IDEAS home Printed from https://ideas.repec.org/a/bla/jomstd/v57y2020i6p1073-1105.html
   My bibliography  Save this article

A Transaction Cost Perspective of Alliance Portfolio Diversity

Author

Listed:
  • Christopher R. Penney
  • James G. Combs

Abstract

Alliance portfolio diversity (APD) helps firms access diverse capabilities and knowledge. APD can also increase transaction costs, but it is unknown whether and how transaction cost theory’s (TCT’s) insights about hierarchical integration operate at the portfolio level. We adapt TCT to the portfolio level to suggest that the transaction costs from APD encourage integration into alliance partners’ industries, and we introduce the concept of shared‐specific investments to pinpoint one source of transaction costs within portfolios and predict which industries will be integrated. Using data from 1996–2013 on S&P 500 firms, we find evidence in support of our theorising. Juxtaposing results with other theoretical perspectives suggests that TCT offers complementary insights about which activities to perform in the firm versus the alliance portfolio.

Suggested Citation

  • Christopher R. Penney & James G. Combs, 2020. "A Transaction Cost Perspective of Alliance Portfolio Diversity," Journal of Management Studies, Wiley Blackwell, vol. 57(6), pages 1073-1105, September.
    • Handle: RePEc:bla:jomstd:v:57:y:2020:i:6:p:1073-1105
    DOI: 10.1111/joms.12518
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/joms.12518
    Download Restriction: no
    File URL: https://libkey.io/10.1111/joms.12518?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Dovev Lavie & Stewart R. Miller, 2008. "Alliance Portfolio Internationalization and Firm Performance," Organization Science, INFORMS, vol. 19(4), pages 623-646, August.
    2. Roberto S. Vassolo & Jaideep Anand & Timothy B. Folta, 2004. "Non‐additivity in portfolios of exploration activities: a real options‐based analysis of equity alliances in biotechnology," Strategic Management Journal, Wiley Blackwell, vol. 25(11), pages 1045-1061, November.
    3. Joel A. C. Baum & Tony Calabrese & Brian S. Silverman, 2000. "Don't go it alone: alliance network composition and startups' performance in Canadian biotechnology," Strategic Management Journal, Wiley Blackwell, vol. 21(3), pages 267-294, March.
    4. Anthony Goerzen & Paul W. Beamish, 2005. "The effect of alliance network diversity on multinational enterprise performance," Strategic Management Journal, Wiley Blackwell, vol. 26(4), pages 333-354, April.
    5. Mahka Moeen, 2017. "Entry into Nascent Industries: Disentangling a Firm's Capability Portfolio at the Time of Investment Versus Market Entry," Strategic Management Journal, Wiley Blackwell, vol. 38(10), pages 1986-2004, October.
    6. Joskow, Paul L, 1991. "The Role of Transaction Cost Economics in Antitrust and Public Utility Regulatory Policies," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 53-83, Special I.
    7. Werner H. Hoffmann, 2007. "Strategies for managing a portfolio of alliances," Strategic Management Journal, Wiley Blackwell, vol. 28(8), pages 827-856, August.
    8. Shelanski, Howard A & Klein, Peter G, 1995. "Empirical Research in Transaction Cost Economics: A Review and Assessment," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(2), pages 335-361, October.
    9. Gwendolyn K. Lee, 2007. "The significance of network resources in the race to enter emerging product markets: the convergence of telephony communications and computer networking, 1989–2001," Strategic Management Journal, Wiley Blackwell, vol. 28(1), pages 17-37, January.
    10. Ulrich Wassmer & Sali Li & Anoop Madhok, 2017. "Resource ambidexterity through alliance portfolios and firm performance," Strategic Management Journal, Wiley Blackwell, vol. 38(2), pages 384-394, February.
    11. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-529, October.
    12. Ulrich Wassmer & Sali Li & Anoop Madhok, 2017. "Resource ambidexterity through alliance portfolios and firm performance," Post-Print hal-02313356, HAL.
