Alliance Portfolio Management: Dimensions and Performance

Depósito de Investigación de la Universidad de Sevilla https://idus.us.es/ This is the peer reviewed version of the following article: Castro, I. and Roldán, J.L. (2015), Alliance Portfolio Management: Dimensions and Performance. European Management Review, 12: 63-81, which has been published in final form at https://doi.org/10.1111/emre.12042. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages thereof by third parties from platforms, services and websites other than Wiley Online Library must be prohibited." For Review Only The Alliance Portfolio Management: Dimensions and Performance Journal: European Management Review Manuscript ID: EMR-OA-13-0051.R2 Manuscript Type: Original Article Keywords: Networks < Networks, competitive advantage < Competitive strategy < Strategy, strategic alliances < MandA Alliances spinoffs < Strategy Additional Keywords: alliance portfolio management capability, mediation analysis, alliance portfolio performance, partial least squares EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 1 Alliance Portfolio Management: Dimensions and Performance 1. Introduction The management of strategic alliances is a valuable tool for firms operating in constantly fluctuating and increasingly competitive environments (Schilke and Goerzen, 2010). Cooperation between firms takes many forms, such as Joint Ventures (JV), partnerships, contracts, licenses, agreements, etc. These can be summarized under the broader term of strategic alliances (Kale and Singh, 2009). These alliances have become a valuable strategic tool for the competitiveness of firms that do business in increasingly fluctuating and competitive environments (Schilke and Goerzen, 2010). Paradoxically, studies have shown that between 30% and 70% of alliances fail to achieve their objectives (Kale and Singh, 2009) and it is therefore essential to analyze how firms can successfully develop a capability to manage the complete set of their individual alliances as a single portfolio. These alliances tend to have been studied from the atomistic perspective (Granovetter, 1992; Dyer and Singh, 1998) and the literature has generally focused on single alliance capability as a source of competitive advantage (Chung et al., 2000; Gulati, 1998; Anand and Khanna, 2000; Schreiner et al., 2009). However, Sarkar et al. (2009:584) point out that the outcome of these investigations “rests on a potentially fallacious assumption that a firm’s alliances exist and create value independent of one another”. Similarly, Duysters et al. (1999) point out that the value of strategic alliances may only be completely exploited by taking account of the whole network in which the focal firm is embedded. Accordingly, there is no one commonly accepted definition of alliance portfolio. The theoretical perspectives that have analyzed this phenomenon have proposed different conceptualizations, all characterized by the use of an additive perspective (Wassmer, 2010). The most frequently used and accepted definition is that proposed by Lavie (2007: 1188): “An alliance portfolio refers to a firm’s collection of direct Page 1 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 2 alliances with partners”. So, some researchers have pointed to the need to adopt a holistic approach, to better understand the differences that exist in firm competitiveness stemming from their cooperation (Kale and Singh, 2009; Kauppila, 2013; Ozcan and Eisenhardt, 2009; Wassmer, 2010). By adopting this approach and considering the complete set of individual alliances as a portfolio or coherent whole (Bae and Gargiulo, 2004; Bamford and Ernst, 2002), the firm is able to access the additional benefits that can be gained from the management of these interdependencies. This creates two types of outcomes: (a) synergies (economies of scale and scope); and (b) conflicts (redundancies or competitive overlap between alliances and partners in the portfolio) (Kale and Singh, 2009; Wassmer, 2010). From this network perspective, the single alliance has to be managed as part of an alliance portfolio (Duysters et al., 1999). In order to achieve the efficient and strategic management of the alliance portfolio the firm must develop a capability known as alliance portfolio management, which is not the same as the management of individual single alliances (Kale and Singh, 2009; Schreiner et al., 2009). This capability has been described as the competence to develop alliance portfolio strategies, to establish a management system and coordinate the portfolio as a whole, facilitating the transfer and combination of resources between the actors (Hoffmann, 2005). This capability must enable the focal actor to establish such a system for the optimal management, coordination and control of the portfolio as a whole (Hoffmann, 2005). Despite the rising importance for firms of this capability, this aspect has received less attention than others, such as training and the composition of the alliance portfolio (Duysters and Lokshin, 2011; Lavie and Singh, 2012; Lavie, 2009; Vasudeva and Anand, 2011; Wassmer and Dussauge, 2011a). Now that we have defined the alliance portfolio, an important question to be addressed is how its management capability may best be analyzed. Alliance portfolio managers need the appropriate related/interaction processes in place in order to manage their portfolios Page 2 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 3 (Schreiner et al., 2009). Accordingly, Sarkar et al. (2009) suggest that alliance portfolio capability consists of three collaborative rent-creating dimensions: partnering proactiveness; relational governance; and portfolio coordination. However, these researchers analyze the dimensions independently. Schilke and Goerzen (2010) and Kauppila (2013), on the other hand, view this capability as a multidimensional and comprehensive second-order construct, yet they do not study the relationships between its dimensions or the key alliance management routines. Finally, Heimeriks and Duysters (2007) and Kale and Singh (2007) analyzed