The Emergence of Partnership Networks in the Enterprise Application Development Industry: A Global Corporation Perspective

Within the IS development industry, incumbent system developers (hubs) are increasingly embracing partnerships with less well established companies acting in specific niches (spokes). This paper seeks to develop a better understanding of the motives for this strategy. Relying on existing work on strategic alliance formation, it is argued that partnering is particularly attractive for hubs if these small companies possess certain capabilities that are difficult to obtain through other arrangements than partnering. Drawing on the literature, three categories of capabilities are identified: the capability to innovate within their niche, the capability to provide a specific functionality that can be integrated with the incumbents' systems, and the capability to address novel markets. These factors are analyzed through a single-case study. The case represents a market leader in the global IS development industry, which fosters a network of smaller partner firms. The study reveals that temporal dynamics between the identified factors exist in these networks. A cyclical partnership model is developed that attempts to explain the life cycle of partnerships within such a network.