Cross-function and same-function alliances: How does alliance structure affect the behavior of partnering firms?
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Firms collaborate to develop and deliver new products. These collaborations vary in terms of the similarity of the competencies that partnering firms bring to the alliance. In same-function alliances, partnering firms have similar competencies, whereas in cross-function alliances, partners have very different competencies. On examining managerś view of these alliances, we find that, on average, same-function alliances are expected to perform better than cross-function alliances, holding fixed the level of inputs. A game-theoretic analysis shows that this apprehension about cross-function alliances is consistent with a Pareto-inferior equilibrium. A Pareto-superior equilibrium, however, suggests that partners in cross-function alliances may invest more in their alliances than those in same-function alliances. It is also often believed that increasing the number of partnering firms is not conducive for collaborative effort. Our analysis shows that this belief is correct for same-function alliances, but not for cross-function alliances. We test these equilibrium predictions in an experiment where we exogenously vary the type of alliance and the number of partnering firms. The experimental results lend support for the Pareto-superior equilibrium. Partners in cross-function alliances invested more than their counterparts in same-function alliances, and this difference in investment levels increased with the number of partnering firms. We extend our model to consider alliances where firms have an opportunity to learn from their partners and later leverage this knowledge outside the scope of their alliance. Though such learning increases the resources committed by alliance partners in the learning phase, it decreases investment in the subsequent competition and also dampens the overall investment across the two stages. In addition, an increase in inter-alliance competition decreases investments in the focal alliance but increases investment in the competition outside the scope of the alliance. © 2010 INFORMS.
Published Version (Please cite this version)10.1287/mnsc.1090.1103
Publication InfoAmaldoss, W; & Staelin, R (2010). Cross-function and same-function alliances: How does alliance structure affect the behavior of partnering firms?. Management Science, 56(2). pp. 302-317. 10.1287/mnsc.1090.1103. Retrieved from https://hdl.handle.net/10161/4423.
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Thomas A. Finch Jr. Professor of Business Administration, in the Fuqua School of Business
Professor Amaldoss received his Ph.D in Marketing in 1998 from the Wharton School of the University of Pennsylvania. He holds an MBA from the Indian Institute of Management, Ahmedabad. He has taught earlier at the Krannert Graduate School of Management of Purdue University. He is interested in understanding strategic behavior in the context of pricing and advertising. Recent publication credits include “Branding Conspicuous Goods” (joint with Sanjay Jain) in Management Sc
Gregory Mario and Jeremy Mario Professor
Richard Staelin is the Edward and Rose Donnell Professor of Business Administration at The Fuqua School of Business, Duke University. He served as Associate Dean for Faculty Affairs at The Fuqua School from 1984 until July 1991. For the next two years he was Executive Director of Marketing Science Institute in Cambridge, Massachusetts. After that he served as Managing Director of The Fuqua School's Global Executive MBA program (GEMBA) 1995-1997, Associate Dean for Executive Education 2000-200
Alphabetical list of authors with Scholars@Duke profiles.