how certain alliance learning process practices, which can be regarded as “second-order” dynamic capabilities, permit the firm to improve this capability and impact on the success of the firms’ alliances across its entire portfolio, but as the authors themselves acknowledged, they neither conceptualized nor measured this (“first-order” dynamic capability) concept directly. Zollo and Winter (2002) noted that these learning processes develop organizational routines, both directly and through the intermediate step of dynamic capabilities (see Illustration 1). In this sense, the literature points out that alliance portfolio management capability is a higher-order capability, of a dynamic nature, only obtained or imitated with difficulty, which has the potential to increase the performance of the firm’s alliance portfolio (Kauppila, 2013; Schilke and Goerzen, 2010). This capability is composed of a series of routine organizational blocks (Sarkar et al., 2009; Schilke and Goerzen, 2010). When this higher-order capability is conceptualized as a multidimensional phenomenon, the dimensions that form the basis of a firm’s alliance portfolio capability should necessarily be interrelated (Grant and Baden-Fuller, 1995; Zollo and Winter, 2002). Otherwise, we would be talking of independent capabilities that perform different tasks (Eisenhanrdt and Martin, 2000). So, for this same reason, Sarkar et al (2009) concluded that the intermingling of these routines or dimensions influences alliance portfolio performance. Therefore, alliance portfolio management capability needs to be better understood and important questions remain as to how the dimensions of alliance Page 3 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 4 portfolio capability are related and how these interrelate with the dimensions that influence alliance portfolio performance; beginning with the premise that this performance is more than the simple sum of the value generated by individual alliances, as a consequence of collaborative synergies (Parise and Casher, 2003). Taking these previous perceptions into account, the objective of this study is to investigate the central question: what is the relationship between the different dimensions of the alliance portfolio management capabilities? We particularly wish to understand the influential relations, both direct and indirect, between these different dimensions, and how they affect the performance of their alliance portfolio. This will give a greater insight into the development of alliance portfolio management capability and how it functions. Our aim is to make a conceptual and empirical contribution to the literature on the conceptualization and measurement of alliance portfolio management, which will focus and guide the research in this field. Our study shows that the different dimensions of alliance portfolio management are interrelated, they play different roles and each has a different effect on alliance portfolio performance. Our findings will also have practical implications for managers making decisions about strategic alliances, such as the importance of evaluating and managing strategic alliances as a whole, in order to generate greater collaborative synergies, and how the development of one dimension of the alliance portfolio management has a significant direct or indirect influence on another dimension. With these aims in mind, the structure of this paper is as follows. We begin with a review of the literature on alliance portfolio management capability, in order to identify and measure each dimension that constitutes the construct, as well as its impact on the value of the alliance portfolio. We propose a multiple mediating model (a three-path mediation model; cf. Hayes 2009; Taylor et al., 2008) showing the dimensions of alliance portfolio management capability. We then present and discuss our results, based on the analysis of the data collected Page 4 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 5 from 144 leading Spanish companies. The study concludes with a discussion of the results, the implications of the study, its limitations and suggested future lines of research. 2. Literature Review and Research Hypotheses 2.1. Alliance portfolio management capability The resource-based view of the firm establishes that organizational capabilities are a set of socially complex practices or skills, designed to perform a certain task, and are an additional source of alliance portfolio success (Amit and Schoemaker; 1993; Eisenhardt and Martin, 2000; Schilke and Goerzen, 2010). Alliance portfolio management capability has been defined by various authors as adeptness in identifying partners, initiating strategic alliances, taking part in continuous management and the possible restructuring and even completion of these alliances (Khanna et al., 1998). Accordingly, researchers consider it critical for the firm to develop a capability to perform the following functions: managing strategic alliances as a whole rather than individually, achieving tangible and intangible gains from collaboration, maximizing the probability of success, and creating competitive advantage through the alliances that constitute the firm’s alliance portfolio (Wassmer, 2010). With regard to the development of this capability, Wassmer (2010:160) points out that firms must continue to process two types of alliance experience in their alliance portfolios. Firstly, how best to manage individual alliances and secondly, how best to manage multiple simultaneous alliances with different partners. These two types of experience lead to two different types of capabilities (Kale and Singh, 2009): the capability to manage individual alliances or dyadic relationships; and the capability to manage alliance portfolios, which involves all of the strategic alliances as a whole. In this study, our focus is on the latter experience. Alliance portfolio management is therefore the capability of a focal firm to develop alliance portfolio Page 5 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 6 strategies, establish a management system and