Unpacking functional alliance portfolios: How signals of viability affect young firms' outcomes
Article first published online: 8 JUL 2013
Copyright © 2013 John Wiley & Sons, Ltd.
Strategic Management Journal
How to Cite
Hoehn-Weiss, M. N. and Karim, S. (2013), Unpacking functional alliance portfolios: How signals of viability affect young firms' outcomes. Strat. Mgmt. J.. doi: 10.1002/smj.2158
- Article first published online: 8 JUL 2013
- Accepted manuscript online: 10 JUN 2013 10:38AM EST
- Manuscript Accepted: 13 SEP 2012
- Manuscript Revised: 12 SEP 2012
- Manuscript Received: 27 OCT 2011
- alliance portfolio;
- entrepreneurial venture;
- venture capital;
- signaling theory
This article investigates how alliance portfolio composition affects young firms' outcomes. Drawing on signaling theory, we propose how alliance portfolio composition—number, functional domains (R&D, manufacturing, and marketing), and single-purpose or multi-purpose nature of alliances within the portfolio—may affect a firm's likelihood of achieving a liquidity event (IPO or acquisition). We study 8,600 U.S.-based, VC-backed firms during the period of 1990 to 2002 from 10 industry sectors. We find that alliance portfolios (to a certain extent) increase a firm's liquidity event likelihood. Further, firms with heterogeneous alliance portfolios, including portfolios emitting greater efficiency signals versus endorsement signals, are more likely to experience an IPO versus acquisition. Our findings lend support to the value of multi-function alliances within portfolios. Copyright © 2013 John Wiley & Sons, Ltd.