Creating and taming discord: How firms manage embedded competition in alliance portfolios to limit alliance termination

Firms with resources that make them attractive allies are also desirable partners for competitors so that competition among partners is embedded in alliance portfolios. We develop a framework in which competition within a portfolio creates benefits for a focal firm but threatens partners, increasing the hazard of alliance termination. We then propose four mechanisms for managing the threat of competition to partners reflecting aspects of portfolio configuration: alliance governance, social cohesion, social structure of competition, and partner similarity. We test our framework using a sample of 204 biopharmaceutical firms with alliance portfolios comprising 1,621 alliances between 1990 and 2000. The study addresses the interplay of competition and cooperation in alliance portfolios, and more generally, key aspects of value chain integration strategy. Alliance portfolios comprise a focal firm's set of direct partners, some of which compete with each other because of overlapping resources, capabilities, and strategies. The threat of actual or perceived competition from other partners may cause some firms to terminate their alliance with the focal firm. We develop a framework comprising four mechanisms related to alliance portfolios-alliance governance, social cohesion, social structure of competition, and partner similarity-that allows focal firms to attenuate the hazard of termination of their alliances. We find support for our framework in a study of 204 biopharmaceutical firms with alliance portfolios comprising 1,621 alliances between 1990 and 2000. We improve understanding of how firms can manage competition and cooperation within their alliance portfolios.