coordinate and control the portfolio as a whole, facilitating the transfer and combination of resources between the actors (Hoffmann, 2005). Schilke and Goerzen (2010) argue that it is essential for the focal firm to possess a distinct dynamic capability. A critical part of alliance portfolio management capability, this requires a series of organizational processes or dimensions to be in place (Kale and Singh, 2009; Sarkar et al., 2009; Schreiner et al., 2009). In turn, these dimensions could be further disaggregated into their constituent discrete “local abilities,” or skill-based competencies (Eisenhardt and Martin 2000; Salvato and Rerup, 2011). Thus, the focal organization, applying its initial and subsequent experiences in strategic alliances, can develop interrelated processes or routines to manage its alliance portfolio in a systematic and relatively predictable manner. Some authors (Zollo and Winter, 2002; Heimeriks and Duysters, 2007) argue that learning mechanisms for the accumulation, selection, and diffusion of certain experiences and knowledge underpin the generation and evolution of these processes or routines. This alliance portfolio learning process, which requires the articulation, codification, sharing and internalization of alliance portfolio management know-how, will impact on the success of the overall portfolio (Kale and Singh, 2007). Indeed, this capability to learn may be partner specific (Dyer and Singh, 1998), or, as shown by Anand and Khanna (2000), these learning effects or mechanisms also arise across a portfolio of alliances. In this way, the simultaneous development of a focal firm’s alliance portfolio experience and its learning mechanisms will reinforce the ability to improve the performance of its alliance portfolio (Heimeriks and Duysters, 2007; Kale and Singh, 2007). The management of the alliance portfolio implies the completion of series of tasks and functions. These activities are: the selection of partners based on their suitability for the portfolio; governance of the set of alliances that constitute the portfolio, the leverage of Page 6 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 7 knowledge through partners; the management of alliances as a set of resources and skills; the exploitation of synergies and management of conflicts at portfolio level; the development and implementation of collective portfolio strategies; the control and coordination of the portfolio and the establishment of an alliance management system (Sarkar et al., 2009; Hoffmann, 2005). At best, the completion of these activities means that the development of different organizational routines (Hoffmann, 2005; Schilke and Goerzen, 2010) will generate different rents or benefits for the focal actor. For that reason, the study of alliance portfolio management capability requires the identification and analysis of its different dimensions. Thus, Sarkar et al. (2009: 586) note that on the whole alliance portfolio management capability consists of three principal dimensions or organizational routines. Firstly, a proactive dimension that aims to embrace the organizational routines embedded in the alliance portfolio (partnering proactiveness). Secondly, a relational dimension that gathers together the focal actor’s skills to develop cooperation models characterized by mutual trust and by the minimization of opportunistic behaviors (relational governance). Finally, a coordination dimension that integrates and synchronizes the strategies, knowledge transfer flows and activities and the other types of resources, through the various channels that form the focal actor’s portfolio (portfolio coordination). In order to understand how these dimensions contribute to optimal and strategic management of the alliance portfolios, they must first be defined. The literature on social network analysis defines an alliance portfolio as a focal firm’s egocentric alliance network (Ozcan and Eisenhardt, 2009). This notion of an egocentric network encompasses the focal firm (ego), its set of partners (alters), and their connecting ties (relationships) (Wasserman and Faust, 1994). On this basis, Ahuja et al. (2012) state that the architecture of an alliance portfolio can be conceptualized from three aspects: the nodes that make up the portfolio, the ties that connect the nodes, and the patterns or models of nodal interconnections. As shown in Page 7 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 14 the focal actor logically selects partners that have a better relational reputation and that demonstrate better compliance with their aims and strategies. So, to the extent that the partners really do complement each other and strategic interdependencies really do exist between them –rather than competing interests and rivalry– the benefits that they offer to the portfolio will be extra-additive in nature (Kale and Singh, 2009). This will benefit the relational strength of the alliance portfolio in general (Stuart, 1998). Thus for example, Carbures, which gained a strategic position among Tier-Two companies, specialized in composite materials and structures, and has a department with eight people in charge of business networking for both organic and inorganic growth, the mission of which is the management of long-term relations with clients (Tier One), such as the partners with which it develops its research activities collaboration with which can increase its pool of talent. Likewise, Sarkar et al. (2009) note that the relational governance dimension is associated with alliance portfolio performance. Accordingly, the focal actor requires quick and trouble-free access to the many resources embedded in the network (information, knowledge, reputation, tangible resources, etc.), so that it can adapt rapidly to fluctuations in the environment. Dyer and Singh (1998) demonstrate that a critical determinant for achieving an interorganizational competitive advantage lies in the effective governance of the focal actor’s relations through their influence on transaction costs (Williamson, 1985). This in turn depends on the willingness