.” Although a separate department for alliance management is notalways necessary, at least a project-level task force should be put together. The abilityof an established firm to devote a task force for a partner should be one of the topcriteria that an entrepreneurial firm should consider when selecting alliance partners.
Intention to act with speedThe difference in the criticality of an alliance between two partners may result inconflicts when the entrepreneurial firm is eager to make the alliance work while theestablished firm wants to take some time. Therefore, the entrepreneurial firms shouldmake sure that the potential partner is just as keen to act with speed as they are tomake the alliance work. Such intentions can be best manifested in detailed action plansand specific schedules. A lack of intention to act with speed can be traced to mereenthusiasm without genuine action plans.
Consider the case of the successful partnership between Roche Holdings Ltd, a giantSwiss pharmaceutical company, and Trimeris Inc., a North Carolina-based biotechrising star, in developing anti-HIV drugs (Seachrist, 1999). Trimeris’s vice president,Michael Rechny, was convinced by Roche’s corporate profile as a leader in drugdevelopment, and believed that Roche was as anxious as Trimeris about “a timelyintroduction of a whole new class of anti-retroviral agents,” and would help them speedup the timely development of the two promising anti-HIV fusion inhibitors, T-20 andT-1249 (Seachrist, 1999). Within two years of the formation of the partnership in 1999,the two products were successfully developed and were granted fast-track status bythe FDA, and the two companies extended their partnership for at least three moreyears (Coghill, 2001). The intention to act with speed, which was a major attraction forTrimeris, is a big concern for entrepreneurial firms, because their investors usuallydemand immediate success in technology advancement and product development.Failure to have quick results often is a matter of survival for startup firms. This caseshows how significant the intention to act with speed on the established firm’s part isin an alliance with entrepreneurial startups.
Concluding remarksEntrepreneurial firms have increasingly entered into strategic alliances, especially intechnology-based industries. They seek developmental resources from establishedpartners. However, the asymmetries in power, motives, and learning ability betweenentrepreneurial firms and their established partners make it imperative that carefulattention is given to the selection of alliance partners. We have noted howentrepreneurial firms are different from established firms in terms of intrinsic andalliance making factors, including resources, innovativeness, status in competition,legitimacy, history/track record, economic/political power, organizationalcharacteristics, business focus, planning horizon, control over technology, confidencein the technology, interorganizational interfacing, criticality of alliancing, strategicpurpose, and consistency in commitment. Such differences should result in differentapproaches for entrepreneurial firms in strategic alliance management than thosebetween established firms, which are the major subject of strategic alliance research.Our focus in this paper was on partner selection criteria, the first concern in strategic
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alliance management. We found that very few partner selection criteria studies havebeen done with particular reference to entrepreneurial firms.
For empirical testing of whether the guidelines proposed here lead to more effectiveperformance of entrepreneurial firms engaging in strategic alliances with establishedfirms, care should be taken in measuring success in appropriate terms. For instance,alliance terminations should not be automatically considered as failures – as someresearchers have done – because many alliances are agreements that are essentiallytemporary in nature (Das and Teng, 2000b). Similarly, an acquisition of anentrepreneurial firm by its established partner, or a third party, may or may not be anindicator of alliance failure, depending on the entrepreneur’s expectations. Contextualfactors, such as industry, stage of technology development, size of the alliance partner,location of the firms, and motives of the alliances, may also need to be considered.Future researchers need to examine if there are moderating factors that influence therelative importance of the guidelines we have proposed here. Another significantresearch question is how entrepreneurial firms can better exploit the resources inestablished firms once the alliances are set up.
Based on our analysis of how entrepreneurial firms differ from established firmsalong a number of dimensions, we framed several recommendations urgingentrepreneurial firms to take note of certain characteristics of established firms inselecting them as alliance partners. Entrepreneurial firms should choose thoseestablished firms that are motivated to develop technology or product rather thansimply to meet the threat of a new technology, that are willing to provide access tomanufacturing and marketing functions, that involve committed middle managers inaddition to enthusiastic top managers, that will set up dedicated task forces dealingwith the alliances, and that are committed to act immediately and with speed. Webelieve that by being especially attentive to these factors in selecting established firmsas partners, entrepreneurial firms would have better prospects for survival andgrowth.
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Corresponding authorT.K. Das can be contacted at: [email protected]
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