Designing alliance networks: the influence of network position, environmental change, and strategy on firm performance

Abstract Alliance networks are strategic decisions involving trade‐offs between two stylized structural design choices: prominent and entrepreneurial. Prominent alliance networks emphasize benefits arising out of multiple access and affiliation to other prominent firms in the network. An entrepreneurial position, on the other hand, emphasizes brokerage and diversity benefits arising out of access to nonredundant and diverse information. We demonstrate that the performance benefits of each type of alliance network are contingent on environmental change and strategy, and are thus time dependent. Following an environmental change event in the steel industry, alliance networks that were more entrepreneurial performed better, while those that were more prominent suffered performance decline. However, when the change was radical, both types of alliance networks were negatively related to performance. We suggest that following a radical change, industry alliance networks may not have the requisite information necessary for quick and effective strategic responses. Firms pursuing an analyzer strategy performed better when emphasizing a prominent, and to a lesser extent, entrepreneurial alliance network. However, firms that develop an alliance network high on both prominent and entrepreneurial structural positions had lower relative performance. Our results indicate the need for managers to assess their alliance portfolio over time and redesign it based on environmental and strategic contingencies. Copyright © 2008 John Wiley & Sons, Ltd.