of its partners to involve themselves in value creation. Relational governance plays a critical mediating role in the development of strong ties that facilitate the access to and exchange of resources and capabilities through diverse alliance portfolio channels (Tsai and Ghoshal, 1998). Sarkar et al. (2009: 588) point to partnerships with strong ties that are governed by informal relational mechanisms. These tend to be characterized by a greater bandwidth, which facilitates the flow of valuable resources through various alliance portfolio ties. This greater level of commitment and willingness of the partners strengthens Page 14 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 15 the competitiveness of the portfolio in general, which in turn should create benefits for all the partners. Therefore, the stronger the ties that constitute the focal actor’s alliance portfolio, the better the performance of the alliance portfolio (Sarkar et al., 2009). To conclude, partnering proactiveness affects the governance of the set of relations within the alliance portfolio through the strategic selection of complementary and compatible partners. Furthermore, insofar as the focal actor is able to govern the set of relations within the portfolio based on relational aspects such as trust, then trust will be an important social lubricant (Rivera-Santos, 2009) for the flow of valuable resources through different network ties (Tsai and Ghoshal, 1998). This in turn increases the overall competitiveness of the portfolio and as a result, improves the performance of the alliance portfolio for the focal actor. Therefore: H2. Relational governance mediates the relationship between partnering proactiveness and alliance portfolio performance. 2.5. The mediating role of portfolio coordination Portfolio coordination is the dimension most closely related to portfolio management and refers to the integration and synchronization of strategies, activities and resource flows through the different partners within the portfolio (Sarkar et al., 2009; Stein and Ginevicius, 2010). The coordination concept described by Schreiner et al. (2009) conceptualizes the coordination aspect of alliance management capability, such as the firm’s ability to coordinate and manage interdependence between partners in a dyadic relationship. The interdependencies between the individual interorganizational ties of a focal firm require these dyads and alliances to be coordinated (Hoffmann, 2005) in order to maximize synergies and minimize Page 15 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 16 the constraining or competitive impacts (Parise and Casher, 2003). Some researchers (Goerzen, 2005; Schilke and Goerzen, 2010) have pointed out that although coordination of single alliances is important, the management of a focal firm’s alliance portfolio is also critical. This requires a holistic approach to the analysis of portfolio coordination, entailing organizational coordination routines designed to manage multiple relationships and their interdependencies. This facilitates the transformation of the focal actor’s portfolio into a coherent set of interorganizational strategic resources. Sarkar et al. (2009) emphasize the need to study how partners interchange and combine resources and to link strategic assets at the portfolio level, in order to understand the varying performance of the different actors in the alliance portfolio and to identify their competitive advantage. An analysis of the partnering proactiveness dimension reveals its influence on both proactive assessment and selection of the partners and the development of the structure or relational pattern. The focal actor’s organizational processes will have a fundamental influence on portfolio coordination. Schilke and Goerzen (2010) indicate the need to coordinate the alliance portfolio, primarily because of the interdependencies between individual alliances. The management of such complex interdependencies across multiple and diverse partners within the portfolio requires extensive coordination (Lei et al., 1996). Partnering proactiveness can assist the management of the portfolio-level interdependencies in several ways. Firstly, the assessment and selection of partners that comply with and even share the focal actor’s aims, strategies and strategic viewpoint will improve portfolio coordination and will facilitate the interchange and combination of resources (Tsai and Ghoshal, 1998). When a partner is selected to pursue a certain collaborative initiative, competing partners in the alliance portfolio may show discontent and perhaps even withhold their cooperation (Lavie, 2009). Secondly, it facilitates the synchronization of strategies, activities and resource flows between the partners within the focal actor’s ego network, to the Page 16 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 17 extent that the focal actor owns valuable and complementary resources within the network (Batjargal, 2003; Lin, 1999). Lavie (2009) points out that, of the network resources that the focal actor can access through its alliance portfolio ties, only those that are complementary will have the potential to create value. Finally, when the focal actor has a greater holistic and strategic understanding of the formation of the alliance portfolio, it is much easier to integrate and synchronize the strategies, activities and resource flows through the different partners in the portfolio. This relationship has been linked to a strong influence on the resulting highperforming alliance portfolio (Duysters et al., 2012; Ozcan and Eisenhardt, 2009). In conclusion, the value of portfolio coordination processes will be conditioned by the specific content of the partners in the portfolio (Sarkar et al., 2009). Hence, partnering proactiveness is a dimension that significantly influences portfolio coordination. This is achieved through the formation of the portfolio, by facilitating and improving the management of strategic interdependencies between the different portfolio partners (Gulati, 1995b; Lavie, 2009), and by minimizing