Making more of alliance portfolios: The role of alliance portfolio coordination

Journal Pre-proof Making More Of Alliance Portfolios: The Role Of Alliance Portfolio Coordination

Raymond Van Wijk, Anna Nadolska PII:

S0263-2373(19)30153-7

DOI:

https://doi.org/10.1016/j.emj.2019.12.009

Reference:

EMJ 1971

To appear in:

European Management Journal

Received Date:

02 August 2018

Accepted Date:

13 December 2019

Please cite this article as: Raymond Van Wijk, Anna Nadolska, Making More Of Alliance Portfolios: The Role Of Alliance Portfolio Coordination, European Management Journal (2019), https://doi.org /10.1016/j.emj.2019.12.009

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MAKING MORE OF ALLIANCE PORTFOLIOS: THE ROLE OF ALLIANCE PORTFOLIO COORDINATION

RAYMOND VAN WIJK ANNA NADOLSKA Department of Strategic Management & Entrepreneurship Rotterdam School of Management Erasmus University Rotterdam P.O. Box 1738 3000 DR Rotterdam Tel: +31 10 408 1601; Email: [email protected]

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MAKING MORE OF ALLIANCE PORTFOLIOS: THE ROLE OF ALLIANCE PORTFOLIO COORDINATION ABSTRACT Alliance portfolios enable firms to access and integrate multiple resources from different, simultaneous partners. We assess the extent to which alliance portfolio coordination benefits focal firms along three alliance portfolio characteristics: alliance portfolio size, the complementarity of the resources available through the portfolio, and the degree to which relation-specific investments are made across the portfolio. Based on a questionnaire completed by 444 Dutch companies, we found that the three portfolio characteristics play an important role in creating benefits for focal firms through their portfolios. Additionally, our findings suggest that alliance portfolio coordination is an important element in dealing with the challenge of managing portfolios, in that it shapes the effect of the other portfolio characteristics.

KEYWORDS Alliance portfolio; portfolio size; resource complementarities; relation-specific investments; alliance portfolio coordination; alliance benefits

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Journal Pre-proof 1. INTRODUCTION Alliance portfolios provide firms with access to resources of multiple partners simultaneously (Asgari, Singh & Mitchell, 2017; Lavie, 2007). The extent to which a firm is able to enhance its competitiveness and derive benefits from its portfolio is dependent on the creation of synergistic effects deriving from the synthetization of resources and the creation of a coherent portfolio (George et al, 2001; Wassmer & Dussauge, 2011a). To answer the question of how firms capture benefits from their alliance portfolios, prior research has followed two separate avenues. The first approach has concentrated on the configuration of alliance portfolios to understand how the design of the portfolio, its structure, and the characteristics of its constituent partners influence portfolio outcomes. For example, studies have examined portfolio size (Deeds & Hill, 1996), partner rivalry (Baum, Calabrese & Silverman, 2000), partner resource contributions (Lavie, 2007), portfolio complexity (Duysters & Lokshin, 2011), resource interdependencies (Wassmer & Dussauge, 2011b), partner heterogeneity (Cobeña, Gallego & Casanueva, 2017), and partner diversity (Cui & O’Connor, 2012; Oerlemans, Knoben & Pretorius, 2013; Wuyts & Dutta, 2014). The second approach has focused more on the management processes required to make alliance portfolios successful (Faems, Janssens & Neyens, 2012; Parise & Casher, 2003; Wassmer, 2010). This stream of research has examined how alliance portfolio management capabilities are developed and exploited (Heimeriks & Duysters, 2007) in an attempt to determine the types of management processes that can help a focal firm create synergies and capture benefits (Goerzen, 2005; Hoffmann, 2005; Oerlemans et al, 2013; Subramanian & Soh, 2017). In this paper, we combine these two perspectives to understand whether management processes enable firms to derive more benefits from the configurational characteristics of their alliance portfolios. We concentrate on one specific management process – alliance portfolio coordination – which, through its ability to allow firms to synthesize resources, knowledge,

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Journal Pre-proof activities, and strategies across different partners in a portfolio, functions as a key component of alliance management capability (Degener, Maurer & Bort, 2018; Hoffman, 2005; Sarkar, Aulakh & Madhok, 2009). In addition to this, alliance portfolio coordination helps focal firms meet objectives, accumulate relevant knowledge, and enhance portfolio performance (Schilke & Goerzen, 2010), as well as improve the “health” of a firm’s alliances via its central activity role of creating a holistic and integrated set of alliances (Sarkar et al, 2009, p. 585). Hence, in this paper, we develop theoretical arguments for whether and how alliance portfolio coordination helps focal firms realize synergistic effects and build upon the benefits that stem from structural elements of the portfolio (cf. Faems et al, 2012). Given that resources constitute the main drivers of synergy and value creation, we take a resource perspective and borrow from the resource-based view, the relational view, and network theory to develop our hypotheses (Dyer & Singh, 1998; Dyer, Singh & Hesterly, 2018; Lavie, 2006; 2007). We focus on three key configurational characteristics of an alliance portfolio that capture the potential number, quality, and competitiveness of the resources: portfolio size, portfolio resource complementarity, and portfolio-level relation-specific investments, respectively. In this paper, we argue that alliance portfolio coordination facilitates the harmonization between individual partners and creates a portfolio effect (Parise & Casher, 2003), increases the coherence of the portfolio, and adds to the portfolio as an “integrated resource system” where resources are synergistically aligned (Wassmer & Dussauge, 2011a, p. 880). As a result, coordination strengthens a firm’s ability to extract more benefits from a larger number of resources made available by more partners, qualitatively align complementary partner resources, and render resources more competitive by cospecializing them through specific investments. In sum, we contribute to the alliance literature by establishing alliance portfolio coordination as a key managerial task through which firms derive more benefits from an alliance portfolio.

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Journal Pre-proof We develop hypotheses and test them empirically using data obtained through primary data research with a survey methodology. Our survey was returned by executive-level managers, who were in charge of their respective firm’s alliances. A total of 444 Dutch companies, from a wide variety of industries – from construction to manufacturing, and from trade to financial services – were included.

2. THEORETICAL BACKGROUND AND HYPOTHESES Defined as a firm’s set of direct simultaneous alliances (Lavie, 2007; Parise & Casher, 2003), alliance portfolios allow firms to draw on resources of multiple partners, which in turn enables firms to create synergies with and across partners. Such synergies may be observed as subadditive cost and/or superadditive value (Tanriverdi & Venkatraman, 2005). Alliance portfolios present firms with an opportunity to create value and increase innovation by enhancing synergies emerging from the technological and knowledge resources of its partners (Duysters & Lokshin, 2011). Alliance portfolios may also lead to cost synergies; for example, when a focal firm increases its performance by pooling its manufacturing resources (e.g., a plant) with those of its partners to procure supplies at a lower cost and enhance overall efficiency. In our study, we adopt a firm-level perspective “akin to the notion of the egocentric network which comprises the focal firm (ego) [and] its set of partners (alters)” (Lavie, 2007, p. 1188). In that vein, we define alliance portfolio benefits as the performance gains that a focal firm would not be able to attain in the absence of the portfolio, and results from cost and value synergies across partner resources and/or from spillovers (cf. Khanna, Gulati & Nohria, 1998). In that sense, portfolio benefits for a focal firm include increased financial performance, market growth, increased market share, growing exports, and improved efficiency (Luo, 1997), as well as the gains from innovative activity that result from integrating knowledge and technologies

