Alliance Portfolio Diversity and Firm Performance

Strategic Management Journal, Vol. 31, pp. 1136-1144, 2010

9 Pages Posted: 4 May 2011

See all articles by Ruihua Joy Jiang

Ruihua Joy Jiang

Oakland University

Qingjiu Tom Tao

affiliation not provided to SSRN

Michael D. Santoro

Lehigh University - Department of Management

Date Written: June 17, 2010

Abstract

In this paper, we offer a comprehensive alliance portfolio diversity construct that includes partner, functional, and governance diversity. Grounding our work primarily with the resource and dynamic capabilities-based views, we argue that increased diversity in partners’ industry, organizational, and national background will incur added complexity and coordination costs but will provide broadened resource and learning benefits. Increased functional diversity results in a more balanced portfolio of exploration and exploitation activities that expands the firm’s knowledge base while increased governance diversity inhibits learning and routine building. Hypotheses were tested with alliance portfolio and performance data for 138 multinational firms in the global automobile industry during the twenty-year period from 1985 to 2005. We found alliance portfolios with greater organizational and functional diversity and lower governance diversity were related to higher firm performance while industry diversity had a U-shaped relationship with firm performance. We suggest firms manage their alliances with a portfolio perspective, seeking to maximize resource and learning benefits by collaborating with a variety of organizations in various value chain activities while minimizing managerial costs through a focused set of governance structures.

Suggested Citation

Jiang, Ruihua Joy and Tao, Qingjiu Tom and Santoro, Michael D., Alliance Portfolio Diversity and Firm Performance (June 17, 2010). Strategic Management Journal, Vol. 31, pp. 1136-1144, 2010. Available at SSRN: https://ssrn.com/abstract=1626349

Ruihua Joy Jiang (Contact Author)

Oakland University ( email )

Rochester, MI 48309-4401
United States

Qingjiu Tom Tao

affiliation not provided to SSRN

Michael D. Santoro

Lehigh University - Department of Management ( email )

Bethlehem, PA 18015
United States

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