coordination costs and maximizing coordination effectiveness (Schreiner et al., 2009). Some authors have pointed out that the portfolio coordination dimension is related to alliance portfolio performance (Sarkar et al., 2009; Schilke and Goerzen, 2010). The role of portfolio coordination is to identify interdependencies between the portfolio partners, avoid the duplication of actions, and produce synergies between single alliances (Hoffmann, 2005; Schilke and Goerzen, 2010). This dimension therefore plays a critical role in enhancing the alliance portfolio and making it more than simply the sum of its individual alliances (Schilke and Goerzen, 2010). Furthermore, Sarkar et al. (2010) point out that the dimensions of portfolio coordination are a strong source of competitive advantage, by increasing flows of network resources and brokering information across the portfolio of alliances. Insofar as the focal actor may increase network resource flows and generate and exploit collaborative Page 17 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 18 synergies to their maximum at portfolio level, this will increase the competitiveness of the overall network and, therefore, improve alliance portfolio performance (Lavie, 2007; Parise and Casher, 2003; Sarkar et al., 2009). Thus, for example, Lufthansa has its own alliance coordinator in each area (passage, freight, etc) and a vice-president of strategic alliances at the corporate level to co-ordinate alliance activities companywide. Likewise, the CEO of Carbures is in charge of the strategic coordination of all alliances, which gives meaning to the portfolio. The alliance portfolio coordination of Carbures shows the existence of a deliberate strategy that guides the cooperative movements of the company. In essence, we propose that portfolio coordination is a critical mediator in the relation between partnering proactiveness and alliance portfolio performance. This implies that partnering proactiveness can affect coordination, by facilitating the integration and synchronization of the activities, strategies and resource flows between the partners within an alliance portfolio (Batjargal, 2003; Sarkar et al., 2009; Schilke and Goerzen, 2010). Moreover, the portfolio coordination dimension impacts on alliance portfolio performance as a consequence of the management of interdependencies and the management of synergies at portfolio level (Lavie, 2009). Based on these logical explanations and previous research, we hypothesize the following: H3. Portfolio coordination mediates the relationship between partnering proactiveness and alliance portfolio performance. In this work, we propose a multiple mediating model in which the partnering proactiveness dimension, with its focus on portfolio formation (Sarkar et al., 2009), is the prime generator of alliance portfolio performance and in which relational governance and Page 18 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 19 portfolio coordination are critical mediators –although the former precedes the latter. In this regard, Illustration 1 shows that partnering proactiveness is the critical organizational routine for the formation and configuration of the focal actor’s egocentric network through its deliberate efforts to seek and act on new alliance opportunities (Sarkar et al., 2009). If the focal actor fulfills this task well, by evaluating potential partners and selecting those that are best adjusted to the overall objectives of the integrated portfolio, strategies and values, they will be able to govern the set of ties that constitutes the portfolio, through informal and selfenforcing safeguards (Sarkar et al., 2009). In this way, the relational governance dimension impacts on portfolio coordination, as stronger bonds reflect the greater incentives, commitment and willingness to exchange truly valuable resources between the alliance portfolio partners. This in turn will favor the integration and synchronization of the strategies, activities and resource flows throughout the overall ego network (Puhakka, 2006; Schreiner et al., 2009; Schilke and Goerzen, 2010). Thus, the lower the contracting and monitoring costs and number of self-enforcing safeguards, the greater the incentive for value-creating activities such as sharing fine-grained tacit knowledge, exchanging resources that are difficult to value, and offering innovations or responsiveness beyond the contractual terms (Sarkar et al., 2009). Hoffmann (2005) suggests that the synergies between the alliances within the portfolio can be utilized by transferring information and resources from one partner to another and by mutual specialization between partners. Moreover, governance mechanisms will play a critical role in this process at a portfolio level, based on relational aspects such as trust. Finally, alliance portfolio coordination promotes economies of scope and scale through the identification and management of interdependencies that exist between the partners within the ego network, the production of synergies, and the avoidance of conflicts between alliances, by eliminating overlapping interests and duplicity. These economies increase the overall competitive strength of the portfolio and improve alliance portfolio performance (Dyer and Singh, 1998; Page 19 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 20 Hoffmann, 2005; Schilke and Goerzen, 2010; Schreiner et al., 2009). In view of the theory outlined above and empirical evidence, we see that partnering proactiveness will be related to alliance portfolio performance; first of all through the relational governance dimension and then through portfolio coordination. Integrating these two models by mediation through the relational governance dimension and the portfolio coordination dimension generates a threepath mediation model (Figure 1) (Hayes, 2009; Taylor et al., 2008). To summarize, we tested whether the relational governance dimension and the portfolio coordination dimension sequentially mediate the relationship between partnering proactiveness and alliance portfolio performance. We took this approach