In Between Markets and Hierarchies - Networking Through the Life Cycle of New Biotechnology Firms

Resource dependence and transaction cost theories focus on organizations as mitigating their dependence on the task environment through various strategies. However, these theories have contradicting predictions as to the conditions under which network alliances are formed. New Biotechnology Firms (NBFs) provide an example of knowledge-organizations, operating under uncertainty and competitive environmental constraints, yet highly dependent on external resources. The event history analysis (EVA) of NBFs (N=554) shows that although avoidance of formation of alliances is associated with death, the formation of at least one inter-organizational alliance for each age year of the firm has an inverse U shape. The life cycle dependence argument is further supported when an analysis conducted on only self-standing NBFs shows a higher and longer dependency on external alliances. These findings suggest an integration of the two theories into a firm life cycle network theory within the domain of population ecology survival theories.