Performance feedback and change in R&D alliance portfolio breadth: The moderating role of economic conditions

Abstract Research Summary We investigate how firm performance feedback and economic conditions (upturns and downturns) impact changes in the breadth of partner types within a firm's R&D alliance portfolio (R&D AP breadth). We theorize that economic conditions moderate firms' motivation to change R&D AP breadth in response to social and historical performance‐aspiration discrepancies, and shape whether they respond more strongly to social or historical aspirations. Using cross‐industry data on Swiss firms (1999–2020), we find that firms performing below social aspiration are more likely to expand R&D AP breadth during downturns but less likely to do so during upturns. Performance below historical aspiration shows no significant effect once economic conditions are considered. Managerial Summary We examine how firms adjust their range of business partners in response to past performance and economic conditions. Analyzing Swiss firms from 1999 to 2020, we find that firms strategically adjust the number of partnership types in response to economic climates. During tough economic times, firms tend to broaden their R&D partnership types when they fall short of peer performance benchmarks. They tend not to do so in prosperous periods under similar performance conditions. We found no consistent effects when performance is benchmarked against the firm's history. These insights help managers strategically navigate alliances under fluctuating economic conditions and underscore the importance of peer‐relative performance benchmarks.