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Unpacking functional alliance portfolios: How signals of viability affect young firms' outcomes
Author(s) -
HoehnWeiss Manuela N.,
Karim Samina
Publication year - 2014
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.2158
Subject(s) - alliance , portfolio , unpacking , affect (linguistics) , initial public offering , business , market liquidity , value (mathematics) , event study , function (biology) , industrial organization , marketing , financial economics , economics , finance , computer science , psychology , paleontology , linguistics , philosophy , context (archaeology) , communication , machine learning , political science , law , biology , evolutionary biology
This article investigates how alliance portfolio composition affects young firms' outcomes. Drawing on signaling theory, we propose how alliance portfolio composition—number, functional domains (R&D, manufacturing, and marketing), and single‐purpose or multi‐purpose nature of alliances within the portfolio—may affect a firm's likelihood of achieving a liquidity event ( IPO or acquisition). We study 8,600 U.S.‐based, VC ‐backed firms during the period of 1990 to 2002 from 10 industry sectors. We find that alliance portfolios (to a certain extent) increase a firm's liquidity event likelihood. Further, firms with heterogeneous alliance portfolios, including portfolios emitting greater efficiency signals versus endorsement signals, are more likely to experience an IPO versus acquisition. Our findings lend support to the value of multi‐function alliances within portfolios . Copyright © 2013 John Wiley & Sons, Ltd.