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This study investigates why firms choose to undertake product expansion through alliances with
competitors rather than on their own. We highlight product heterogeneity as a determinant of
this make or ally choice. We propose that firms turn to horizontal alliances in order to implement
product expansion projects that require greater resources than those available to them. More
precisely, we hypothesize that a firm is more likely to launch a new product through a horizontal
alliance rather than autonomously when the resource requirements of the project are greater,
the resources available to the firm are more limited, there is a mismatch between resource
endowment and requirement, and the firms collaborative competence allows it to better cope with
the interorganizational concerns that collaboration with competitors raises. We find support for
our arguments on a sample of 310 new aircraft developments launched between 1945 and 2000,
either by a single prime contractor or as a horizontal alliance in which prime contractorship is
shared with another industry incumbent. Copyright 2009 John Wiley & Sons, Ltd.
INTRODUCTION
This study investigates why firms choose to undertake product expansion through alliances with
competitors rather than on their own. We argue that
both firm and product heterogeneity influence this
make or ally choice. Drawing on and expanding
Penroses theory of firm growth (Penrose, 1959),
we propose that resource conditions influence not
Keywords: alliance; collaboration; fit; governance; resource; competence; growth
886
The empirical setting of our study is the worldwide aircraft industry. We test our model on a sample of 310 new aircraft projects undertaken by aircraft manufacturers from 1945 until 2000, either as
single prime contractors (autonomous expansion)
or joint prime contractors (horizontal alliance). We
find support for all our hypotheses. More precisely, we observe that aircraft manufacturers are
more likely to undertake a new project through
horizontal collaboration rather than autonomously
when the resource requirements of the project are
greater, when the firms resource endowment is
more limited, and when the firm has substantial
collaborative competence. Further, consistent with
our main argument, we find a significant impact of
the interaction between project resource requirements and firm resource endowment on the choice
between collaborative and autonomous production.
This supports our view that the effect of available
firm resources is contingent on product resource
requirements.
887
888
METHODS
The empirical setting for our study is the worldwide aircraft industry from 1945 to 2000, excluding former Warsaw Pact countries. We focus on
airframe manufacturers, excluding suppliers or
subcontractors, such as engine makers, electronic
equipment providers, and others. This is an appropriate empirical setting given that airframe makers
have been forming horizontal alliances with each
other for many years.
Because of increasing resource requirements and
costs, the aircraft industry has undergone major
domestic consolidation over the years (Anand and
Singh, 1997). However, national security concerns
have limited the potential for international consolidation. This has led airframe manufacturers to turn
extensively to collaboration to jointly produce aircraft. Most of these collaborations associate industry incumbents that undertake a project together by
sharing the prime contractorship. Joint prime contractorship entails jointly defining product features,
sharing investments, risks, and benefits. In such
arrangements, the partners split the development
work among themselves and then each assumes
responsibility for manufacturing (sometimes turning to subcontracting) those elements and modules it has developed (Dussauge and Garrette,
1995). Such joint prime contractorship arrangements, which have accounted for close to 20 percent of all new aircraft developed since World War
II (Janes All the Worlds Aircraft, 19452003), are
horizontal alliances between incumbents, formed
to launch new products together.
Strat. Mgmt. J., 30: 885894 (2009)
DOI: 10.1002/smj
889
0.09
0.29
0.03
0.35
0.18
0.01
0.01
0.02
0.16
0.65
0.00
0.11
0.01
0.10
0.31
0.30
0.14
0.20
0.02
0.20
0.31
0.20
0.05
0.05
0.61
0.08
0.05
0.04
0.04
0.07
0.15
0.46
0.10
0.17
0.11
0.22
0.06
0.39
0.51
0.34
0.08
0.15
0.12
0.26
0.34
0.18
0.12
0.26
0.45
0.68
0.02
0.04
0.03
0.26
0.33
0.30
0.03
0.07
0.42
0.24
0.12
0.14
0.10
0.04
0.31
0.11
0.00
0.05
0.22
0.38
0.15
0.02
0.03
0.11
0.35
0.03
0.08
0.04
0.20
0.16
0.02
0.01
0.14
0.01
0.01
0.09
0.00
0.08
0.06
0.08
0.10
0.50
0.24
0.13
0.13
0.39
0.31
0.29
0.15
0.15
0.26
0.20
0.05
0.05
0.05
0.08
0.03
0.63
0.26
0.51
0.40
0.08
0.24
0.15
0.17
0.13
0.04
0.18
0.01
0.09
0.09
0.09
0.35
0.08
0.03
0.05
0.04
0.33
0.09
0.06
0.05
0.20
0.28
0.07
0.06
1.00
6.78
16.00
13.36
5.00
1.00
1.00
1.00
7.68
1999
8.84
1.00
1.00
2.01
1.00
1.00
35.00
0.00
1.26
0.00
14.47
0.00
0.00
0.00
0.00
3.64
1949
1.13
0.00
0.00
0.10
0.00
0.00
0.00
0.45
1.10
3.06
3.12
0.82
0.41
0.45
0.43
0.79
12.64
1.27
0.48
0.50
0.61
0.39
0.37
6.84
N = 310
0.27
4.26
3.01
0.18
0.34
0.22
0.27
0.24
5.94
1974
3.03
0.35
0.44
1.12
0.82
0.16
16.52
1
Max
Min
S.D.
