When do firms change technology-sourcing vehicles? the role of poor innovative performance and financial slack

Razvan Lungeanu, Ithai Stern, Edward J. Zajac

Research output: Contribution to journalArticle

27 Scopus citations

Abstract

This paper examines the adjustments firms make to the composition of their portfolios of technology-sourcing vehicles (i.e., alliance, acquisition, or go-it-alone) in response to poor innovative performance. We advance a behavioral perspective on the make/buy/ally question, suggesting that differences in financial slack will generate different portfolio decisions. Specifically, we posit that firms with greater levels of financial slack are more likely to respond to poor innovative performance by opting for (1) greater vehicle diversification, and (2) new sourcing vehicles, while firms with less financial slack will respond by (1) downscoping their portfolio of sourcing vehicles, and (2) reverting to more familiar vehicles. We find support for our predictions using extensive data from the population of U.S. public pharmaceutical firms from 1992 to 2006.

Original languageEnglish (US)
Pages (from-to)855-869
Number of pages15
JournalStrategic Management Journal
Volume37
Issue number5
DOIs
StatePublished - May 1 2016

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Strategy and Management

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