The Costs of Managing Strategic Alliances: Cost Drivers and Performance Effects

To determine whether strategic alliances are successful, prior research has focused on studying alliance performance. Previous studies indicate that alliance portfolio diversity and alliance portfolio size can reduce alliance performance considerably. However, the reasons for the performance decline are largely unexplored. Thus, the aim of this study is to examine the link between different alliance portfolio configurations (i.e., alliance portfolio diversity and alliance portfolio size) and related performance outcomes while explicitly considering three types of alliance costs (dyadic coordination, portfolio coordination and conflict resolution costs). Our SEM analysis of 151 biotechnology firms shows that the different alliance portfolio configurations varying in their respective influence on distinct alliance costs. Yet, not all alliance costs have the same diminishing effect on performance. Indeed, only conflict resolution costs decrease alliance performance significantly. Our research contributes not only to a better understanding of alliance costs but also their respective impact on alliance performance.