    13. Anandhi S. Bharadwaj & Sundar G. Bharadwaj & Benn R. Konsynski, 1999. "Information Technology Effects on Firm Performance as Measured by Tobin's q," Management Science, INFORMS, vol. 45(7), pages 1008-1024, July.
    14. Ulrich Wassmer, 2010. "Alliance Portfolios : A Review and Research Agenda," Post-Print hal-02313048, HAL.
    15. Candace Young-Ybarra & Margarethe Wiersema, 1999. "Strategic Flexibility in Information Technology Alliances: The Influence of Transaction Cost Economics and Social Exchange Theory," Organization Science, INFORMS, vol. 10(4), pages 439-459, August.
    16. Monika Schommer & Ansgar Richter & Amit Karna, 2019. "Does the Diversification–Firm Performance Relationship Change Over Time? A Meta‐Analytical Review," Journal of Management Studies, Wiley Blackwell, vol. 56(1), pages 270-298, January.
    17. Jean-Francois Hennart, 1993. "Explaining the Swollen Middle: Why Most Transactions Are a Mix of “Market” and “Hierarchy”," Organization Science, INFORMS, vol. 4(4), pages 529-547, November.
    18. Dittrich, Koen & Duysters, Geert & de Man, Ard-Pieter, 2007. "Strategic repositioning by means of alliance networks: The case of IBM," Research Policy, Elsevier, vol. 36(10), pages 1496-1511, December.
    19. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and Sustainability of Competitive Advantage," Management Science, INFORMS, vol. 35(12), pages 1504-1511, December.
    20. Jeffrey H. Dyer & Wujin Chu, 2003. "The Role of Trustworthiness in Reducing Transaction Costs and Improving Performance: Empirical Evidence from the United States, Japan, and Korea," Organization Science, INFORMS, vol. 14(1), pages 57-68, February.
    21. Pierre Dussauge & Bernard Garrette & Will Mitchell, 2000. "Learning from competing partners: outcomes and durations of scale and link alliances in Europe, North America and Asia," Strategic Management Journal, Wiley Blackwell, vol. 21(2), pages 99-126, February.
    22. Uriel Stettner & Dovev Lavie, 2014. "Ambidexterity under scrutiny: Exploration and exploitation via internal organization, alliances, and acquisitions," Strategic Management Journal, Wiley Blackwell, vol. 35(13), pages 1903-1929, December.
    23. Anne Parmigiani, 2007. "Why do firms both make and buy? An investigation of concurrent sourcing," Strategic Management Journal, Wiley Blackwell, vol. 28(3), pages 285-311, March.
    24. Dovev Lavie & Jingoo Kang & Lori Rosenkopf, 2011. "Balance Within and Across Domains: The Performance Implications of Exploration and Exploitation in Alliances," Organization Science, INFORMS, vol. 22(6), pages 1517-1538, December.
    25. repec:bla:jfinan:v:43:y:1988:i:1:p:1-19 is not listed on IDEAS
    26. Marianna Makri & Michael A. Hitt & Peter J. Lane, 2010. "Complementary technologies, knowledge relatedness, and invention outcomes in high technology mergers and acquisitions," Strategic Management Journal, Wiley Blackwell, vol. 31(6), pages 602-628, June.
    27. Robert M. Grant & Charles Baden‐Fuller, 2004. "A Knowledge Accessing Theory of Strategic Alliances," Journal of Management Studies, Wiley Blackwell, vol. 41(1), pages 61-84, January.
    28. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    29. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    30. Tasadduq A. Shervani & Gary Frazier & Goutam Challagalla, 2007. "The moderating influence of firm market power on the transaction cost economics model: An empirical test in a forward channel integration context," Strategic Management Journal, Wiley Blackwell, vol. 28(6), pages 635-652, June.
    31. Garcia Martinez, Marian & Zouaghi, Ferdaous & Sanchez Garcia, Mercedes, 2017. "Capturing value from alliance portfolio diversity: The mediating role of R&D human capital in high and low tech industries," Technovation, Elsevier, vol. 59(C), pages 55-67.
    32. Guilhem Bascle, 2008. "Controlling for endogeneity with instrumental variables in strategic management research," Post-Print hal-00576795, HAL.
    33. Wernerfelt, Birger & Montgomery, Cynthia A, 1988. "Tobin's q and the Importance of Focus in Firm Performance," American Economic Review, American Economic Association, vol. 78(1), pages 246-250, March.
