Strategic Alliances of Entrepreneurial Firms: Value Enhancing Then Value Destroying

Research summaryBased on the RBV and dynamic capabilities, this study explains the relationship between alliance formation and the private (pre-IPO) entrepreneurial firm's market performance. Findings show that while alliance formation positively and significantly affects the market performance of venture-backed firms in the software industry, forming a comparatively large number of alliances hurts these firms' market valuations. Managerial summaryEntrepreneurial firms are better off entering a select number of strategic alliances and focusing on enhancing the outcomes of those select alliances as well as developing a dynamic alliance management capability. Such firms benefit most from establishing a moderate number of alliances rather than depending on a small number of alliances or becoming overwhelmed with a great number of alliances. Copyright (c) 2016 Strategic Management Society.