The Bi-directional Relationship between Interfirm Collaboration and Business Sales in Entrant and Incumbent Alliances

This paper demonstrates the existence of bi-directional relationships between interfirm collaboration and business sales. Entry and post-entry collaboration often contribute to superior performance, which in turn attracts more partners. At the same time, though, collaboration may impose constraints on growth opportunities. The relationships vary across types of collaborators and collaborations – with differences among entrant and incumbent partners, between marketing and R&D partnerships, by partner size, and across time. Thus, successful firms may become entrenched in the industry, and will often enjoy preferred access to new partners with capabilities needed for continued growth and survival. The empirical analysis examines businesses that operated in the U.S. hospital software systems industry between 1961 and 1991. The results contribute to dynamic views of strategy.