    34. Corey C. Phelps, 2010. "A longitudinal study of the influence of alliance network structure and composition on firm exploratory innovation," Post-Print hal-00528392, HAL.
    35. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-540, September.
    36. Philip Degener & Indre Maurer & Suleika Bort, 2018. "Alliance Portfolio Diversity and Innovation: The Interplay of Portfolio Coordination Capability and Proactive Partner Selection Capability," Journal of Management Studies, Wiley Blackwell, vol. 55(8), pages 1386-1422, December.
    37. Mitchell, Will & Singh, Kulwant, 1992. "Incumbents' use of pre-entry alliances before expansion into new technical subfields of an industry," Journal of Economic Behavior & Organization, Elsevier, vol. 18(3), pages 347-372, August.
    38. Akbar Zaheer & Exequiel Hernandez & Sanjay Banerjee, 2010. "Prior Alliances with Targets and Acquisition Performance in Knowledge-Intensive Industries," Organization Science, INFORMS, vol. 21(5), pages 1072-1091, October.
    39. Bernard Garrette & Pierre Dussauge & Will Mitchell, 2000. "Learning from competing partners: outcomes and durations of scale and link alliances in Europe, North America and Asia," Post-Print hal-00458812, HAL.
    40. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and the Sustainability of Competitive Advantage: Reply," Management Science, INFORMS, vol. 35(12), pages 1514-1514, December.
    41. Leslie E. Palich & Laura B. Cardinal & C. Chet Miller, 2000. "Curvilinearity in the diversification–performance linkage: an examination of over three decades of research," Strategic Management Journal, Wiley Blackwell, vol. 21(2), pages 155-174, February.
    42. Rothaermel, Frank T. & Deeds, David L., 2006. "Alliance type, alliance experience and alliance management capability in high-technology ventures," Journal of Business Venturing, Elsevier, vol. 21(4), pages 429-460, July.
    43. Dovev Lavie, 2007. "Alliance portfolios and firm performance: A study of value creation and appropriation in the U.S. software industry," Strategic Management Journal, Wiley Blackwell, vol. 28(12), pages 1187-1212, December.
    44. Krishna Palepu, 1985. "Diversification strategy, profit performance and the entropy measure," Strategic Management Journal, Wiley Blackwell, vol. 6(3), pages 239-255, July.
    45. Ruihua Joy Jiang & Qingjiu Tom Tao & Michael D. Santoro, 2010. "Alliance portfolio diversity and firm performance," Strategic Management Journal, Wiley Blackwell, vol. 31(10), pages 1136-1144, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jacob, Jojo & Belderbos, René & Lokshin, Boris, 2023. "Entangled modes: Boundaries to effective international knowledge sourcing through technology alliances and technology-based acquisitions," Technovation, Elsevier, vol. 122(C).
    2. Thakur-Wernz, Pooja & Bruyaka, Olga & Contractor, Farok, 2022. "Sourcing portfolio diversity in new product development: Antecedents and performance implications," Journal of Business Research, Elsevier, vol. 150(C), pages 179-193.
    3. Lumineau, Fabrice & Jin, Jason Lu & Sheng, Shibin & Zhou, Kevin Zheng, 2022. "Asset specificity asymmetry and supplier opportunism in buyer–supplier exchanges," Journal of Business Research, Elsevier, vol. 149(C), pages 85-100.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stienstra, Miranda, 2020. "The determinants and performance implications of alliance partner acquisition," Other publications TiSEM 7fdee0c2-d4d2-4f5b-95e3-2, Tilburg University, School of Economics and Management.
    2. Cobeña, Mar & Gallego, Ángeles & Casanueva, Cristóbal, 2017. "Heterogeneity, diversity and complementarity in alliance portfolios," European Management Journal, Elsevier, vol. 35(4), pages 464-476.
    3. Bae, Joonhyung & Ozmel, Umit, 2024. "The interplay between product development failures and alliance portfolio properties in the formation of exploration versus exploitation alliances," Journal of Business Research, Elsevier, vol. 177(C).
