Strategic orientation and its effect on strategic alliance formation and outcomes in dedicated biotechnology firms

Abstract

Dedicated Biotechnology Firms (DBFs) operate in uncertain, turbulent and ever-changing environments. Product life cycles are decreasing, technological change is increasing, and the marketplace in which these firms operate differs from more traditional markets by the changing nature of competition. DBFs and other technology-based firms depend upon the balance of the skills and resources of marketing and technology to succeed in this environment. They also form many strategic alliances. This thesis set outs to examine the inter-relationships between the strategic orientation of a DBF, the way in which it forms alliances, the outcomes of those alliances, and the effect of these on business performance.

Previous research into strategic orientation, market orientation, and technological' orientation and their relationship with business performance is reviewed. In addition, previous research concerning the formation, objectives, and outcomes of strategic alliances is also discussed. This thesis builds on this previous literature to develop two new models which draw together aspects of alliance formation and outcome, strategic orientation and performance.

These models were tested using empirical data gathered from the biotechnology industry. A postal survey was used to gather this data from biotechnology firms in four different countries. Each step in the model was tested individually using regression analysis. Some of the key findings include: • The market orientation - performance link was found to be sustained within the biotechnology sector. • Technological orientation was found not to be associated with performance. • Environmental turbulence and previous alliance experience appear to predispose a firm to seek out new alliances. Firms that are more proactive in seeking alliances also tend to form more successful alliances. • Firms which are highly technologically oriented chose partner firms which are either highly market oriented or highly technologically oriented, but firms which are highly market oriented appear to form more successful strategic alliances. • Participation in strategic alliances appears to act as a mediating variable in the market orientation - performance relationship. • The strategic alliances formed by TBFs studied in this thesis did not seem to have been formed to bridge gaps in resources. There is significant overlap in functional input from both alliance partners, and complementarity of partner input, if it does exist at all, must be at a far more subtle level than simple functional areas.

The results from this analysis contribute to both the academic literature and have some important managerial implications. Disparate streams of research have been brought together and new relationships between strategic orientation and the way in which TBFs form alliances have been found. A number of new scales and new constructs have been empirically tested within this thesis, namely, technological orientation, strategic alliance pro activity, strategic alliance formality, and the measurement of a strategic alliance partners' strategic orientation. The importance of market orientation is confirmed by the results in this thesis, as is the importance of partner choice when entering into a strategic alliance.

The thesis concludes with a discussion of the key implications for academic research and managers within technology based firms, the limitations of this study and ideas for future research.