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Journal Pre-proof (Duysters & Lokshin, 2011; Lee, Kirkpatrick-Husk & Madhavan, 2017). Additionally, a focal firm may also benefit from new knowledge it has learned from its partners (Lane, Lyles & Salk, 2001), which it can choose to apply and exploit outside of the alliances. In other words, a focal firm enjoys benefits when its alliance partners help it become more competitive because either the resource contributions of all alliance partners create value (part of which is captured by the focal firm) or the resource contributions can be exploited by the firm beyond the alliance. A key component of alliance portfolio capability is alliance portfolio coordination. According to Sarkar et al. (2009, p. 588), “portfolio coordination comprises various organizational processes by which a focal firm engages in integrating and synchronizing activities, strategies, and knowledge flows across partners in their alliance network, [so that] a collection of disparate alliances becomes an integrated, holistic portfolio of interorganizational strategic assets.” In the context of alliance portfolios, firms coordinate: 1) individual alliances; 2) various processes between partners in the portfolio; and 3) the alliance activity of different business units internally (Hoffmann, 2005; 2007). While interorganizational coordination of individual alliance partners ensures that dependencies between partners are governed, partner interests are reconciled and information is shared to align objectives, alliance portfolio coordination addresses the interdependencies between different alliance partners (Hoffman, 2005; Schilke & Goerzen, 2010). In other words, alliance portfolio coordination facilitates the creation of a portfolio effect (Parise & Casher, 2003), adding to the harmonization between individual partners and to the synergistic alignment of resources (Wassmer & Dussauge, 2011a). Hence, in line with Faems et al. (2012) and Wassmer (2010), we develop theoretical arguments on how alliance portfolio coordination as a management process shapes the effect of the structural characteristics of portfolio size, portfolio resource complementarities, and portfolio-level relation-specific investments.

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Journal Pre-proof 2.1. Alliance portfolio size and alliance portfolio coordination Extant research assesses portfolio size by the number of partners in the portfolio (e.g., Baum et al, 2000; Lahiri & Narayanan, 2013). Firms engage in alliances to gain access to resources they do not possess, such as knowledge, technological resources or distribution channels, or to scale up resources they own, such as manufacturing plants or market presence. Additionally, partners may provide access to other network resources through their own alliances. Consequently, a larger portfolio increases the number of resources potentially available to a firm. Prior research shows that the impact of portfolio size on portfolio benefits can be both positive and negative. On the one hand, a larger portfolio increases a firm’s potential set of available resources and creates possibilities to access and tap into relevant productive resources and extract more benefits from an alliance portfolio (Ahuja, 2000; Baum et al, 2000, Stuart, Hoang & Hybels, 1999; Wassmer, 2010). On the other hand, as the size of an alliance portfolio grows, cognitive limits, organizational processes and increased cost may inhibit a firm from dealing with the quantity of resources made available through the portfolio (cf. Deeds & Hill, 1996; Duysters, De Man & Wildeman, 1999; Duysters & Lokshin, 2011). As a result, prior research has found that the relationship between alliance portfolio size and benefits has the shape of an inverted U. In this paper, we suggest that alliance portfolio coordination can help firms derive more benefits from the size of their portfolio for two reasons. First, the mechanisms employed by firms to coordinate their alliance portfolios (such as frequent interactions with alliance partners) enable them to effectively manage a larger number of partners and to have a better grasp of the type and nature of the resources they contribute. By frequently assessing the contributions of the partners in the portfolio, a firm will have a clearer view of the resources in possession by its partners, and a better understanding of how these can contribute to resources managed by both the focal firm and the other partners in the portfolio. Firms are also able to

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Journal Pre-proof increase the reliability and relevance of the resources to their own operations and potentially create more salient synergies. Consequently, firms will have a more complete picture of which resources are redundant, which are unique, and which can be shared and used more effectively (Sarkar et al, 2009). This, in turn, helps to derive more benefits from a (growing) number of resources. Secondly, firms coordinating their alliance portfolio are also in a better position to manage the increased partner diversity that normally comes with a larger portfolio, as well as the diversity of the resources they contribute (Degener et al, 2018; Duysters et al, 2012; Subramanian & Soh, 2017). Because managers interact and communicate more frequently with their colleagues elsewhere within the firm and with their counterparts from their alliance portfolio partner firms, the focal firm and its partners develop shared schemas and a common language. This process thus results in an enhanced capacity to absorb the knowledge required to exploit the resources (cf. Cohen & Levinthal, 1990; Martinez, Zouaghi & Garcia, 2017). In that vein, coordination facilitates the alignment of diverse resources. A firm coordinating their alliance portfolio is therefore likely to be able to grow a larger portfolio from which it can capture benefits before cognitive and organizational limits prevent such benefits from accruing. For example, mobile chip developer ARM (Advanced RISC Machines Holdings Plc) introduced partner managers that take on the responsibility for a set of partners and meet regularly amongst themselves and with regional managers to discuss the alliances. As a result, ARM is able to maintain a network of more than 1,000 partners, in which it has the opportunity to access diverse technological resources from different partners, adjust and integrate those resources into new processor designs, and subsequently license the designs to other partners in its network (O’Keeffe & Williamson, 2002). By adding partner managers as the portfolio grows, ARM has been able to align the technologies provided by its partners with its own and those of other partners, as well as enhance its processor designs. As a consequence, as ARM

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Journal Pre-proof has increased its coordination efforts, it has experienced fewer negative effects of a growing portfolio, and has even been able to leverage portfolio size. In sum, alliance portfolio coordination helps to overcome the cognitive limits and reduce the costs that come from managing a larger portfolio. Formally:

Hypothesis 1: As alliance portfolio coordination increases, the inverted-U relationship between alliance portfolio size and alliance portfolio benefits will become more linear and positive.

2.2. Complementary resources and alliance portfolio coordination While portfolio size reflects the quantity of resources available to a focal firm, resource complementarity assesses the quality of the partners’ resources in terms of their alignment with the resources of the focal firm (Furlotti & Soda, 2018). Partner resources are complementary when they address gaps and weaknesses in the focal firm’s resources (Gulati & Gargiulo, 1999). Complementarity helps to increase the alliance portfolio benefits in two ways: 1) through increased competitiveness; and 2) through facilitation of alliance formation and partner choice. In alliance dyads, complementarities increase the competitive potential of the combined resources and lead to more value creation (Dyer & Singh, 1998). In alliance portfolios, resource complementarities may further increase the potential for value creation as multiple partners are involved and resource interdependencies increase (Cobeña et al, 2018; Wassmer & Dussauge, 2011b). Since multiple partners are involved, rival firms experience more difficulty in assessing the value of the resources (Harrison et al, 2001). Furthermore, even if rivals were able to completely assess the resource combination and its value creation potential, it would be

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Journal Pre-proof difficult for them to imitate the resource package, as they would need to duplicate all resources contributed by the partners (cf. Lavie, 2007). In addition to increasing competitive potential, complementarity of resources facilitates alliance formation and partner choice. Studies show that the complementarity of resources is often evident before firms initiate the negotiation process of forming an alliance (Chung, Singh & Lee, 2000; Gulati, 1995; Matsuhashi & Greve, 2009). Therefore, a potential partner is more likely to reciprocate its resources and is thus more likely to be willing to share sensitive product, customer and market information when it sees that the resources provided by the focal firm and its existing partners are complementary to its own (Parise & Casher, 2003). By adding the partner to its portfolio, the focal firm can use the information to fine-tune the way in which it will combine the resources with those in the portfolio, and the partner gains access to valuable complementary resources of both the focal firm and its other partners (Cobeña et al, 2018; Degener et al, 2018). Since resource complementarities can exist between not only partners and the focal firm but also amongst partners themselves, interdependencies between partners increase as portfolio resource complementarities increase (cf. Wassmer & Dussauge, 2011b). To strengthen collaborative synergies across the portfolio, firms need to effectively manage the interdependencies between portfolio members and “the flow of resources and knowledge across their partner portfolio” (Sarkar et al, 2009, p. 588). Alliance portfolio coordination helps firms harmonize the resources dispersed over various organizations, and over the various individuals working for these organizations (Schilke & Goerzen, 2010). Through coordination, firms gain a more holistic and integrated insight into their portfolio and are therefore able to identify which, and to what extent, resources are interdependent and complementary to their own resources, which of the resources of different partners are complementary to each other, and which partners own which resources (cf.

