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INTRODUCTION

“Everybody has these little pieces to the puzzle and someone has to put the pieces together or they are not going to have a cohesive whole that can get something done.”
(An interview with a biotechnology executive describing alliances.)

Much has been written regarding interfirm alliances and the breakdown of company boundaries in this age of global hypercompetition (D’Aveni, 1994).  The intense interest in seeking competitive advantage through new structures has yet, however, to address the entrepreneurial endeavors evidenced in alliances between large established companies and smaller entrepreneurial ventures.  The present study examines success and failure factors in such alliances in an attempt to provide guidance in their design and management.  The focus is upon alliances for new and innovative technology development.

Approaches which seek sources of competitive advantage in the strategies of small firms miss an important link as they fail to recognize the benefits associated with alliances.  In today’s environment, competing only with one’s own resources might mean abandoning opportunities and resources available through other firms.  Performance, and in some cases even the survival of a firm, may be dependent upon alliance activities with other firms.  The emphasis in the present study is not so much about small venture survival, rather, our concern is about how to successfully grow a business, create new jobs (Drucker, 1985; Phillips, Kirchoff & Brown, 1991), develop new products (Webre & Bodde, 1986), generate wealth and new tax revenues (Webre & Bodde, 1986), and exploit new opportunities in the process. The research in this paper focused on new ventures in the biotechnology industry which have survived, grown, and flourished because of alliances with larger pharmaceutical firms.  Biotechnology firms are perhaps the most experienced firms today with regard to alliance formation.  Based upon a thorough review of the published alliance literature and intensive interviews with experienced alliance managers, a questionnaire was developed based on alleged success and failure factors.  We sampled all publicly traded biotechnology firms and sent the questionnaire to the directors of business planning.  In addition, we interviewed the directors of business planning of 25 of these firms across a broad geographic distribution.  The work was supported by a grant from the Kauffman Foundation.

The purpose of this paper is to explore the sources of firm performance in technology–based entrepreneurial firms which result from their alliances with larger partners.  To accomplish this, we first review the literature and theoretical background on alliances to develop specific hypotheses.  In particular, resource–based theory assists in explaining the unique competitive advantage facilitated through alliances; firms seek alliances in order to supplement gaps in their resource set.  In addition, trust between partners, based on the demonstrated cooperation and sharing of resources is a significant factor in the success of the alliance and of the smaller entrepreneurial venture.  Then we describe the sample and methodology and demonstrate support for these hypotheses using a factor analysis and regression.  Finally, we conclude with a discussion of the implications of these results for the entrepreneurial firm, as well as positing suggestions for future research.

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