Alliance Portfolio Internationalization and Firm Performance

Organization Science, Vol. 19, No. 4, pp. 623-646, 2008

2008 Industry Studies Conference Paper

49 Pages Posted: 3 Nov 2007 Last revised: 20 Oct 2008

See all articles by Dovev Lavie

Dovev Lavie

Bocconi University - Department of Management and Technology

Stewart R. Miller

University of Texas at San Antonio - Department of Management

Abstract

Alliance research has traditionally focused on structural and relational aspects of the networks in which firms are situated, paying less attention to the inherent characteristics of their partners. This study introduces the notion of alliance portfolio internationalization (API), which refers to the degree of foreignness of partners in a firm's collection of immediate alliance relationships. We develop a framework to explain how API impacts firm performance. We suggest that as a firm's API increases, financial performance is expected to initially decline, then improve, and finally decline again. This sigmoid relationship between API and financial performance is ascribed to evolving learning effects that shape the net benefits of API. When the firm's alliance portfolio, on average, consists of proximate foreign partners, the firm may fail to recognize latent national differences, but at moderate levels of API, its absorptive capacity and specialized collaborative routines support the exchange of valuable network resources. Nevertheless, high levels of API undermine firm performance because of the failure of collaborative routines and mounting liabilities of cross-national differences. We test the framework using data on the alliance portfolios of U.S.-based software firms during the period from 1990 to 2001. The results provide support for the sigmoid relationship as well as for our predictions that firms which have gained experience with foreign partners and maintained wholly owned subsidiaries in their partners' countries of origin can overcome some of the liabilities of API and better leverage its benefits.

Keywords: Alliance, Collaboration, Portfolio, Network, Interorganizational, Learning, International, Internationalization, Foreign, Performance

JEL Classification: F23, P13, M10, Z1

Suggested Citation

Lavie, Dovev and Miller, Stewart R., Alliance Portfolio Internationalization and Firm Performance. Organization Science, Vol. 19, No. 4, pp. 623-646, 2008, 2008 Industry Studies Conference Paper, Available at SSRN: https://ssrn.com/abstract=1027130

Dovev Lavie (Contact Author)

Bocconi University - Department of Management and Technology ( email )

Via Roentgen 1
Milan, MI 20136
Italy

Stewart R. Miller

University of Texas at San Antonio - Department of Management ( email )

501 W. Durango
San Antonio, TX 78207
United States

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