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Journal Pre-proof Degener et al, 2018; Goerzen, 2005; Hoffman, 2005; Sarkar et al, 2001; 2009; Schreiner, Kale & Corsten, 2010). Furthermore, since alliance portfolio coordination requires more frequent interaction with partners, the focal firm understands the way in which resources are used at the partner organization, and how to adapt them to make them more productive together with its own resources and with the resources provided by other portfolio partners (Lavie, 2006). Not only can firms that coordinate their alliance portfolio tap into and enhance the competitive potential of complementary resources, they also have the option to search for and select portfolio partners that are more likely to provide them with access to valuable complementary resources (cf. Degener et al, 2018; Gulati, 1995). By coordinating the alliance portfolio, the focal firm develops a more complete understanding of the complementarities in its portfolio, thus enabling it to more effectively select partners carrying the resources it needs. Since a firm that coordinates its alliance portfolio is also more likely to be viewed as a reputable alliance partner (cf. Dyer, Kale & Singh, 2001), such potential partners are also more likely to contribute their resources, even when the resource combination does not immediately show competitive potential. For example, ARM selects partners that “fill an emerging capability gap in ARM” (O’Keeffe & Williamson, 2002, p. 6). The technological resources and know-how provided by a new ARM partner must complement the technology and knowledge already developed by ARM together with its existing set of partners. Both the partner and ARM benefit from these technological resource combinations as such a process helps ARM create design wins from which they can develop derivative base chip models to be implemented in products of other partners to the benefit of all those involved. Coordination of its portfolio provides ARM with the ability to have a better idea of which resources reside with which partners and how they complement existing resources and resource combinations. ARM’s partner managers play an important role in such coordinative efforts, as they understand partners’ needs, bring partners

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Journal Pre-proof in contact with the appropriate people within ARM, and often have a better picture of what goes on in different divisions of the partner firm than the partner itself. Therefore:

Hypothesis 2: As alliance portfolio coordination increases, the positive relationship between alliance portfolio resource complementarities and alliance portfolio benefits will become stronger.

2.3. Relation-specific investments and alliance portfolio coordination While portfolio size and resource complementarity assess the quantity and quality of resources, relation-specific investments assess whether the pooled resources are likely to become cospecialized and more competitive. Relation-specific investments play a critical role in the functioning, governance, and success of individual alliances (Dyer & Singh, 1998; Kang, Mahoney & Tan, 2009). In general, prior literature has argued that the relationship between relation-specific investments and the benefits gained from alliances reaches an optimum, after which the benefits start decreasing. On the one hand, relation-specific investments increase the specificity of the resources for which the investments are made, producing assets that are customized for a particular user or transaction (Joskow, 1987; Klein, Crawford & Alchian, 1978; Williamson, 1991). Cospecializing the resources of multiple partners in a portfolio by making multilateral relationspecific investments produces integrated resources that are difficult to imitate by rivals due to increased resource interdependencies (cf. Madhok & Tallman, 1998). By making relationspecific investments, a firm also signals trust to the partner by indicating that it intends to pursue the alliance for a longer period (Dyer, 1997; Gulati, Khanna & Nohria, 1994). Partner firms are thus more likely to reciprocate the investments. The increased competitiveness of the resources presents a focal firm with the opportunity to derive more benefits, and the increased

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Journal Pre-proof resource interdependencies tie in partners as value gets created from their multilateral investments. On the other hand, relation-specific investments may increase the risk of opportunistic behavior through hold-up (i.e., when a relation-specific investment is not reciprocated by a partner) (Heide & John, 1988; Martinez-Noya, Garcia-Canal & Guillen, 2013). When the relation-specific investments across multiple partners in a portfolio become more sizable, the focal firm may be exposed to excessive risk in that the incentive of one or more partners to behave opportunistically increases. With multiple partners, it is more likely that any opportunistic behavior on behalf of one partner goes unnoticed or is unaddressed, which may signal to others that behaving opportunistically is advantageous. Also, as the focal firm continues to make relation-specific investments, it will become inherently more difficult to ascertain whether relation-specific investments are reciprocated. In other words, transaction costs increase; the focal firm needs governance mechanisms to guide the transactions (cf. Parkhe, 1993), but the value of all the resources being traded decreases. By coordinating its portfolio, a focal firm is better positioned to further enhance the value created by cospecializing resources through relation-specific investments. Portfolio coordination provides a firm with more information about partners’ intentions and likelihood of behaving opportunistically, as well as the ability to manage differing objectives and conflicts (Degener et al, 2018; Hoffmann, 2007). Because of its coordinative activities, the focal firm also signals its own genuine and deliberate intentions, and so solidifies its reputation as a trustworthy alliance partner. As a result, partners will be less likely to behave opportunistically and take advantage of the focal firm. Since alliance portfolio coordination also facilitates the screening and assessment of resources brought in by partners, a firm is able to select the most relevant resources for cospecialization, which will consequently become more idiosyncratic and more competitive (cf. Harrison et al, 2001; Lavie, 2006). In this case, not only does the

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Journal Pre-proof focal firm obtain more benefits, such benefits are more likely to accrue to the partners as well (cf. Dyer, 2007; Dyer & Hatch, 2006), thus increasing the likelihood that resources and investments are reciprocated. Simply put, we suggest that a firm that coordinates its alliance partners in its portfolio is less likely to run a risk when it makes relation-specific investments. Firms that actively coordinate their alliance portfolios create more value from their cospecialized resources and are less affected by the negative effects of relation-specific investments that are set in motion as they pass a certain threshold. For example, ARM makes relation-specific investments in its partners to develop new chip designs that incorporate technology and knowledge from said partners. These designs are then further developed and licensed to other partners in its network (O’Keeffe & Williamson, 2002). By coordinating its alliance portfolio through partner managers, ARM is able to make partners dependent on them and increase its reputation as a credible partner. Opportunistic behavior on behalf on any of the partners will be more likely observed by partner managers, and partners will anticipate this. If a partner behaves opportunistically regardless, ARM will be given no choice but to expel them from the network. ARM would be foolhardy to use and share with a cheating partner processor technology developed with other partners. The noncheating partners will stop processor co-development as it may spill over to the cheating partner. Based on the notion that any partner would struggle to provide the same competitive product offering with its own limited resource base, there is a lack of incentive to behave opportunistically. In that vein, ARM is able to continue making relation-specific investments, and its coordinative ability helps it to derive more benefits. In sum:

Hypothesis 3: As alliance portfolio coordination increases, the inverted-U relationship between relation-specific investments and alliance portfolio benefits will become more linear and positive.

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3. METHODOLOGY To test the hypotheses, we used data obtained in 2011 through a questionnaire completed by 444 Dutch companies from a wide variety of industries, ranging from construction to manufacturing, and from energy to (financial) services. Dutch companies operate in one of the most innovative and competitive economies in the world, make use of alliances to a relatively high degree (cf. Schilling, 2009), and often have alliance departments, thus making them particularly suited for observing patterns of interest.

3.1. Sample To create our sample, we used company information available from Reach, a database administered by Bureau Van Dijk/Thomson Financial that contains information on all organizations that are officially registered and situated in the Netherlands. Since alliances are used for a variety of purposes in different industries (cf. Schilling, 2009), we included companies with more than 50 employees from all industries. This resulted in an initial sampling frame of 9,055 companies. The entries of these companies were manually checked for errors, typographical mistakes, duplicates and other erroneous information. This resulted in the deletion of another 276 companies, and a final sampling frame of 8,779 companies.

