A behavioral theory of alliance portfolio reconfiguration: Evidence from pharmaceutical biotechnology

Research Summary Extant research suggests that firms rationally evaluate external and/or internal contingencies when deciding how to reconfigure their alliance portfolios. We advance a behavioral perspective which assumes that managers are boundedly rational and thus rely on behavioral heuristics when making alliance portfolio reconfiguration decisions. In panel data on U.S.‐listed biotechnology firms, we find that below‐aspiration performance motivates a firm to form alliances with novel partners within the resource scope of its existing alliance portfolio. This effect is weakened by equity ties with existing partners and strengthened by firm‐specific uncertainty. Conversely, above‐aspiration performance leads to new alliances with existing partners but outside the resource scope of the firm's existing alliance portfolio. Finally, as organizational slack increases, a firm forms alliances with novel partners focusing on new‐to‐the‐portfolio resources. Managerial Summary We study why and how firms change the configuration of their alliance portfolios over time. We find that actual performance relative to performance objectives, and firms' excess resources, are important drivers of such change. The more firms fail to meet their performance objectives, the more likely they are to form alliances with novel partners focusing on areas in which they already have one or more alliances with other partners. The more firms exceed their performance objectives, the greater their inclination to form alliances with their existing partners in areas in which they do not yet have alliances. The greater the stock of excess resources, the greater firms' propensities to form alliances with novel partners focusing on areas in which they do not yet have alliances.