The enterprise software industry changed significantly during the 1990s, transformed in part by the commercialization of the Internet. An early emphasis on narrow and discrete MRPII-based manufacturing systems was superseded by enterprise resource planning (ERP) systems that delivered more value to a broader range of companies. The subsequent emergence of customer relationship management (CRM) further expanded the breadth of systems. Enterprise application integration (EAI) also appeared, providing an architecture that promised to connect this growing and increasingly heterogeneous set of technologies.; These changes made it increasingly difficult for a single firm to remain a bastion of competitive advantage. In response, software firms innovated and positioned their products through alliances.; This dissertation leverages resource-based theories of the firm and innovation theory to address two fundamental research questions. First, what strategic patterns do firms exhibit with respect to their alliances? Second, how does the market value these strategies? Data were collected for nine firms over the period of 1990–1999. News announcements were used to examine patterns in alliance formation using case analysis and event study methods.; The majority of horizontal alliances were of two types: integration and/or marketing. Early alliances focused on component integration. Firms entered multiple alliances to gain market share and avoid technological lockout. Emphasis was placed on aligning with key ERP and platform vendors. Marketing alliances allowed firms to expand shares across geographical and industrial boundaries. A shift took place in the late 1990s when ERP and CRM firms embraced EAI, which provided tighter integration and allowed a renewed focus on core competencies.; The event study methodology was used to examine the reaction of the stock market to alliance announcements. The reaction was positive for software alliances in general. The market's reaction was stronger where firms integrated components with other firms (i.e., exploiting existing knowledge) than where they entered into new product development/R&D alliances (i.e., creating new knowledge). Firms were more likely to integrate their components with other firms that were in close technological proximity to them. However, the market favored alliances where technological proximity was distant.
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