3.2. Data collection To obtain the data with which to test our hypotheses, we administered an online questionnaire. Prior to this, we tested the questionnaire and the online invitation process using four specialists in the research field. Their feedback on content and user-friendliness were used to optimize the questionnaire and the survey process in general.

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Journal Pre-proof To reduce measurement error and to increase the response rate, various measures were taken (Dillman, Smyth & Christian, 2009). First, we personalized the invitations, by including company and respondent names. Second, we crafted the questionnaire in two languages, Dutch and English, since respondents could have potentially been foreign. To ascertain that no mistranslations were made, we had the questionnaire translated and back-translated by language experts prior to its administration. Third, we assured our respondents that the information they provided would be treated confidentially. Fourth, we offered respondents the opportunity to receive a summary of the research findings. Finally, a complementary website was created to support the research initiative and enhance its professional appeal. The questionnaire was administered in three waves. A week after the initial invitation, we noticed that many respondents viewed the email as spam regardless of the measures we had taken. Therefore, we approached the companies in our sampling frame by phone. During the phone calls, we asked to be forwarded to one of the executive managers we mentioned in our email. A week after the respondents received their first invitation, we sent out a reminder, which we repeated again a week later. After those three weeks, a total of 537 companies filled out the questionnaire. Of those responses, 93 had incomplete data, which subsequently resulted in an effective response of 444 companies and a response rate of 5.1%, which is comparable to other studies using an open invitation (e.g., Oerlemans et al., 2013; Tse, 1998). Most of the respondents were executive-level managers. In particular, we targeted those in charge of their respective firm’s alliances, since managers with end responsibility for alliance portfolios often reside at the corporate level, increasingly in a department dedicated to managing a firm’s alliances (Kale & Singh, 2007). Approximately 90% of the respondents were members of the management board or corporate development department, while 9.5% of the questionnaires were filled out by senior managers. The remaining 0.5% of the responses

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Journal Pre-proof were completed by operational-level management. Average company tenure of the respondents was 7.6 years.

3.3. Sampling and common method bias After finishing data collection, we analyzed the data for sampling bias. First, since early and late respondents have potentially different attitudes towards a given topic (Armstrong & Overton, 1977), we compared respondents that completed the questionnaire (1) after the initial invitation (n=142); 2) after the first reminder (n=162); and 3) after the second reminder (n=140). We compared the three groups for differences in firm size and the distribution over different industries. Our results show that early and late respondents did not differ significantly in terms of firm size (F3,441=0.922; n.s), and that the distribution of industries was also not significantly different (χ251=40.07; n.s). Second, we compared respondents and non-respondents for firm size. The mean (tvalue = 0.649; n.s) and variance (Levene’s F=0.499; n.s) of firm size were not statistically different between respondents and non-respondents. Based on these findings, we concluded that no systematic sampling and response bias was present. We also checked whether common method bias could have been a problem in our study and did two tests. First, we did a Harman’s single factor test, which revealed that no systematic bias that influenced the results was present. Second, we performed the unmeasured latent variable approach as suggested by Podsakoff, MacKenzie, Podsakoff and Lee (2003) using LISREL. We added a single unmeasured latent method factor with all of the observed measures as indicators to a measurement model containing all measured items and their corresponding latent constructs. By separating trait effects from method effects and random error, this approach illustrated that no systemic variance was present, independent of the covariance.

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Journal Pre-proof Based on these two tests, we concluded that common method bias did not significantly influence the results.

3.4. Variables Our questionnaire consisted of multi-item scales that were adapted from previous studies to ensure concept reliability and validity. The scale items are included in Table 1. Almost all questions were presented in the form of statements for which respondents were asked to tick their agreement on a seven-point Likert-type scale (1: to a very small extent; 7: to a very large extent). ────────────────── Insert Table 1 about here ────────────────── 3.4.1. Dependent variable. Alliance portfolio benefits. Measurement of alliance performance has been subject to great discussion. Stock market return measures are short-term and dependent on individual alliance announcements, whereas accounting measures gauge the overall financial performance of a farm, but ignore specific alliance benefits. To measure the benefits that an organization draws from its alliance portfolio, we included all relevant dimensions and assessed both financial and non-financial benefits. We adapted the scales used by Kale and Singh (2007), Lane, Salk and Lyles (2001), Lunnan and Haugland (2008), and Simonin (1997). Items inquired whether the alliances of a firm: (1) helped an organization achieve its primary objectives; (2) enhanced the competitive position of the organization; (3) increased market share; (4) contributed to making profits; and (5) helped the firm develop and learn new skills and capabilities. Cronbach’s alpha for the scale was 0.88.

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Journal Pre-proof Studies show that self-reported measures of performance correlate with performance measures obtained through secondary sources in general (Dess & Robinson, 1984; Homburg & Bucerius, 2005; Morgan, Vorhies & Mason, 2009). Even though we are interested in benefits from alliance portfolios specifically, our measure should correlate with overall firm performance relative to competitors given the importance of alliances (cf. Chandler & Hanks, 1993). To assess whether our self-reported measure aligns with the performance of the organization, we collected data on industry-adjusted return on assets (ROA) over a period of five years, ranging from one year before data collection to three years after. ROA is a preferred performance measure in asset-driven ventures like alliances.1 Industry-weighted ROA indicates whether an organization performs better than its peers and accounts for industry differences. To calculate our measure, we subtracted the average ROA of organizations active in the same Standard Industrial Classification (SIC) code from the ROA of the responding organization. Since our sample includes smaller organizations for which such financial data was not available, we performed our analysis on a limited number of companies. Our survey measure correlated significantly with the average industry-adjusted ROA in the year of data collection (r=0.26; N=69). Since ROA varies over years, and performance implications of alliances and acquisitions typically emerge after three years (Homburg & Bucerius, 2005), we also correlated our measure with the change in the average ROA in the two years prior to data collection and the average ROA in the three years after data collection, which was significant (r=0.25; N=57). Given that our measure gauges benefits specifically from the alliance portfolio, the correlation with overall performance was good.

3.4.2. Independent variables Alliance portfolio size. Similar to prior work (Baum et al, 2000; Deeds & Hill, 1996), we used a count measure of an organization’s alliances as an indicator of alliance portfolio size.

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Journal Pre-proof In the questionnaire, we asked respondents to indicate how many alliances their organization was currently engaged in. Of the 444 respondents, 274 indicated that their organization currently operates with one alliance or none at all. Since alliance portfolios only exist when a firm has at least two or more partners, the entries with one or fewer alliances were excluded from the main analyses. Resource complementarities. Our measure for assessing the degree to which resources brought in by the partners in an organization’s alliance portfolio were complementary to the resources of the focal organization was based on Lunnan and Haugland (2008). Our six-item scale tapped into the degree to which the resources that were contributed to the portfolio by the partners were different and interdependent, enhanced the value and effectiveness of the focal organization’s resources, and were needed to make the alliances a success (Cronbach’s alpha = 0.79). Relation-specific investments. Our measure gauging the degree to which the focal organization made investments that were specific to the partners across its portfolio was adapted and based on the measures of Lunnan and Haugland (2008). We focused on asset specificity in general as this has the potential to manifest itself in alliance portfolios with multiple partners. To that end, we adapted the scale to include six items that tap into the degree to which equipment and systems change and are tailored to the alliance partners, the investments in the relationships, and the extent to which financial losses would be incurred as a result of termination. Cronbach’s alpha for this scale was 0.86. Alliance portfolio coordination. Our measure of the degree to which organizations actively coordinated different partners in their alliance portfolios was based on the measure of Sarkar et al. (2009), which approaches portfolio coordination as a set of various organizational processes in which a focal firm engages by integrating and synchronizing activities, strategies, and knowledge flows across partners in their alliance network. The measure contains items that

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Journal Pre-proof assessed: (1) whether an organization viewed its alliances as a portfolio that requires active coordination; (2) whether activities and strategies of the focal organization and its partners were coordinated; and (3) whether synergies were created and knowledge was shared across partners. The composite reliability of the measure proved to be high (Cronbach’s alpha = 0.86).

