Our study employs the behavioral theory of the firm to explain a focal firm's behavior, when it's innovative performance goes below and above innovative aspiration level.
1. The behavioral theory of the firm (Cyert and March, 1963)
2. Performance-induced change (Ocasio, 1995)
3. Performance feedback models (Greve, 2003)
4. Organizational learning (Levit and March, 1988)
5. Environmental uncertainty (Grant and Baden-Fuller, 2004; van de Vrande, Vanhaverbeke, & Duysters, 2009).
6. Transaction cost theory (Williamson, 1975; Geykens, Steenkamp and Kumar, 2006)
Until now studies have largely focused on how exogenous uncertainty afftects a firm's governance mode choice. However, little attention has been paid to endogenous uncertainty arising from the gap between performance and aspirations set up for this performance influences a firm's governance mode choice.
How does innovative performance relative to aspiration level set up for this performance affect a firm's trade between less (i.e. non-equity strategic alliances) and more integrated governance modes (i.e. joint ventures)
Our study is quantitative (longitudinal panel study). In particular, using data from different sources (SDC Platinum Joint Ventures and Alliances database, Compustat, USPTO, CRSP, NBER's public data) we constructed a unique database for firms from 12 hi-tech industries for the period of 1990-2010.
We used multiple sources in the data collection. Data on firms’ external knowledge sourcing vehicles were collected from the SDC Platinum Joint Ventures and Alliances database. SDC tracks a very wide range of agreement types including research & development agreements, sales and marketing agreements, banking agreements, manufacturing agreements(Schilling, 2009).
We extracted patent data from The National Bureau of Economic Research (NBER) paper (Kogan, Papanikolaou, Seru and Stoffman, 2017), in which the authors used extensive name-matching tools to assign USPTO patents to focal firms. However, these firms were classified by a “permno” identifier. Thus, we employed a CRSP/Compustat merged database (linking table) to obtain more common identifiers such as gvkey and cusip for each patent. Consequently, we matched our sample firms with their joint venture and alliance data from SDC, patent data and financial data from Compustat using gvkey and/or cusip.e also constructed a large, cross-firm and cross-industry sample of t Compustat firms for the period of 1990 – 2010 in 12 high-tech industries.
We only used agreements whose purposes were developing/improving technoloy (or at least one of the alliance purposes).We ended up with more than 7.000 firm-year observations from more than 800 firms in 12 hi-tech industries.
H1: Firms performing below innovative aspiration level are more likely to source knowledge through less integrated governance modes (i.e. non-equity alliances).
Only historical aspiration model we don’t find a significant relationship between below aspiration and likelihood of undertaking non-equity alliances.
Only social aspiration model we find a positive relationship (at the 10%) between below aspiration and likelihood of undertaking non-equity alliances. This is a partial support for the first hypothesis.
To sum up, the results show that if a firm is below social aspiration, it will more likely tosource technological knowledge through less integrated governance modes (i.e. non-equity alliances).
H2: Firms performing above the aspiration level are more likely to source knowledge through more integrated governance modes (i.e. equity joint ventures).
Only historical aspiration model we find a significant relationship between above aspiration and likelihood of undertaking JVs.
Only social aspiration model we find a positive relationship between above aspiration and likelihood of undertaking JVs. This is a full support for the second hypothesis.
To sum up, the results show that if a firm is above aspiration (both historical and social), it will more likely to source technological knowledge through more integrated governance modes (i.e. JVs).
Contribution to Scholarship
1. Our main contribution is that we find a relation between innovative performamce and a firm's trade off between non-equity strategic alliances and joint ventures. Previous studies have only focused on exogenous factors which can not be decreased by a firm's actions. We conclude that a firm's behavior in governance modes also depends on factors which can be controlled by its actions.
2. We move beyond the focus on collaboration with individual partners (the dyadic perspective) that has been the dominant emphasis in the literature until now. In this study the unit of the analysis is a focal firm.
Dyadic governance mode choice studies assume that a firm has to choose one of potential modes. However, we consider that a firm has 3 options at its disposal :
choosing either one of less and more integrated modes, both of them or neither of them.
Contribution to Practice
Our study makes a distinction between two types of governance mode:
1. non-equity atrategic alliances
2. joint ventures
we find that firms above innovatiove performance prefer joint ventures, because we find such alliances are better equiped to protect technological knowledge. Firms below aspiration prefer non-equity strategic alliances, as they have less to lose.
These findings might give some ideas to top managers how to behave in bad (below aspiration) and good (above aspiration) situations depending on their pupose (to protect technological knowledge or swim in a pool with full of knowledge).
This study only focuses of R&D agreements. In particular, how a firm's behavior in R&D agreements is driven by performance feebacks. Moreover, our focus is a firm's innovative performance, not financial performance. These two factors make this study so relevant to this conference.
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