Equity versus non-equity partnership strategies for leaders, challengers, and niche players

Abstract

Competitive strategy should fit well with the focal firm's market position. This study extends this line of research to include a firm's technology positioning by considering market position at the industry level. Two inter-firm cooperative strategies considers equity-base (joint ventures) and non-equity alliances as effecting factors. The data file obtains that patent, inter-firm cooperative agreements, and financial data of technology firms from 1997 to 2008. This research demonstrates different strategic logic of industry leaders, challengers, and niche players. The empirical results show a nonlinear trend (an inverted U-shaped) to describe the relationship between technology position and non-equity alliances. As compared with joint ventures, challengers are less strategically active in non-equity alliances to compete against industry market leaders. However, niche players are more likely to engage in non-equity alliances than industry leaders when as compared with joint ventures. In terms of theoretical contribution, this study extends the concept of market competitive strategy from the product-market level to that of industry network level. It also broadens the scope of positioning strategy to include technology so that the abundant literature of the knowledge-based view of the firm can be integrated with the market positioning literature. Moreover, the empirical results will provide strategic implications and a systematic framework in managing partnership strategies for the business managers in the future.