3.4.3. Control variables To address any confounding effects, we included a variety of control variables, seven of which account for organizational characteristics. Because larger organizations are more likely to have a higher number of alliances to which they contribute more resources, and may have more resources to make these alliances function well, we included firm size as measured by the natural logarithm of the number of full-time employees. For legal purposes, organizations in the Netherlands are often registered as foundations. Hence, we included a binary variable to indicate whether a firm was a foundation (1) or not (0). We also controlled for firm age, as measured by the number of years since the firm was founded. Furthermore, since organizations operating in different industries depend on alliances in different ways, we controlled for diversification; a count measure of the number of industries the responding organization was active in using three-digit SIC codes. Because companies with multiple subsidiaries are more likely to be experienced in coordination and alliances, we controlled for number of subsidiaries, as subsidiaries typically run a smaller portion of a firm’s total set of alliances. Additionally, we controlled for the influence of a company being a subsidiary of a foreign parent. As our final organizational control, we included number of patents to control for an organization’s innovativeness, as innovative organizations are often more dependent on alliances. To account for contextual effects influencing the results, we controlled for two effects. Part of the organizations in our sample are present in a more economically active region in the

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Journal Pre-proof Netherlands, hence we controlled for region. Also, we controlled for industry. Using SIC codes, we included six dummies indicating whether an organization operated in the manufacturing, energy, construction, services, professional or other industry.

3.5. Data analysis To test the hypotheses, we relied on ordinary least squares hierarchical regression analyses. Our data did not violate the assumption of normality excessively and no transformations to the variables were necessary. Inspection of the data showed one particularly prominent case that strongly influenced the coefficients in our statistical analyses. It concerned a company stating it had 3,000 alliances. Even though this high number proved unlikely to be a typographical error after checking the company, based on Cook’s distance value we decided to exclude the data point (we reran the analyses with the data point included, and it did not significantly change the conclusions we drew from the analyses).

4. RESULTS Table 2 provides an overview of the correlations between the study variables. The results of the hierarchical regression analyses are portrayed in Table 3. The control variables are outlined in model 1. The control model explains 8% of the variance in alliance portfolio benefits (R2 = 0.08; F13,145 = 0.96; n.s.), and the effects of the control variables are insignificant. ────────────────── Insert Table 2 about here ────────────────── To assess whether the findings of earlier studies were corroborated, before entering our measure of portfolio coordination we added main effects in model 2. This model explains an additional 50% of the variance in alliance portfolio benefits (R2 = 0.58; ΔR2 = 0.50; ΔF5,140 =

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Journal Pre-proof 32.66; p < 0.001). Consistent with earlier studies, alliance portfolio size and alliance portfolio benefits are curvilinearly related along an inverted-U shape. The predictor of the linear term is positive (b = 0.03; p < 0.05). The predictor for the squared term is, as expected, significantly negative (bsquared = -0.0004; p < 0.05). Support for the relationship between resource complementarities and alliance portfolio benefits is also strong (b = 0.55; p < 0.001), and underscores prior findings. Finally, the relationship between the degree to which firms make relation-specific investments in the alliance portfolio and the benefits created by the portfolio is, as predicted, curvilinear with an inverted-U shape (b = 0.27; p < 0.001; bsquared = -0.04; p < 0.10). ────────────────── Insert Table 3 about here ────────────────── Our hypotheses were tested in models 3 to 5. The results portrayed in model 3 show support for Hypothesis (1), which argued that the inverted-U relationship between alliance portfolio size and benefits would become more linear and positive as alliance portfolio coordination increases. By adding the moderating variable and the interaction terms, model 3 explains an additional 7% of the variance in alliance portfolio benefits (R2 = 0.65; ΔR2 = 0.07; p < 0.001), most of which is due to the addition of the moderator alliance portfolio coordination. While the coefficient for the interaction effect of alliance portfolio coordination with the linear term of alliance portfolio size is non-significant, the interaction with the corresponding squared term is moderately significant and positive (b = 0.0003, p < 0. 10). When we exclude the other main effects, the effects of alliance portfolio size on alliance portfolio benefits become stronger and more pronounced (blinear = 0.05; p < 0.001; bsquared = -0.001, p < 0. 05), as model 6 indicates. Also, the effect of alliance portfolio coordination (b = 0.57, p < 0. 0001), as well as the effect

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Journal Pre-proof of the interaction term with alliance portfolio size (bsquared = -0.0004, p < 0. 05), become stronger. The interaction is graphically portrayed in Figure 1. The graph in Figure 1 shows that the relation between alliance portfolio size and alliance portfolio benefits lies at a higher level for firms coordinating their alliance portfolios. Firms that do not coordinate their alliance portfolio do not extract as many benefits as firms that do. Furthermore, the curvilinear relationship inflects at a higher number of partners in the portfolio for firms coordinating their portfolio. To determine the inflection point, we solved the first derivative of the equation represented by model 3 for 0: δ(APB)/δ(APS) = 0.03 – 0.002*APS + 0.0006*APS*APC = 0 (where APB is alliance portfolio benefits, APS is alliance portfolio size, and APC is alliance portfolio coordination), which we corrected for meancentering. At the mean levels of the other variables, the inflection point for alliance portfolio size at a low level of alliance portfolio coordination (one standard deviation below the mean) lies at approximately 21 partners. The inflection point at a high level of alliance portfolio coordination (one standard deviation above the mean) lies at approximately 34 partners. Moreover, at higher levels of alliance portfolio coordination the relationship is also flatter. This suggests that firms coordinating their alliance portfolio experience fewer negative effects of increasing alliance portfolio size and do so with larger portfolios. ────────────────── Insert Figure 1 about here ────────────────── Hypothesis (2), postulating that the relation between resource complementarities and alliance portfolio benefits would increase as firms coordinate their alliance portfolios more, is partly supported. The interaction term is, as expected, positive and significant in model 4 (b = 0.06, p < 0. 05). However, this could not be reproduced in model 7, where we exclude the effects of the other variables. In model 7, most variance in alliance portfolio benefits is

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Journal Pre-proof explained by a direct effect of resource complementarities. It seems that, when explaining alliance portfolio benefits, resource complementarities correlate with other variables of interest. Since the effect of resource complementarities may be dependent on the size of the portfolio and the degree to which relation-specific investments accompany their use, we assessed whether resource complementarities interacted with alliance portfolio size and relation-specific investments. However, we find no effect large and/or significant enough to explain the effect in model 7. Since the interaction effect is present in model 4 and the full model, we plotted the interaction in Figure 2. ────────────────── Insert Figure 2 about here ────────────────── Model 5 adds the interaction terms relevant for testing Hypothesis (3), which suggested that the inverted-U relationship between relation-specific investments and alliance portfolio benefits would become linear and positive at higher levels of alliance portfolio coordination. Even though we found that the relationship between relation-specific investments and alliance portfolio benefits was positive and linear, we included the squared terms to assess the interaction, since opposite curvilinear relationships may manifest at high and low levels of coordination. The coefficient of the interaction for the linear term of relation-specific investments is insignificant, but the coefficient for the accompanying squared term is positive (b = 0.03, p < 0. 05). The effect is sustained both in model 8, where we exclude the other main variables, and in full model 9. The interaction is plotted in Figure 3. It shows that the relation between relation-specific investments in portfolio partners at low levels of alliance portfolio coordination has the shape of an inverted U, suggesting that without coordination there are limits to the value-adding effect of relation-specific investments. However, at high levels of coordination the relationship becomes linear and even slightly U-shaped. As such, firms that