Mean
Table 1.
FINDINGS
Alliance
Product resource requirements
Production experience
Product res. req. prod. exp.
Horizontal alliance experience
Helicopter
Fighter
Jet
Firm size
Year
Level of technology
Civil
Military
Defense budget
Cold War
War time
Nb of competing aircraft
10
11
12
13
14
15
16
0.00
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
890
(1 = horizontal
alliance)
Model 1
Coef.
Product resource
requirements
Production experience
Product res. req.
prod. experience
Horizontal alliance
experience
Helicopter
1.40
Fighter
0.39
Jet
0.53
Firm size
0.06
Year
0.06
Level of technology
0.14
Civil
0.78
Military
0.97
Defense budget
1.09
Cold War
0.12
War time
0.27
Number of competing
0.00
aircraft
Constant
118.84
N
310
Wald chi-square
60.07
Pseudo R square
0.16
(a)
891
Model 2
(a)
Robust
Std. err
Coef.
Model 3
(a)
Robust
Std. err.
Coef.
Model 4
(a)
Robust
Std. rrr.
1.13
0.25
Coef.
Robust(a)
Std. err.
1.10
0.11
0.08
0.26
0.07
0.07
0.14
0.07
0.76
0.18
0.89
0.18
0.85
0.20
0.67
0.60
0.52
0.26
0.02
0.19
0.35
0.41
0.31
0.47
0.40
0.03
1.29
0.35
0.44
0.15
0.05
0.15
0.78
1.06
0.74
0.07
0.21
0.01
0.60
0.60
0.52
0.26
0.02
0.21
0.36
0.45
0.30
0.47
0.40
0.02
2.89
0.23
0.72
0.47
0.07
0.21
0.80
0.79
0.79
0.12
0.06
0.00
0.77
0.59
0.59
0.27
0.02
0.19
0.40
0.44
0.32
0.57
0.46
0.03
2.74
0.30
0.74
0.50
0.07
0.22
0.81
0.81
0.78
0.11
0.09
0.01
0.77
0.62
0.59
0.28
0.02
0.20
0.41
0.46
0.32
0.58
0.46
0.03
40.57
96.37
310
105.67
0.20
43.44
128.56
310
111.84
0.25
45.34
136.98
310
103.43
0.26
45.86
(12df)
(14df)
(15df)
0.06
0.05
(16df)
892
firms resource needs and strengths relate to resources that are different in nature: one partners
strengths compensate for the others weaknesses
and vice versa. However, our findings suggest that
resource needs may not always relate to different
resource categories, but rather to sufficient quantities in the same resource categories (Hennart,
1988; Doz, 1988; Das and Teng, 2000; Dussauge,
Garrette and Mitchell, 2000). Similarly, attractiveness may not necessarily result from the possession of different resources, but rather from additional quantities of the same resources. Indeed, our
results suggest that firms form horizontal alliances
to pool similar resources with competitors in order
to jointly match the resource requirements of
expansion projects that they would be unable to
address on their own. In contrast, for projects with
more limited resource requirements, the same firms
tend to opt for autonomous expansion.
We acknowledge that our measures present some
limitations. In particular, our measure of firms
available resources could be improved. Future
studies should take into account both the scope and
the depth of the firms resource endowment along
the value chain, identifying the strategic nature of
resources as well as their redeployability to the
new project (Poppo and Zenger, 1998). Along the
same lines, future research should attempt to capture resource requirements more directly by assessing the scope and magnitude of resources needed
to implement the new project.
More fundamentally, a possible limitation of our
research is that we consider a firms make or ally
choice without explicitly considering the extent
to which the firm can outsource the products
components or form vertical partnerships (Masten, 1984; Dyer, 1996). We recognize that these
various governance choices might influence one
another. Indeed, outsourcing or vertical partnerships might make it possible for firms with more
limited resources to launch relatively complex
new products without forming horizontal alliances.
Also, in this research we did not consider licensing
and corporate acquisitions as alternative expansion
modes. However, we believe our framework could
apply to expansion modes other than autonomous
production and alliances.
Finally, we believe our study offers additional avenues for future research. In particular,
it shows that weaker (i.e., less well resourceendowed) firms choose to form horizontal alliances
rather than to undertake expansion projects
Strat. Mgmt. J., 30: 885894 (2009)
DOI: 10.1002/smj
ACKNOWLEDGEMENTS
We would like to acknowledge the support of
the CNRS-GREGHEC lab and of the Atos Origin Chair on Growth Strategies and Integration
Management, as well as the research assistance of
Louis Mulotte. We are also grateful to Editor Will
Mitchell and two anonymous reviewers for their
constructive comments and help in improving this
paper. We also thank Africa Arino, Bob Gibbons,
Nandini Rajagopalan, and Jeffrey Reuer for their
valuable comments on previous versions of this
paper.
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Copyright 2009 John Wiley & Sons, Ltd.
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