This study attempts to determine how strategic alliances impact firm performance. The degree of alliance impact is theorized to be dependent on the type of alliance entered and how that alliance allows firms to leverage their own capabilities. Alliances are categorized as between similar partners and dissimilar partners. The degree of impact also depends on the structure of the alliance whether there is an exchange of equity in the alliance. Productive and innovative capabilities are identified as being demonstrative of resource exploitation and exploration. Alliances are hypothesized to contribute to the performance impact of both of these activities. The biotechnology fields of traditional drugs and bioinformatics provide the research setting to test the hypotheses. The strategic alliances in these firms are categorized and examined for their impact on two measures of firm performance, return on sales and revenue growth. The alliance activity is measured in the target year and regressed against subsequent performance. The results show minimal direct impact on performance due to alliance activity, however, post-hoc test show major impact when alliance type is interacted with performance variable. The findings also show that the performance effects are dissipated over time showing that exploration and exploitation must be constant processes for firms.
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