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Journal Pre-proof coordinate their alliance portfolios seem to be able to extract more benefits from their portfolios as they make more relation-specific investments. This finding largely supports Hypothesis (3). ────────────────── Insert Figure 3 about here ──────────────────

5. DISCUSSION AND CONCLUSION To further our understanding of how firms capture benefits from their alliance portfolios, this paper focused on the extent to which benefits resulting from the configuration of an alliance portfolio are dependent on the alliance management processes employed by a focal firm (cf. Degener et al, 2018; Faems et al, 2012; Wassmer, 2010). Specifically, we examined the role of alliance portfolio coordination; a management process that helps a focal firm harmonize partners, synthesize their resource contributions (Sarkar et al, 2009), and align them synergistically (Wassmer & Dussauge, 2011a). We took a resource perspective, and developed theoretical arguments as to how alliance portfolio coordination shapes the effects on resource access and exploitation that three configurational portfolio characteristics – portfolio size, resource complementarities and relation-specific investments – have in creating benefits for a focal firm. Overall, our findings corroborate earlier work on how portfolio size (gauging the quantity of potential resources made by the partners), resource complementarities (addressing the quality of the alignment of resources) and relation-specific investments (determining cospecialization of resources) influence portfolio benefits accruing to firms. We add to this work by showing that focal firms extract more benefits from these configurational characteristics as they coordinate their portfolios more actively.

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Journal Pre-proof Even though the effect was small, our results indicate that firms coordinating their portfolio are able to work with a larger portfolio with more partners, gain increased access to more resources, and extract more benefits until the burden on management becomes too big and cognitive that organizational limits inhibit such a possibility (cf. Deeds & Hill, 1996). How coordination decreases the management burden is, however, an avenue for future research. Coordination itself is a management activity that takes time and effort. And if cognitive limits are to be relieved, alliance portfolio coordination may need to be adopted by dedicated managers. Future studies that examine the degree to which alliance portfolio coordination is part of broader alliance portfolio capabilities, with a focus on whether housing it in an alliance function is useful in freeing up managers’ time and resources (cf. Heimeriks, Klijn & Reuer, 2009; Kale & Singh, 2007), may shed further light on the effectiveness of alliance portfolio coordination. Firms coordinating their portfolio are also able to derive more benefits from their portfolio at increasing levels of resource complementarity. Through coordination, a firm is able to identify relevant aligning resources, both at the formation of alliances and later, as the companies get to collaborate more extensively. Coordination enhances the value created through complementary resources (Cobeña et al., 2017) and reduces the risk that resources of partners are a poor match to the resources of the focal firm itself and other partners (Deeds & Hill, 1996). Whether that risk is mostly mitigated during the formation of alliances when complementarities are assessed, or when the partner is part of the portfolio and complementarities between resources unfold, remains to be seen. Firms may also have screening and partner selection capabilities that interplay with portfolio coordination (cf. Degener et al, 2018; Sarkar et al, 2009). Future studies assessing both capabilities may further uncover whether the value potential of complementary resources is mostly created during formation or whether it emerges as the firms collaborate.

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Journal Pre-proof Finally, our study provides evidence that alliance portfolio coordination enables firms to extract more benefits from making relation-specific investments in assets and resources across partners. As the results imply, coordination not only enables the synchronization of a larger number of resources across partners and their synergistic alignment (cf. Sarkar et al. 2009; Wassmer & Dussauge, 2011a), but also their cospecialization, which makes them more specific and competitive. An alliance portfolio increases the flexibility of a focal firm in that it can select different partners (cf. Bakker & Knoben, 2015). Coordination enables the selection of partners that are more fitting, more willing to reciprocate relation-specific investments, and are less likely to behave opportunistically. Coordination also helps a focal firm establish its reputation as an active, credible and trustworthy alliance partner, and signals to partners that making relation-specific investments will be reciprocated and beneficial. Coordinating investments across multiple partners helps firms shape spillover effects and increase the value potential of the resources for which the investments are made (Kang et al, 2009). A promising avenue for future research is to examine whether the added benefits created by coordination are due to cost or value synergies, and are therefore higher for specific investments in similar or dissimilar resources (Das & Teng, 2000) and in scale free or non-scale free resources (Levinthal & Wu, 2010). A wider theoretical implication of our study involves the relation between portfolio diversity and benefits, and the role of alliance portfolio coordination (Degener et al, 2018). Understanding the effect of portfolio diversity has been a central topic in many studies (Lee et al, 2017). A larger portfolio grants access to a larger set of potential resources, which are more likely to be diverse. Prior research has often operationalized complementarity as an indicator of diversity (Furlotti & Soda, 2018; Chung et al. 2000). Cobeña et al. (2017) found, however, that complementarities mediate the relationship between portfolio diversity and portfolio gains. Diversity does not drive portfolio benefits per se, but rather determines whether such diverse

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Journal Pre-proof resources are complementary. Cospecialization through relation-specific investments further enhances the competitive potential of such diverse resources. In that vein, our study provides more fine-grained insight into how portfolio diversity drives portfolio benefits, as well as the facilitatory role of portfolio coordination. Taken together, the main contribution of our paper lies in the fact that we establish alliance portfolio coordination as a key managerial task for deriving benefits from an alliance portfolio. Our study illustrates that alliance portfolio coordination may be an important dynamic or meta- capability part of a firm’s alliance management capability (Heimeriks, Duysters & Vanhaverbeke, 2007; Schilke & Goerzen, 2010), helping firms in building on advantages created through the configuration of the portfolio, while minimizing detrimental effects of such configuration.

5.1. Managerial implications The study findings also bear important implications for practitioners and managers engaged in the alliances of firms. Our data supports other studies that many firms, small and large, are involved in multiple alliances simultaneously, with some even having hundreds (cf. Villalonga & McGahan, 2005). Whereas small firms have comparatively limited resources and may make certain managers responsible for their alliances, large firms increasingly install dedicated alliance functions to build on their alliance experience, to facilitate the organization of alliances, and to make alliances an integral part of their corporate and business strategy (Heimeriks & Duysters, 2007; Hoffmann, 2005; Kale & Singh, 2007). Such functions increase the visibility of the firm as a credible alliance partner, and facilitate the management of alliance knowledge that helps firms coordinate across businesses (Dyer et al, 2001). Our findings suggest that the external coordination of partners in an alliance portfolio may need to become a core activity of alliance functions if the focal firm is to make more of its alliances.

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Journal Pre-proof The results of our questionnaire filled out by executive-level managers indicates that alliance portfolio coordination directly benefits firms. By coordinating the portfolio, firms can actively manage and fine-tune the various resource contributions of the partners so as to create an integrated and holistic portfolio. In doing so, firms also indicate to existing and potential new partners that they are active partners and serious about their alliances and partners. In turn, alliance portfolio coordination helps alliance managers deal with the limitations imposed upon them by their structural characteristics of their alliance portfolios. By being actively involved with partners, the limits on portfolio size materialize less and managers are able to tease out more from the complementary resources provided by the partners. Finally, partners of a firm manifesting itself as an active alliance partner are more likely to reciprocate relation-specific investments, and may even expand upon them so as to create more value.

