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  • STRATEGIC TECHNOLOGY ALLIANCES AND NETWORKS

    Nicholas Vonortas

    Center for International Science and Technology Policy & Department of Economics

    The George Washington University

    and Lorenzo Zirulia

    University of Bologna, CRIOS and RCEA

    Abstract: This paper briefly reviews the literature on strategic technology alliances (STAs) and networks, allocating the contributions to “micro” (firm) and “meso” perspectives (the network). The focus is on a logical reconstruction of important themes in the literature pertaining to the role of STAs in boosting innovation and in promoting the survival and growth of partners and their environments. Overall the literature points to a quite important role of alliances and networks especially in knowledge intensive industrial activities combining the production and utilization of technological knowledge for competitiveness and growth. Not unexpectedly, important differences are pointed out in terms of incentives and benefits from alliances across different types of firms and industries. Network structure evolves in accordance to the nature of the industry and to the type of technological advancement sought by participating organizations. [Forthcoming Economics of Innovation and New Technology 2015] Note: This paper draws extensively on work undertaken by the two authors in the context of the research project “Advancing Knowledge-Intensive Entrepreneurship and Innovation for Economic Growth and Social Wellbeing in Europe” (AEGIS), 7th Framework Programme for Research and Technological Development, European Commission, DG Research and Innovation.

  • 1

    1 INTRODUCTION In 2013 Accenture and General Electric initiated a strategic alliance to develop “technology

    and analytics applications that help companies across a range of industries take advantage of

    the massive amounts of industrial strength big data generated through their business

    operations”.1 The two companies were expanding their existing collaboration in Taleris

    (Accenture and GE Aviation) which provides airlines and cargo carriers intelligent operations

    services to predict, prevent and recover from operational disruptions. This agreement aligns

    the complementary capabilities of a service company and conglomerate with arms in both

    services and manufacturing to exploit a potentially lucrative application of big data.

    Nowadays alliances are hardly the realm of enterprises in developed countries alone. Indus

    Towers was established in November 2007 as a joint venture between India’s Bharti Airtel,

    Vodafone Essar, and Idea Cellular, with the goal of reducing infrastructure costs for each

    company. Bhati Airtel and Vodafone Esser, the two largest private telecom-services providers

    in the country, realized they could cooperate on tower development while remaining

    competitive in their core businesses of providing telecom services. Together, they decided to

    jointly establish an independent firm to construct and manage towers throughout the two

    firms’ common operating regions. Idea Cellular, the third largest telecom operator, was also

    offered a smaller share in the new firm. With a portfolio of over 110,000 towers, Indus

    Towers quickly became the largest telecom tower company in the world.2 Over the past two-

    three decades, Brazil’s Petrobrás has evolved successfully into a global leader in deep sea

    drilling techniques by using strategic alliances to help it absorb external knowledge to

    generate unique solutions as well as develop its own formidable internal research

    capabilities.3

    The aforementioned examples are just three of a large number of strategic technology

    alliances being formed every day. Strategic technology alliances play indeed a prominent role

    1 Accenture Newsroom: Accenture and GE Form Global Strategic Alliance to Develop Advanced Applications that Leverage Industrial Strength Big Data to Drive Efficiency and Productivity. (2013, June 18). Website: http://newsroom.accenture.com/news/accenture-and-ge-form-global-strategic-alliance-to-develop-advanced- applications-that-leverage-industrial-strength-big-data-to-drive-efficiency-and-productivity.htm Accessed April 25, 2014.

    2 Gulati, et al. (2010) 3 Furtado and Gomes de Freitas (2000)

  • 2

    in contemporary business environments. Innovation is increasingly complex, building on

    several technological fields. This includes technology producers, namely high tech

    manufacturing sectors such as pharmaceuticals, especially following the introduction of

    molecular biology in the mid-1970s, and microelectronics, where innovation hinges on

    competencies in fields as different as solid physics, construction of semiconductor

    manufacturing and testing equipment, and programming logic. It also includes technology

    users, namely knowledge intensive services such as finance and management consulting; and

    it includes more traditional technology user sectors such as construction and agriculture.

    Firms cannot master all the relevant information and knowledge required to innovate and,

    therefore, they look for partners with complementary capabilities to assist in an increased rate

    of introduction of new products and processes, to monitor new opportunities and enter new

    markets, and to sustain long-lasting competitive advantage.

    At the same time, in the scholarly realm, a vast literature on networks has emerged on several

    related fields such as economics, management, sociology and organization theory. In

    particular, an important area of research has focused on networks arising from strategic

    technological alliances (Ozman, 2009; Malerba and Vonortas, 2009). Nowadays, the idea that

    innovation must be understood looking also at the webs of the various relationships occurring

    among firms is widely, if not unanimously, accepted (Powell and Grodal, 2004).

    This paper reviews (selectively) the existing empirical literature on this theme, trying to locate

    important contributions within a single conceptual model. The model links in a co-

    evolutionary perspective the “micro” dimension of organizations (in particular firms) and the

    “meso” dimension of networks as a step towards the impact of strategic technology alliances

    on growth and development (i.e. the “macro” dimension).

    The rest of the paper is structured as follows. In Section 2, a definition of strategic technology

    alliances is put forward together with some basic evidence. In Section 3, we advance our

    conceptual framework which relies on a bidirectional causal link between strategic alliances

    and networks. In Section 4, we take the point of view of organizations and ask two questions:

    i) what are the characteristics of networking activity of different types of organizations? ii)

    how networking activity impacts on their innovative and economic performance? In Section

    5, we take the point of view of networks and ask what is the role of different organizations in

    affecting the growth and dynamics of networks and how it influences the rate and direction of

    technological progress in industries. Based on this review Section 6 suggests possible

    directions for future empirical research. Finally, Section 7 concludes.

  • 3

    2. DEFINITION, SOURCES OF DATA, STYLIZED FACTS

    2.1 Definition

    The term strategic alliance was introduced in the 1980s to describe the multitude of forms of

    agreements between firms, universities and other research organisations that analysts had

    already begun to observe. Strategic alliances essentially refer to agreements whereby two or

    more partners share the commitment to reach a common goal by pooling their resources

    together and co-ordinating their activities (Teece, 1992; Hagedoorn, 2002).

    Alliances denote some degree of strategic and operational co-ordination and may involve

    equity investments. Alliances can occur vertically across the value chain, from the provision

    of raw materials and other factors of production, through research, design, production and

    assembly of parts, components and systems, to product/service distribution and servicing.

    They can also occur horizontally between partners at the same level of the value chain. An

    alliance can have both horizontal and vertical elements. Alliances can involve cooperation

    among firms and other organizations, notably universities (Mowery and Sampat, 2005).

    Partners may be based in one country. They may also be dispersed in several countries, thus

    establishing an international alliance.

    A subset of alliances can be characterised as innovation-based, focusing primarily on the

    generation, exchange, adaptation and exploitation of technical advances. These are called

    herein strategic technology alliances (STAs). This paper focuses on formal STAs. We do not

    consider forms of informal cooperation, occurring, for instance, through information

    exchange among engineers or scientists (Von Hippel, 1987).

    Our definition is broad, encompassing several ways in which collaboration can occur: various

    legal arrangements, different degrees of resources commitment, different levels and directions

    of technological flows, different coor