    4. Jacob, Jojo & Belderbos, René & Lokshin, Boris, 2023. "Entangled modes: Boundaries to effective international knowledge sourcing through technology alliances and technology-based acquisitions," Technovation, Elsevier, vol. 122(C).
    5. Cho, Sam Yul & Arthurs, Jonathan D., 2018. "The influence of alliance experience on acquisition premiums and post-acquisition performance," Journal of Business Research, Elsevier, vol. 88(C), pages 1-10.
    6. Kavusan, K., 2015. "Essays on capability development through alliances," Other publications TiSEM 8eb736a5-b217-4718-ac13-d, Tilburg University, School of Economics and Management.
    7. Mavroudi, Eva & Kesidou, Effie & Pandza, Krsto, 2023. "Effects of ambidextrous and specialized R&D strategies on firm performance: The contingent role of industry orientation," Journal of Business Research, Elsevier, vol. 154(C).
    8. Dovev Lavie & Randi Lunnan & Binh Minh T. Truong, 2022. "How does a partner's acquisition affect the value of the firm's alliance with that partner?," Strategic Management Journal, Wiley Blackwell, vol. 43(9), pages 1897-1926, September.
    9. Shuman Zhang & Changhong Yuan & Chen Han, 2020. "Industry–university–research alliance portfolio size and firm performance: the contingent role of political connections," The Journal of Technology Transfer, Springer, vol. 45(5), pages 1505-1534, October.
    10. Cobeña, Mar & Gallego, à ngeles & Casanueva, Cristóbal, 2019. "Diversity in airline alliance portfolio configuration," Journal of Air Transport Management, Elsevier, vol. 75(C), pages 16-26.
    11. Partanen, Jukka & Kohtamäki, Marko & Patel, Pankaj C. & Parida, Vinit, 2020. "Supply chain ambidexterity and manufacturing SME performance: The moderating roles of network capability and strategic information flow," International Journal of Production Economics, Elsevier, vol. 221(C).
    12. J. Nils Foege & Erk P. Piening & Torsten-Oliver Salge, 2017. "Don’T Get Caught On The Wrong Foot: A Resource-Based Perspective On Imitation Threats In Innovation Partnerships," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 21(03), pages 1-42, April.
    13. Manuela N. Hoehn-Weiss & Samina Karim & Chi-Hyon Lee, 2017. "Examining Alliance Portfolios Beyond the Dyads: The Relevance of Redundancy and Nonuniformity Across and Between Partners," Organization Science, INFORMS, vol. 28(1), pages 56-73, February.
    14. Wadhwa, Anu & Phelps, Corey & Kotha, Suresh, 2016. "Corporate venture capital portfolios and firm innovation," Journal of Business Venturing, Elsevier, vol. 31(1), pages 95-112.
    15. Golonka, Monika, 2015. "Proactive cooperation with strangers: Enhancing complexity of the ICT firms' alliance portfolio and their innovativeness," European Management Journal, Elsevier, vol. 33(3), pages 168-178.
    16. Li, Zhengyu, 2016. "Essays on knowledge sourcing and technological capability : A knowledge structure perspective," Other publications TiSEM b8ff31fc-c57b-4bc3-b5a4-0, Tilburg University, School of Economics and Management.
    17. Shukla, Dhirendra Mani & Mital, Amita & Qureshi, Israr & Wang, Taiyuan, 2020. "Valuation effects of alliance portfolio expansion speed and strength: Evidence from high-tech firms," Journal of Business Research, Elsevier, vol. 113(C), pages 370-383.
    18. Rene M. Bakker & Joris Knoben, 2015. "Built to Last or Meant to End: Intertemporal Choice in Strategic Alliance Portfolios," Organization Science, INFORMS, vol. 26(1), pages 256-276, February.
    19. Prothit Sen & Phanish Puranam, 2022. "Do Alliance portfolios encourage or impede new business practice adoption? Theory and evidence from the private equity industry," Strategic Management Journal, Wiley Blackwell, vol. 43(11), pages 2279-2312, November.
    20. Dovev Lavie & Jingoo Kang & Lori Rosenkopf, 2011. "Balance Within and Across Domains: The Performance Implications of Exploration and Exploitation in Alliances," Organization Science, INFORMS, vol. 22(6), pages 1517-1538, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jomstd:v:57:y:2020:i:6:p:1073-1105. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-2380 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.