5.2. Limitations Several limitations of this study merit discussion. First, our cross-sectional design limits any possibility of inferring causal relationships. Although we asked firms about the extent to which they derive benefits from their current alliance portfolios, the benefits are not necessarily felt by focal firms immediately. Possibly, a focal firm in our study added a new alliance to its portfolio in the year of data collection and the benefits have not yet materialized. We partly addressed this issue by collecting from our secondary source performance data in the years surrounding data collection, which correlated with our survey measure. Given the importance of alliances, firm performance and alliance benefits are clearly expected to correlate, yet the former is dependent on many more activities than just a firm’s alliances. Studies seeking to measure alliance portfolio benefits specifically, over time, would require the administration of questionnaires at regular intervals. Such measurement could also include a more fine-grained analysis of alliance benefits. In our study, we adopted a scale used in prior studies that taps into

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Journal Pre-proof multiple financial and non-financial competitive benefits (e.g., Lane et al, 2001; Lunnan & Hauglund, 2008). Further discriminating between, for example, financial, competitive and innovative benefits separately would allow for a better understanding of how alliance portfolio coordination helps focal firms derive benefits from different forms of portfolio activity. Second, our data consisted largely of single-informant responses. Even though the performance data we collected from another source correlated strongly with our survey measure of alliance portfolio benefits, and common method bias did not seem to jeopardize the results, obtaining data from multiple respondents may reduce key informant bias and further increase the robustness of the results. Even though our informants were executive-level managers who are likely more knowledgeable about the alliances of a firm than any other informant, they may be less knowledgeable of more specific details, especially in companies with a large portfolio. Future studies may additionally seek to obtain data not only from the focal firm but also from the partners in its alliance portfolio. Such a design would uncover the network effects at play when a focal firm’s partners have their own portfolio of partners, and would thus enable a better understanding of the resource interdependencies within a wider network (Wassmer & Dussauge, 2011b). Subsequently, assessing the specific ways in which the resources brought in by the focal firm are complementary to those of the partners and their partners, and how cospecialization of resources through relation-specific investments by multiple firms functions across different portfolios, would enable one to uncover the ways in which benefits are distributed at the network level. A multi-partner perspective would also uncover whether partners respond to coordination by a focal firm as an activity that not only benefits the focal firm but also themselves. Furthermore, it would show whether specificity created by relation-specific investments constrains the use of resources with other partners (cf. Levinthal & Wu, 2010).

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Journal Pre-proof Finally, the data for this study was obtained from Dutch companies. A single-country setting helps control for a variety of contextual factors, yet such factors may affect the way in which alliance portfolios operate. For example, political and legal systems vary over countries, and Dutch laws may impact the ways in which companies work together with their partners. Also, culturally, Dutch companies tend to operate in a more feminine environment and power differentials are lower. Consequently, they may rely on trust in relationships more than companies in other countries, which could influence not only the way they govern their alliances (Das & Teng, 1998), but also their willingness to make relation-specific investments (Dyer, 1997; Dyer & Singh, 1998). A cross-national setting could increase the generalizability of our findings and provide further insights into and account for the role played by legal, political, economic, and cultural forces.

NOTES 1

Our sample includes financial services firms, which are typically more asset-heavy,

and may therefore influence the correlations with ROA. Except for local branches of banks, our sample did not include major banks and insurers, and financial services were typically limited to activities like financial consulting, accounting, and bookkeeping, which are not asset-heavy. We ran the analysis without financial services companies and both correlations stayed the same (rbenefits,ROA = 0.26, N=64; rbenefits,ΔROA = 0.25, N=52).

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Journal Pre-proof Subramanian, A. M., & Soh, P-H. (2017). Linking alliance portfolios to recombinant innovation: The combined effects of diversity and alliance experience. Long Range Planning, 50, 636-652. Tanriverdi, H., & Venkatraman, N. (2005). Knowledge relatedness and the performance of multibusiness firms. Strategic Management Journal, 26, 97-119. Tse, A. C. B. (1998). Comparing response rate, response speed and response quality of two methods of sending questionnaires: E-mail vs. mail. International Journal of Market Research, 40(4), 353-361. Villalonga, B., & McGahan, A. M. (2005). The choice among acquisitions, alliances and divestitures. Strategic Management Journal, 26, 1183-1208. Wassmer, U. (2010). Alliance Portfolios: A review and research agenda. Journal of Management, 36(1), 141-171. Wassmer, U., & Dussauge, P. (2011a). Network resource stocks and flows: Ho do alliance portfolios affect the value of new alliance formations. Strategic Management Journal, 32, 871-883. Wassmer, U., & Dussauge, P. (2011b). Value creation in alliance portfolios: The benefits and costs of network resource interdependencies. European Management Review, 8, 47-64. Williamson, O. E. (1991). Comparative economic organization: The analysis of discrete structural alternatives. Administrative Science Quarterly, 36(2), 269-296. Wuyts, S., & Dutta, S. (2014). Benefiting from alliance portfolio diversity: The role of past internal knowledge creation strategy. Journal of Management, 40(6), 1653-1674.

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Journal Pre-proof TABLE I Questionnaire scales and items

Scale items

Composite reliability

Alliance portfolio benefits  My company has achieved its primary objective(s) as a result of its alliances  My company's competitive position has been greatly enhanced due to its alliances  My company has been successful in learning some critical skill(s) and capabilities from its alliance partners  As a result of its alliances, my company has increased its market share  Our alliances contribute to making profits Resource complementarities  We and our partners are mutually dependent on each other since we contribute different resources and competencies  Our partners contribute similar resources and competencies as we do  Our alliances would not be possible without the resources and competencies of our partners  Combining the resources of our partners with our own makes them more valuable  The effectiveness of our resources depends on the resources of our partners  Resources brought in by our partners were very valuable to the success of our alliances Relation-specific investments  We make specific investments in plants/equipment/systems in order to develop our alliances  It is important that our alliances continue, as termination will result in financial losses due to our investments  Making investments that are tailored to our alliances is a precondition for establishing our alliances  We adjust our production equipment/systems in order to establish our alliances  We develop/acquire new competencies that have limited value if our alliances are terminated  We invested a lot of time and effort in building the relationships with our partners Alliance portfolio coordination  We consider our alliances as a portfolio that requires overall coordination, and not as independent, one-off alliances  Our activities across different alliances are well coordinated  We systematically coordinate our strategies across different alliances  We have processes to systematically transfer knowledge across alliance partners  Managers from different departments periodically meet to examine how we can create synergies across our alliances

40

0.88

0.79

0.86

0.86

Mean Std. Dev. (1) (2) (3) (4) (5) (6) (7) (8) (9) (1) Alliance portfolio benefits 4.61 1.20 (2) Alliance portfolio size 9.66 11.73 0.22** (3) Resource complementarities 4.36 1.03 0.67*** 0.23** (4) Relation-specific investments 3.79 1.32 0.59*** 0.17* 0.53*** (5) Alliance portfolio coordination 4.43 1.24 0.62*** 0.19* 0.47*** 0.46*** (6) Firm size 5.52 1.37 0.09 0.19* 0.08 0.07 0.03 (7) Foundation 0.31 0.46 -0.10 0.10 0.04 -0.04 -0.03 -0.05 (8) Firm age 40.74 27.38 0.05 -0.06 0.07 0.01 -0.01 0.16* -0.10 (9) Diversification 2.84 2.09 0.11 0.01 0.08 0.04 0.02 0.17* -0.30*** 0.20** (10) Number of subsidiaries 4.67 36.67 -0.03 -0.04 0.04 -0.06 -0.13† 0.33*** -0.08 0.08 -0.01 (11) Subsidiary of foreign parent 0.51 0.50 0.13† -0.03 0.05 0.01 -0.01 0.06 -0.61*** 0.17 0.35*** (12) Number of patents 1.47 5.54 0.15† -0.00 0.20* 0.12 -0.03 0.14 -0.17* 0.17* 0.10 (13) Region 0.47 0.50 -0.05 -0.04 -0.15* -0.01 -0.11 0.09 0.01 -0.05 0.08 (14) Manufacturing 0.14 0.35 0.10 -0.04 0.10 0.02 0.04 0.04 -0.27*** 0.15* 0.04 (15) Energy 0.04 0.19 -0.08 0.11 -0.02 -0.03 -0.02 0.11 0.01 -0.07 0.06 (16) Construction 0.07 0.25 0.08 0.18* 0.02 -0.02 0.06 0.03 -0.18* 0.08 0.21** (17) Service 0.61 0.49 -0.07 -0.04 -0.05 0.05 -0.04 -0.01 0.38*** -0.08 -0.13 (18) Professional 0.14 0.34 -0.01 -0.11 -0.03 -0.08 -0.04 -0.13 -0.12 -0.07 -0.03 † = p < 0.10; * = p < 0.05; ** = p < 0.01; *** = p < 0.001 -0.07 0.02 0.11 -0.00 0.00 -0.02 0.04 -0.03

