A resource need and availability view of the make or ally choice: evidence from the worldwide aircraft industry 1945-2000

This paper investigates why firms choose to undertake product expansion through alliances with competitors rather than on their own. We argue that both firm and product heterogeneity influence this expansion mode choice. Building on and expanding Penrose's theory of firm growth, we propose that resource conditions influence not only the decision to grow but also the choice of expansion mode: firms turn to horizontal alliances in order to implement product expansion projects that require greater resources than those available to them. More precisely, we hypothesize that a firm is more likely to launch a new product in a given business domain through a horizontal alliance rather than autonomously, when the resource requirements of the project are greater, when the resources available to the firm are more limited, when there is a mismatch between resource endowment and requirement, and when the firm's collaborative competence allows it to better cope with the inter-organizational concerns that collaboration with competitors raises. We find support for our arguments on a sample of 310 new aircraft developments launched between 1945 and 2000, either by a single prime contractor or as a horizontal alliance in which prime contractorship is shared with another industry incumbent. This paper highlights the importance of developing an integrated perspective which combines production and exchange aspects of governance decisions.