A Multi-dimensional Approach to Technological Alliance Portfolios and Firm Performance: An Empirical Study of the Korean Defense Industry

Abstract

The alliance partners with which a focal firm allies itself can be classified into three layers (vertical up-stream, horizontal, and vertical down-stream alliances) depending on the partners characteristics. In chapter 2, this thesis hypothesizes that alliance portfolios affecting the performance of the firm differ according to layers. It tests how alliance portfolio configuration variables affect the firms performance at vertical up-stream, down-stream and comprehensive alliance network levels. Chapter 3 also deals with the effect of the alliance portfolio configuration on the firms performance in the vertical down-stream alliance portfolio. It presents three questions. First, do the resources that are accessible to a focal firm affect its performance? Second, what are the relative capabilities between a focal firm and partners affecting the formers performance? Lastly, which alliance portfolio structure, that is, one spanning structural hole versus a densely embedded network, is superior considering the relative capabilities? The 54 leading firms of Korean defense industry are analyzed with two–step generalized method of moments (GMM) estimates over the period 1995–2010. In chapter 2, the results show that the balance between vertical up-stream and down-stream partners is important and that the alliance portfolio should differ depending on the vertical up-stream and down-stream alliance portfolios. In chapter 3, in the vertical down-stream alliance portfolio, large amounts of resources could improve firm performance with improved accessible resource measurement. Also, when constituting an alliance portfolio, a focal firm should compare its capabilities with a candidate partner firm, and the alliance portfolio structure should different according to the relative capabilities of a focal firm and partners. These findings provide managers with good intuitions for the detailed analysis and specification of strategy for the composition of alliance portfolios.