Stefan Wuyts

The Formation of Buyer—Supplier Relationships: Detailed Contract Drafting and Close Partner Selection

Firms face two strategic decisions when engaging in a new purchase transaction: the decision whether to draft a detailed contract and the decision whether to select a partner with which they share a close tie. The authors study how organizational culture affects these decisions and the effectiveness of these decisions in curtailing the partners opportunistic behavior. The results suggest that organizational culture exerts an important but different influence on both decisions. Selecting a close partner shows a marked ability to hedge against partner opportunism, but beyond a certain point, it encourages the opportunism it is designed to discourage. Contracting becomes effective only when a nonclose partner is selected and when the focal relationship is embedded in a network of close mutual contacts.

Portfolios of Interfirm Agreements in Technology-Intensive Markets: Consequences for Innovation and Profitability

Despite the high relevance of firms’ portfolios of upstream interfirm agreements in technology-intensive markets, little is known about their impact on innovative success. The authors develop a conceptual framework that explains the consequences of different portfolio descriptors for radical innovation, incremental innovation, and profitability. An empirical test in the pharmaceutical industry shows strong support for the developed theory.

Benefiting from Alliance Portfolio Diversity: The Role of Past Internal Knowledge Creation Strategy

The perspective in alliance research has shifted from the individual dyad to alliance portfolios; a key descriptor of a firm’s alliance portfolio is diversity. Focusing on firms that are confronted with emerging technological fields, the authors examine the consequences of their alliance portfolio’s technological diversity on superior product innovation. The literature has not been conclusive about the consequences of portfolio diversity. The authors examine the nature of the effect of portfolio diversity on superior product innovation and follow up on the call for a contingency perspective—as not all firms benefit equally from portfolio diversity. The contingency perspective is based on the assertion that a firm’s past strategies in internal knowledge creation are a source of experiences that increase the firm’s capability to leverage extramural knowledge. Theoretically, the study thus contributes to the absorptive capacity literature that has recently acknowledged the importance of such higher-order internal capabilities. By identifying concrete dimensions of internal knowledge creation that enable firms to benefit from portfolio diversity, actionable recommendations are derived on how to align internal knowledge creation with external knowledge sourcing. The empirical support in the biopharmaceutical industry corroborates the developed theory and serves as a warning signal for firms that are ill prepared to leverage a diverse alliance portfolio.

The market valuation of outsourcing new product development

Firms are increasingly outsourcing new product development (NPD), yet little is known about the financial performance implications of this decision. An empirical test shows that there is considerable variation in the performance implications of NPD outsourcing. The authors develop a contingency framework to explain when taking a minority equity participation in the outsourcing provider versus selecting a provider to whom the outsourcing firm has outsourced NPD in the past (i.e., prior tie selection) may increase the outsourcing firms performance. They find that the superior governance mechanism depends on two forms of uncertainty: technological uncertainty and cultural uncertainty.

Corporate Board Interlocks and New Product Introductions

Firms’ boards of directors affect many strategic outcomes. Yet the impact of boards on new products, a key organizational adaptation mechanism, has been overlooked. Addressing this gap, the authors consider the effect of the firms board interlock centrality, the extent to which board members are connected to boards of other firms, on its new product introductions. They propose that board interlock centrality provides firms access to market intelligence, creating opportunities to introduce incremental new products. Applying the motivation-opportunity-ability theory, the authors propose that two aspects of board leadership moderate this relationship: internal (vs. external) leadership and marketing leadership. They test the hypotheses using a panel of publicly listed U.S. consumer packaged goods firms, in which most new products are incremental innovations. As hypothesized, board interlock centrality increases new product introductions. This effect is stronger when firms have high internal leadership, internal marketing leadership, and a marketing CEO; it is weaker with high intra-industry external leadership. The findings highlight the unexpected role of board interlocks on innovation outcomes and advance the literature on marketing leadership, board interlocks, and social networks.

New Challenges in Alliance Portfolio Management

In order to expand the pool of opportunity and access external R&D, many pharmaceutical firms have accumulated portfolios of alliances with other industry participants over the past decade. Academic research has amply demonstrated that such alliance portfolios can contribute to firm innovativeness and profitability. Yet, alliance portfolios don’t always pay off and much remains to be done to arrive at a theory of effective alliance portfolio management. This chapter pursues a number of contributions to this area. First, the author offers an overview of the key dimensions of portfolio management: scale, partners, governance, technology diversity, cost, and dynamics. Second, the author singles out the technological diversity of the alliance portfolio and elaborates on its definition and measurement. Third, the author addresses three challenges that relate to managing technologically diverse alliance portfolios in the pharmaceutical industry. The first challenge is theoretical in nature: the author contrasts two competing theoretical perspectives that raise different expectations with regard to optimal portfolio diversity, and he motivates why the real options perspective may prove to outperform the learning theory perspective. The second challenge stems from the observation that not all firms benefit equally from similar levels of alliance portfolio diversity: the author argues that such differences across firms can be explained by differences in the commitment of managerial resources to implementing a portfolio strategy and by differences in internal routines and capabilities. The third challenge relates to the changing nature of collaboration: the evolution of biotechnology as a scientific field, the emergence of nanotechnology, the increasing potential of personalized medicine, and particular institutional changes such as healthcare reforms have reshaped the pharmaceutical landscape and require novel approaches to alliance portfolio management.