Old Technology Meets New Technology: Complementarities, Similarities, and Alliance Formation

Frank T. Rothaermel

Georgia Institute of Technology

Warren Boeker

University of Washington - Center for Innovation and Entrepreneurship

Strategic Management Journal, Vol. 28, 2007

Alliance formation is commonplace in many high-technology industries experiencing radical technological change, where established firms use alliances with new entrants to adapt to technological change, while new entrants benefit from the ability of established players to commercialize the new technology. Despite the prevalence of these alliances, we know little about how these firms choose to ally with specific firms given the range of possible partners they may choose from. This study explores factors that lead to alliance formation between pharmaceutical and biotechnology companies. We focus on the alliance tie as the unit of analysis and argue that dyadic complementarities and similarities directly influence alliance formation. We then introduce a contingency model in which the positive effect of complementarities and similarities on alliance formation is moderated by the age of the new technology firm. We draw theoretical attention to the intersection between levels of analysis, in particular, the intersection between dyadic and firm-level constructs. We find that a pharmaceutical and a biotechnology firm are more likely to enter an alliance based on complementarities when the biotechnology firm is younger. Another noteworthy contribution is the finding that proxies for broad capabilities appear to be at least as, if not more, effective in predicting alliance formation compared to fine-grained science and technology-related indicators, like patent cross citations or patent common citations. We conclude by suggesting that future studies on alliance formation need to take into account interactions across levels; for example, how dyadic capabilities interact with firm-level factors, and the advantages and disadvantages of more or less fine-grained measures of organizational capabilities.

Keywords: Alliance Formation, Technological Change, Measurement of Capabilities, Multi-Level Research, Pharmaceutical Biotechnology Industry

JEL Classification: L1, L14, L22, L23, L65, M1, M13, O31, O32, O33

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Date posted: January 23, 2007  

Suggested Citation

Rothaermel, Frank T. and Boeker, Warren, Old Technology Meets New Technology: Complementarities, Similarities, and Alliance Formation. Strategic Management Journal, Vol. 28, 2007. Available at SSRN: http://ssrn.com/abstract=958513

Contact Information

Frank T. Rothaermel (Contact Author)
Georgia Institute of Technology ( email )
800 West Peachtree Street NW
Atlanta, GA 30308-1149
United States
404-385-5108 (Phone)
404-894-6030 (Fax)
HOME PAGE: http://mgt.gatech.edu/rothaermel
Warren Boeker
University of Washington - Center for Innovation and Entrepreneurship ( email )
Seattle, WA
United States
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