Unpacking Functional Alliance Portfolios: How Signals of Viability Affect Young Firms’ Outcomes
Hoehn-Weiss, Manuela and Samina Karim (2014). “Unpacking functional alliance portfolios: How signals of venture viability affect new-venture outcome.” Strategic Management Journal 35(9): 1364-1385.
Posted: 20 Feb 2012 Last revised: 7 Nov 2014
Date Written: 2014
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.
Keywords: alliance portfolio, entrepreneurial venture, venture capital, IPO, signaling theory
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