in order to demonstrate that alliance portfolio performance is influenced by both the direct and the indirect relations between the three dimensions of alliance portfolio management capability. Thus: H4. Relational governance and portfolio coordination sequentially mediate the relationship between partnering proactiveness and alliance portfolio performance. ------------------------------------------- Place Figure 1 here Fig. 1. Three-path mediation model ------------------------------------------- 3. Methodology 3.1. Sample Primary data was required to test our hypothesis. We obtained this information through guided questionnaires administered by interviewers. We compiled a list of 500 firms from Page 20 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 21 among the leading Spanish firms included on the INFORMA D&B and SABI databases (providing financial company information and business intelligence for companies in Spain and Portugal). All the firms on the list were first contacted by phone, when 200 indicated their willingness to collaborate and a total of 300 firms chose not to participate. Appointments were arranged to carry out guided surveys with the participating firms and a team of interviewers then undertook the field work. Of the 200 firms willing to take part in the survey, 56 were eliminated when their Chief Executive Officers (CEOs) stated that they were unaware of the strategic alliances-related processes and activities of their firms, or indicated that their company had never carried out any kind of strategic alliances, opting instead for the complete internalization of their value chain activities (Lyles and Schwenk, 1992). This left a total of 144 eligible firms. With the objective of maximizing data accuracy and reliability, we carried out various analyses. In the first place, with the objective of verifying the consistency and homegeneity of our sample over time, our work followed Huber and Power’s (1985) guidelines on obtaining quality data from single informants (CEOs). The study applied several tests for potential sources of bias in the collected data (Armstrong and Overton, 1977). We therefore measured non-response bias, in order to ensure the statistical representation of the participating firms in this research. We verified that there were no significant differences between the average incomes of the cooperating companies and those that had declined to participate in the survey. In addition, the temporal element in the response was also assessed, by comparing the first 15 replies with the last 15 questionnaires. No significant differences were found for the two items -app1 and app2- of the alliance portfolio performance variable. Secondly, with the objective of maximizing data accuracy and reliability, given that the information was obtained from a single informant, we analysed the potential existence of common methods bias following the procedure described by Liang et al. (2007). So, a new factor called “method” was introduced in the research model. This method factor included all Page 21 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 22 the principal indicators of the construct. In this way, the variance of each indicator was explained for both the principal construct and the factor method. Our results show an average substantively explained variance of the indicators of .684 and an average method-based variance of .010. The ratio of substantive variance to method variance was about 68.4:1. In addition, none of the method factor loadings were significant. Therefore, the common method bias is unlikely to cause serious concern in this study. Table 1 summarizes the most relevant characteristics of sample. ------------------------------------------- Place Table 1 here Table 1. Demographic characteristics of the sample ------------------------------------------- 3.2. Measures Dependent variable: Alliance portfolio performance Hoffman (2005) uses two types of factors to calculate alliance portfolio performance: output and input. Output factors are used to assess the financial performance of the alliance portfolio and the achievement of strategic objectives. Some authors (Schilke and Goerzen, 2010) consider that this approach is appropriate if the respondents represent top-level management. There is an emerging consensus among scholars that managerial assessments are a reasonable way to assess alliance performance (Das and Teng, 2000). We therefore measured the alliance portfolio in terms of performance satisfaction (Heimeriks and Duysters, 2007; Kale and Singh, 2007). We used a four-item scale based on the work of Schilke and Goerzen (2010). A principal components factor analysis with varimax rotation was carried out on the four indicators to develop a composite measure and the four indicators were loaded onto one Page 22 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 23 factor. We used the factor scores as a composite measure for alliance portfolio performance (OUTPUT). Input factors reflect the quantity and quality of the resources brought by the partners in the portfolio. Alliance portfolio capital was measured by a three-item scale based on Sarkar et al. (2009). A principal components factor analysis with varimax rotation was applied to these three indicators to develop a composite measure and the three indicators were again loaded onto one factor. We used the factor scores as a composite measure for alliance portfolio capital (CAPITAL). Independent variables: The dimensions of alliance portfolio management capability Appendix 1 describes the individual items and the original sources of the measurement scales for the principal constructs. Partnering proactiveness was measured with a five-item Likert scale (seven points). This dimension brings together the organizational process or the firm’s skill in identifying potentially valuable partnering opportunities. The items were taken from prior literature on alliance portfolio management capability (Sarkar et al., 2009; Schilke and Goerzen, 2010). Relational governance represents the focal firm’s skills to develop routines