Alliance Portfolio Diversity and Firm Performance

Abstract

How does the alliance portfolio diversity impact firm performance? Prior work has suggested that knowledge heterogeneity within a network allows for performance benefits, whereas others have shown such diversity to be of detriment to firms. The SDC Platinum Database was used to identify alliance portfolios for the global textile and apparel industry. Based on performance data availability from Compustat, we were able to obtain a panel data set containing the firms global alliance portfolio First study focuses specifically on the alliance portfolio internationalization in the textile and apparel industry. Using two-stage analysis for handling potential self-selection bias of data collected from the textile and apparel industry, we have identified a three-stage relationship between the alliance portfolio internationalization and financial performance. At low levels of API, firm performance declines due to negative transfer effects, improves at moderate levels with alliance portfolio internationalization at which firms maintain a positive balance between value of network resources and efficiency of its relative absorptive capacity, and once again declines when excessive API results in differences too complex and difficult to coordinate. In second study, we explore the relationship between alliance portfolio diversity and performance in fashion retail firms. This study was driven by the lack of studies on alliance portfolio diversity in textile and apparel industry despite the importance of alliance as one of the primary sources of competitive advantage for retail firms. Furthermore, as manufacturing firms and retail firms are different in many respects, it could be expected that retail firms could pursue and emphasize different aspects of managing alliance portfolio than their manufacturing counterparts. Drawing on the alliance literature and grounding our work in large part with the resource-based views, we explore how firms global alliance portfolio diversity in terms of alliance partners industry, functions, and governance structures influences the change in retail firms performance.