Technology-intensive industries, such as computer industry and bio-pharmaceutical industry, have witnessed a rising trend of strategic alliances between asymmetric partners that vary in many different dimensions such as firm size, social status and market positions. For example, low-status firms enter into alliances with high-status partners, and incumbent firms form alliances with entrant firms. The asymmetry between partners gives rise to distinct tensions and disparities in motivation, commitment and power in the alliances. While prior research has generally acknowledged the homophily argument that firms with same attributes flock together (Chung, Singh, & Lee, 2000, Saxton, 1997), our understanding of these asymmetric alliances has been very limited, especially on the intera...[ Read more ]

Technology-intensive industries, such as computer industry and bio-pharmaceutical industry, have witnessed a rising trend of strategic alliances between asymmetric partners that vary in many different dimensions such as firm size, social status and market positions. For example, low-status firms enter into alliances with high-status partners, and incumbent firms form alliances with entrant firms. The asymmetry between partners gives rise to distinct tensions and disparities in motivation, commitment and power in the alliances. While prior research has generally acknowledged the homophily argument that firms with same attributes flock together (Chung, Singh, & Lee, 2000, Saxton, 1997), our understanding of these asymmetric alliances has been very limited, especially on the interaction between asymmetric partners and the possible consequences or returns of asymmetric alliances.

In this dissertation I attempt to examine the consequences of asymmetric alliances for participating firms. In particular, I develop two essays with one to examine the potential payoff for disadvantageous partners in the asymmetric alliances, and the other one to investigate the payoff for advantageous partners in the asymmetric alliances. In the first essay I set out to examine how the status asymmetry between low-status and high-status alliance partners may influence the low-status firms’ status improvement. This research expands the well-established hypothesis on status endorsement in that low-status firms will improve their status by allying with high-status firms. I draw on social categorization theory to argue that a sharp contrast in status asymmetry between allying firms may initiate the social categorization process, making it harder for low-status firms to gain status improvement. Specifically, I argue that a moderate level of status asymmetry between allying firms enhances the status for low-status firms, while a large status asymmetry results in diminishing status improvement for low-status firms. I further argue that the above relationship is moderated by the degree of status inequality in the status hierarchy and the technological capability of the low-status firms. Data analysis from sample firms in both biopharmaceutical and computer industries largely support the above hypotheses.

In the second essay I examine whether incumbent firms can lead technological changes (i.e., introduction of breakthrough innovations) under technological discontinuities by configuring their exploratory alliances with entrant firms. Specifically, I draw on real option perspective to argue that each exploration alliance with entrant firms is taken as a real option by incumbents to address the uncertain nature of technological discontinuities. A moderate number of options in the alliance portfolio help incumbents manage the uncertainties in knowledge discovery and generate breakthrough innovations, while too many options hurt the knowledge discovery. I further contend that industry technological dynamism and partner firms’ technological diversity moderate the above relationship. The above hypotheses find support in a sample of U.S. computing and biopharmaceutical firms during 1988 and 2006.

In summary, these two essays challenge the well-established hypotheses in the literature. The first essay develops a fresh perspective (i.e. social categorization theory) to complement the logic of uncertainty-reduction, which has been used to support status endorsement in prior research. Further, the first essay argues that organizational status is not only decided by its exchange partners, but also by the material outcomes of the relationships with them. A high degree of status asymmetry in alliances may undermine the status improvement for a low-status firm, the finding of which extends the linear prediction of uncertainty-reduction logic used in prior research.

The second essay also develops a new perspective (i.e., real option theory) to examine incumbent firms’ exploratory alliances with entrant firms. The findings suggest that incumbents do not fall behind in technological competition under technological discontinuities if they are able to use real option logic to access new technologies through exploratory alliances with entrants.

Key Words: asymmetric alliances, status asymmetry, status improvement, incumbent firms, entrant firms, breakthrough innovations