Chapter 8 (Collaboration Strategies)

Small firms and Larger Firms

Large firms might form alliances with small firms in order to take a limited stake in the smaller firm's development efforts, while small firms might form alliances with large firms to tap the larger firm's greater capital resources, distribution and marketing capabilities, or credibility.

What do Allienaces often lack

Often lack the shared language, routines, and coordination that facilitate the transfer of knowledge—particularly the complex and tacit knowledge that is most likely to lead to sustainable competitive advantages. Alliances can thus also be costly. They require monitoring and coordination. There is also a risk of partners taking the firm's intellectual property for their own advantage

Resource and Risk Pooling

One primary reason firms collaborate on a development project is to share the costs and risks of the project

Building a Coalition around a Shared Standard

Firms may also collaborate on a development project when such a collaboration would facilitate the creation of a shared standard.

governance

The act or process of exerting authority and/or control.

Careful with Allienaces

while collegiality between partners can facilitate trust and communication, too much collegiality may be a warning sign that information gatekeepers within the firm are not being sufficiently vigilant.

When is outsourcing appropriate

(a) firm activities that are not central to its competitive advantage (b) activities that would cause the firm to give up crucial flexibility if performed in-house (c) activities in which the firm is at a cost or quality disadvantage

REASONS FOR GOING SOLO

1. the firm may perceive no need to collaborate with other organizations—it may possess all the necessary capabilities and resources for a particular development project in-house. 2. solo venture if it is concerned that collaborating would put its proprietary technologies at risk, or if it seeks to have full control over the project's development and returns.

licensing

A contractual arrangement whereby one organization or individual (the licensee) obtains the rights to use the proprietary technology (or trademark, or copyright, etc.) of another organization or individual (the licensor).

Partner Selection

A number of factors can influence how well suited partners are to each other, including their relative size and strength, the complementarity of their resources, the alignment of their objectives, and the similarity of their values and culture.

joint venture

A partnership between two or more firms involving a significant equity stake by the partners and often resulting in the creation of a new business entity.

Protecting Proprietary Technologies

Firms sometimes avoid collaboration for fear of giving up proprietary technologies. Working closely with a partner might expose the company's existing proprietary technologies to the prying eyes of a would-be competitor.

Outsourcing

Firms that develop new technological innovations do not always possess the competencies, facilities, or scale to perform all the value-chain activities for the new innovation effectively or efficiently. Such firms might outsource activities to other firms

alliance contracts

Legally binding contractual arrangements to ensure that partners (a) are fully aware of their rights and obligations in the collaboration and (b) have legal remedies available if a partner should violate the agreement

Increasing Flexibility

Obtaining some of the necessary capabilities or resources from a partner rather than building them in-house can help a firm reduce its asset commitment and enhance its flexibility.

What type of services can be outsourced

Other activities, such as product design, process design, marketing, information technology, or distribution can also be outsourced from external providers.

Down sides of outsourcing?

Reliance on outsourcing may cause the firm to forfeit important learning opportunities, potentially putting it at a disadvantage in the long run.By not investing in development of in-house capabilities, a firm might not develop many of the skills and resources related to its products that enable the development of future product platforms. The firm risks becoming hollow.

Licensing

contractual arrangement whereby one organization or individual (the licensee) obtains the rights to use the proprietary technology (or trademark, copyright, etc.) of another organization or individual (the licensor).

ADVANTAGES OF COLLABORATING

offer a firm a number of advantages, including faster speed to market, greater flexibility, learning capabilities from other firms, and building a coalition around a standard.

TYPES OF COLLABORATIVE ARRANGEMENTS

partnering with suppliers, customers, competitors, complementors, organizations that offer similar products in different markets, organizations that offer different products in similar markets, nonprofit organizations, government, and more.

Resource fit

refers to the degree to which potential partners have resources that can be effectively integrated into a strategy that creates value

Building and Renewing Capabilities

solo development even when partnering could save time or money because they believe that development efforts are key to building and renewing their capabilities

When does solo make sense?

solo internal development might make sense for a firm that has strong competencies related to the new technology, has access to capital, and is not under great time pressure.

forms of collaborative arrangements used in technological innovation

strategic alliances, joint ventures, licensing, outsourcing, and collective research organizations

Strategic fit

the degree to which partners have compatible objectives and styles.

contract manufacturing

When a firm hires another firm (often a specialized manufacturer) to manufacture its products

Strategic Alliances

A strategic alliance is a temporary relationship that can take many forms. It can be formalized in a contract or an informal agreement. It can be a short-term agreement or a long-term agreement, and it can include an equity investment made by the partners in each other (termed equity alliances, discussed later in the chapter). use strategic alliances to access a critical capability that is not possessed in-house or to more fully exploit their own capabilities by leveraging them in another firm's development efforts

alliance

Alliance is a general term that can refer to any type of relationship between firms. Alliances may be short or long term and may include formally contracted agreements or be entirely informal in nature.

Learning from Partners

Collaboration with partners can be an important source of learning for the firm. Close contact with other firms can facilitate both the transfer of knowledge between firms and the creation of new knowledge that individual firms could not have created alone.

Collective Research Organizations

Collective research organizations may take a number of forms, including trade associations, university-based centers, or private research corporations.

capability complementation

Combining ("pooling") the capabilities and other resources of partner firms, but not necessarily transferring those resources between the partners.

Why collaboration if firms are similar?

Even firms that have similar capabilities may collaborate in their development activities in order to share the risk of a venture or to speed up market development and penetration.

capability transfer

Exchange of capabilities across firms in such a manner that partners can internalize the capabilities and use them independently of the particular development project.

Availability of Capabilities

If a firm has all of the necessary capabilities for a project, it may have little need to collaborate with others and may opt to go it alone.

CHOOSING AND MONITORING PARTNERS

It is also possible that a collaboration partner will exploit the relationship, expropriating the company's knowledge while giving little in return.

relational governance

Self-enforcing norms based on goodwill, trust, and reputation of the partners. These typically emerge over time through repeated experiences of working together

Controlling Technology Development and Use

Sometimes firms choose not to collaborate because they desire to have complete control over their development processes and the use of any resulting new technologies.

equity ownership

When each partner contributes capital and owns a specified right to a percentage of the proceeds from the alliance

Joint Ventures

a joint venture involves a significant equity investment from each partner and often results in establishment of a new separate entity

three main types of governance mechanisms organizations

alliance contracts, equity ownership, and relational governance.

What can licensing open up?

can enable the firm's technology to penetrate a wider range of markets than it could on its own. Licensing a technology from another firm is typically much less expensive for a licensee than developing a new technology in-house.

Acquiring Capabilities and Resources Quickly

gain rapid access to important complementary assets by entering into strategic alliances or licensing arrangements.

Licensing Agreements

typically impose many restrictions on the licensee, enabling the licensor to retain control over how the technology is used. However, over time, licensees may gain valuable knowledge from working with the licensed technology that can enable them to later develop their own proprietary technologies.