and informal safeguards that facilitate cooperation between actors. This dimension was defined by a five-item Likert scale (seven points) adapted from the literature (Sarkar et al., 2009). Finally, we used a five-item Likert scale (seven points) to measure the portfolio coordination dimension. This dimension reflects a focal firm’s ability to combine and mobilize the activities, strategies and resources of the alliance portfolio partners. Measures for this dimension were developed from previous literature on alliance portfolio management capability (Sarkar et al., 2009; Schilke and Goerzen, 2010). Page 23 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 30 However, when we analyzed the full model (Figure 2B), the importance of the direct effect of the structural dimension decreased considerably in favor of relational governance and, above all, in favor of alliance portfolio coordination. Traditional partner selection has been focused on researching the best fit between two parties. However, some authors consider that this is not sufficient in itself, even though it is necessary, and the fit in the alliance portfolio must be taken into account (Duysters et al., 1999; Goerzen (2005). The proactive alliance formation dimension will therefore impact on other dimensions or organizational routines such as the relational governance and portfolio coordination dimensions. Partnering proactiveness influences relational governance, as the proactive search for and selection of partners carried out by the focal actor probably favors the development of strong relationships (Sarkar et al., 2009). The relational governance dimension is a consequence of strengthening a firm’s relationships and developing trust (Gulati, 1995b), establishing informal safeguards, and taking account of the set of relations that form the alliance portfolio. As such, it will have a positive and significant influence on alliance portfolio performance. Therefore, the presence of inter-firm trust is an extraordinary lubricant for the set of portfolio alliances that involve considerable interdependence and task coordination (Gulati, 1998). However, the portfolio coordination dimension variable is more directly associated with alliance portfolio performance. Consequently, our research shows that the dimension or organizational routine that facilitates the synchronization of strategies and activities and the flow of resources between the partners in the focal actor’s ego network has a positive impact on alliance portfolio performance (Sarkar et al., 2009). In fact, the alliance portfolio coordination dimension is the best predictor of portfolio performance in our research model (clarifying 46.9% of its explained variance). This surpasses the direct influence that the partnering proactiveness and the relational governance dimensions exert on the final endogenous variable. However, proactiveness in forming partnerships can facilitate the management of Page 30 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 31 interdependencies at the portfolio level, through the selection of the most suitable partners, given that the need to coordinate the alliance portfolio is primarily a result of the interdependencies between individual alliances (Schilke and Goerzen, 2010). In conclusion, this study has helped to demystify the complex relationships between the different dimensions of alliance portfolio management capability that have either been analyzed independently (Sarkar et al., 2009), or analyzed as dimensions that are considered to be second order constructs in the literature (Schilke and Goerzen, 2010), without studying the ties between them. Indeed, the structural model shows that all path coefficients between partnering proactiveness, relational governance and portfolio coordination are significant. Consequently, these dimensions of alliance portfolio management capability are not only interrelated sequentially, but also in a parallel process: partnering proactiveness is significantly associated with relational governance and portfolio coordination. By looking into this issue in greater detail, we have shown that the relational governance and the portfolio coordination dimensions sequentially mediate the relationship between partnering proactiveness and alliance portfolio performance. Our results further indicate that this is a partial mediation because the partnering proactiveness dimension continues to be significant in the presence of the mediators. Thus, the direct impact of partnering proactiveness on the performance of the alliance portfolio becomes less relevant in the presence of the relational governance and the portfolio coordination dimensions. These findings support our theoretical argument in favor of analyzing the direct and indirect relations between the dimensions of this capability, in order to identify and understand the competitive advantage that stems from the focal actor’s alliance portfolio management capability. Our conclusion supports Parise and Casher’s (2003) assertion that a successful alliance portfolio capability is not only a function of how companies work with their individual alliances, but also of how they design and manage their entire partner portfolio. Page 31 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 32 5.2. Practical implications The increasing importance of strategic alliances in a global business environment in a state of constant flux raises the question of how firms should manage their alliance portfolios (Wassmer, 2010). Managers of firms that engage in multiple simultaneous alliances have realized that these alliances may not be independently managed (Lavie, 2009). Alliances therefore need to be designed and managed in an efficient way to capture their maximum value (Lavie, 2009). Achieving this requires a clear understanding of the alliance portfolio management capability, which entails analyzing the portfolio’s dimensions and the relationships between them. The results of our empirical tests demonstrate the importance of the focal firm’s partnering formation proactiveness, as this facilitates