Complementary assets, strategic alliances, and the incumbent’s advantage: an empirical study of industry and firm effects in the biopharmaceutical industry

We argue that incumbents may be in a position to adapt to radical technological change via interfirm cooperation with new entrants when the incumbents have complementary assets within their firm boundaries that are critical to commercializing the new technology. We study 889 strategic alliances of pharmaceutical companies with new biotechnology firms. We find that an incumbent’s alliances with providers of the new technology are positively associated with the incumbent’s new product development and, in turn, new product development is positively associated with firm performance. At the industry-level, we show that incumbents exhibit a preference towards alliances that leverage complementary assets (exploitation alliances) over alliances that focus on building new technological competencies (exploration alliances). In addition, the cooperation between incumbents and new entrants may contribute to an improvement in incumbent industry performance. © 2001 Elsevier Science B.V. All rights reserved.