Asymmetric New Product Development Alliances: Win-Win or Win-Lose Partnerships? by Kartik Kalaignanam, Venkatesh Shankar, Rajan Varadarajan
Abstract
Many new product development (NPD) alliances are asymmetric, that is they are formed between a larger firm and a smaller firm. In this paper, we examine whether such alliances promote increased shareholder values and, if so, what factors drive the changes in shareholder values of the partner firms. We develop and empirically test a model of short-term changes in shareholder values of firms involved in NPD alliances in the information technology and communication industries. We find that both the larger and smaller partners in the alliances experience significant shortterm financial gains. However, larger firms differ from smaller firms with regard to the drivers of financial gains. For the larger partner firm, an alliance that encompasses multiple functional areas (e.g., R&D, marketing, and distribution) enhances financial gains. In contrast, the smaller partner firm benefits from alliances in which the R&D efforts of the partners are pooled. However, our findings suggest that smaller firms obtain greater financial gains from alliances than do larger firms. To obtain significant financial gains from NPD alliances, larger firms may want to pay closer attention to forming broad scope alliances with innovative smaller partners, while smaller firms should focus on larger partners who are willing to devote greater R&D resources to the alliance.
Source: MANAGEMENT SCIENCE Vol. 53, No. 3, March 2007, pp. Iv-vii issn 0025-1909 eissn 1526-5501 07 5303 00iv
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