governance based on trust and the information-relational aspects of the ties that create the network. This proactiveness also aids the synchronization and coordination of strategies, activities and resource flows between the partners in the focal actor’s ego network. Managers need to invest more in developing skills and routines in three aspects of alliance portfolio management: portfolio configuration, relationship management, and portfolio coordination (Sarkar et al., 2009). This requires actions on three fronts. Firstly, identify, evaluate and select the most suitable partners. Secondly, develop trust and strong ties in all the relationships that constitute the portfolio. Finally, the most important aspect of alliance portfolio management capability is the integration and synchronization of the strategies, activities and resource flows emanating from the different partners in the alliance portfolio (Sarkar et al., 2009). In this way, managers will be able to transform the potential benefits of the alliance portfolio into actual benefits. In summary, if they can identify the relationships between the various dimensions of the alliance portfolio management capability and demonstrate that the dimensions of relational governance and alliance portfolio coordination play a critical mediating role, managers will be Page 32 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 33 able to adopt a better strategic approach to the administration of their alliance portfolios and thereby improve performance. In conclusion, firms are participating in a greater number of alliances to remain competitive in an increasingly demanding economy. Therefore, when executives develop a holistic understanding of the possible interdependencies between different types of firms, develop organizational routines for their management team and understand how the dimensions relate to each other, then they will be able to identify and enrich their strategic possibilities. The opportunities for these managers to achieve competitive advantage will increase, as opposed to those who maintain a simplistic view, in which they are constrained by pre-supposed dyadic interdependencies (Ozcan and Eisenhardt, 2009; Sarkar et al., 2009). 6. Limitations We should acknowledge a series of limitations in our results and conclusions. First, the data is perceptual, because our work is based on primary information gathered from a sample of firms through a survey. Furthermore, although we developed a series of analyses, in order to maximize data accuracy and reliability, these data were not gathered from a single respondent, which could generate the problem of a possible common methods bias. Second, an initial limitation is related to the notion of causality. Although evidence is provided of the model’s causality, this evidence has not been fully tested. Our study has taken a soft modeling approach directed more towards prediction than causality. While causation guarantees the ability to control events, predictability allows only a limited degree of control (Falk and Miller, 1992). The third limitation arises from the technique used for the proposed model: structural equations, which assume a linearity of relationships between latent variables (Hair et al., 1998). Fourth, the design of this empirical work was cross-sectional. However, the Page 33 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 34 dimensions of alliance portfolio management capability are dynamic (Sarkar et al., 2009; Schilke and Goerzen, 2010) and can change over time. Future research should measure the concepts analyzed at several points in time, taking these dynamics into account to configure the different dimensions of alliance portfolio management capability. Fifth, the limitations of using a multi-sectoral sample of firms from a single country can present serious inconveniences when extrapolating the conclusions of our analysis. An interesting future research line would be to analyze possible differences in the development of the dimensions of the alliance portfolio management capability as a consequence of the cultural differences between countries (Lavie and Miller, 2008; Tihanyi et al., 2005). It would likewise be of interest to introduce contextual variables such as environmental dynamism, to analyze how those variables influence the effectiveness of alliance portfolio management capability on portfolio performance (Schilke, 2013). In conclusion, whilst acknowledging the considerable difficulty entailed in the analysis and measurement of the organizational capability of alliance portfolio management, we consider that this work has succeeded in providing a better understanding of the concept. Increasing management of multiple and simultaneous strategic alliances has revealed the need for an understanding of the processes and skills used to manage a portfolio as a coherent whole by adopting a holistic approach (Wassmer, 2010). We therefore consider it vital, in order to gain a full understanding of alliance portfolio management capability, to identify not only the different dimensions of this capability, but also the interrelationships between the dimensions. We believe that this study has taken us a step closer to gaining that understanding. Bibliography Adler, P. S. and S. Kwon, 2002, "Social Capital: Prospects for a New Concept". Academy of Management Review, 27: 17-40. Page 34 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 35 Ahuja, G., 2000a, "Collaboration Networks, Structural Holes, and Innovation: A Longitudinal Study". Administrative Science Quarterly, 45: 425-455. 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Page 39 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only 193x138mm (150 x 150 DPI) Page 46 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only Fig. 1. Three-path mediation model 259x181mm (150 x 150 DPI) Page 47 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review For Review Only Fig. 2. Structural model: Three-path mediation model 259x192mm (150 x 150 DPI) Page 48 of 48 EURAM/Wiley-Blackwell European Management Review - Paper for Review