(10)

(12)

0.19* -0.12 0.13† 0.29*** 0.34*** -0.07 -0.01 0.06 0.13 -0.24** -0.28*** 0.04 -0.03

(11)

(14)

(15)

(16)

(17)

-0.05 -0.05 -0.08 -0.06 -0.11 -0.05 0.13† -0.51*** -0.24** -0.33*** -0.03 -0.16* -0.08 -0.11 -0.50***

(13)

Journal Pre-proof TABLE II

Means and correlations

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Journal Pre-proof TABLE III

OLS Hierarchical Regression Analyses

Intercept

(1) 4.53*** (0.96)

Main predictors Portfolio size Portfolio size squared Resource complementarities Relation-specific investments Relation-specific investments squared

(2) 4.74*** (0.67)

(3) 4.41*** (0.63)

Alliance portfolio benefits (4) (5) (6) 4.44*** 4.49*** 3.95*** (0.62) (0.63) (0.73)

0.03* (0.01) -0.0004* (0.00) 0.55*** (0.09) 0.27*** (0.06) -0.04† (0.03)

0.03* (0.01) -0.001† (0.00) 0.41*** (0.08) 0.19*** (0.06) -0.02 (0.03)

0.02* (0.01) -0.0004* (0.00) 0.44*** (0.08) 0.19*** (0.06) -0.04 (0.03)

0.02* (0.01) -0.0003* (0.00) 0.40*** (0.08) 0.19*** (0.06) -0.01 (0.03)

0.05*** (0.01) -0.001* (0.00)

0.32*** (0.06)

0.33*** (0.06)

0.30*** (0.06)

0.57*** (0.06)

Portfolio coordination Interactions Portfolio size x portfolio coordination Portfolio size squared x portfolio coordination Resource complementarities x portfolio coordination Relation-specific investments x portfolio coordination Relation-specific investments squared x portfolio coordination Controls Firm size Foundation Firm age Diversification Number of subsidiaries Subsidiary of foreign parent Number of patents Region Manufacturing Energy Construction Service Professional

-0.00 (0.01) 0.0003† (0.00)

(7) 4.79*** (0.65)

0.39*** (0.06)

R2 0.08 0.58*** ∆R2 0.08 0.50*** d.f 145,13 140,18 † = p < 0.10; * = p < 0.05; ** = p < 0.01; *** = p < 0.001

0.32*** (0.06) -0.04† (0.03)

0.02† (0.01) -0.001† (0.00) 0.41*** (0.08) 0.19*** (0.06) -0.03 (0.04)

0.38*** (0.07)

0.31*** (0.06)

0.02 (0.04) 0.05** (0.02)

-0.01 (0.01) 0.0002† (0.00) 0.14* (0.06) -0.03 (0.04) 0.05* (0.02)

-0.01 (0.01) 0.0004* (0.00) 0.04 (0.04) 0.02 (0.04) 0.03* (0.02)

0.04 (0.06) -0.30 (0.21) -0.00 (0.00) 0.00 (0.04) -0.00 (0.00) 0.15 (0.18) -0.01 (0.01) 0.14 (0.15) 0.26 (0.64) -0.76 (0.72) 0.51 (0.67) 0.18 (0.62) 0.31 (0.64)

(9) 4.67*** (0.63)

0.58*** (0.08)

0.06* (0.04)

0.09 (0.08) -0.15 (0.29) -0.00 (0.00) 0.05 (0.05) -0.00 (0.00) 0.13 (0.26) 0.03 (0.02) -0.21 (0.21) 0.36 (0.91) -0.69 (1.03) 0.42 (0.95) 0.24 (0.89) 0.28 (0.91)

(8) 3.99*** (0.67)

0.03 (0.05) -0.24 (0.19) -0.00 (0.00) 0.00 (0.03) -0.00 (0.00) 0.22 (0.17) 0.00 (0.01) 0.13 (0.14) 0.36 (0.59) -0.40 (0.67) 0.56 (0.62) 0.37 (0.58) 0.46 (0.60)

0.03 (0.05) -0.23 (0.19) -0.00 (0.00) 0.00 (0.03) 0.00 (0.00) 0.20 (0.17) 0.00 (0.01) 0.13 (0.14) 0.34 (0.59) -0.47 (0.66) 0.58 (0.61) 0.31 (0.57) 0.41 (0.59)

0.03 (0.05) -0.23 (0.19) -0.00 (0.00) 0.00 (0.03) -0.00 (0.00) 0.21 (0.17) 0.00 (0.01) 0.14 (0.14) 0.32 (0.59) -0.47 (0.66) 0.55 (0.62) 0.32 (0.57) 0.40 (0.59)

0.02 (0.06) -0.21 (0.22) -0.00 (0.00) 0.02 (0.04) 0.00 (0.00) 0.28 (0.20) 0.03† (0.01) 0.01 (0.16) 0.68 (0.69) -0.08 (0.78) 0.72 (0.72) 0.77 (0.67) 0.80 (0.69)

0.04 (0.05) -0.23 (0.19) -0.00 (0.00) 0.01 (0.04) -0.00 (0.00) 0.15 (0.17) 0.01 (0.01) 0.13 (0.14) -0.03 (0.61) -0.68 (0.69) 0.13 (0.63) 0.00 (0.60) 0.02 (0.61)

0.02 (0.05) -0.08 (0.21) -0.00 (0.00) 0.01 (0.04) 0.00 (0.00) 0.23 (0.18) 0.02 (0.01) -0.02 (0.15) 0.71 (0.64) -0.07 (0.72) 0.81 (0.66) 0.65 (0.62) 0.76 (0.63)

0.03 (0.05) -0.28 (0.19) -0.00 (0.00) -0.00 (0.03) 0.00 (0.00) 0.19 (0.17) 0.01 (0.01) 0.11 (0.14) 0.19 (0.59) -0.60 (0.67) 0.41 (0.62) 0.19 (0.58) 0.30 (0.59)

0.65*** 0.07*** 137,21

0.65*** 0.07*** 138,20

0.65*** 0.07*** 137,21

0.50*** 0.42*** 140,18

0.60*** 0.52*** 142,16

0.57*** 0.49*** 140,18

0.66*** 0.08*** 134,24

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Journal Pre-proof FIGURE 1 Interaction between alliance portfolio size and alliance portfolio coordination

43

Journal Pre-proof FIGURE 2

Interaction between resource complementarities and alliance portfolio coordination

44

Journal Pre-proof FIGURE 3 Interaction between relation-specific investments and alliance portfolio coordination

45