Do They Know Something We Don't? Endorsements from Foreign MNCs and Domestic Network Advantages for Start‐Ups

Abstract

Plain language summary This article examines the effects of alliances with foreign multinational corporations (MNCs) on a local start‐up's attractiveness as a partner in its domestic research networks. We argue that such international strategic alliances enhance a start‐up's subsequent alliance activity and its status in its domestic R&D network. The analysis shows that, indeed, alliances with foreign MNCs significantly enhance the start‐up's attractiveness and its future alliance activity, especially when the start‐up is young (up to the age of five). Furthermore, alliances with foreign MNCs from a variety of different countries of origin (e.g., U.K., Germany, and France) have stronger effects on a start‐up's subsequent alliance activity, supporting the argument that even in the age of globalization, location still matters. Technical summary This article examines the effects of endorsements from foreign multinational corporations (MNCs) on the centrality of biotech start‐ups within their domestic research networks. We argue that international strategic alliances enhance a start‐up's subsequent movement toward a more central position in its domestic R&D network. Analyzing U.S. biotech start‐ups over time, our findings show that endorsements from foreign MNCs significantly enhance the subsequent network centrality of U.S. biotech start‐ups. This endorsement effect is magnified in the early stages of the start‐up's life cycle. Furthermore, endorsements by foreign MNCs from a variety of different countries of origin have stronger effects on a start‐up's subsequent network centrality, supporting the contention that even in the age of globalization, location still matters. Copyright © 2016 Strategic Management Society.

Location and the Global Advantage of Firms

“…In turn, Aharonson, Amburgey, and Tzabbar (, this issue) examine how organizations venturing abroad come to shape local networks in the host market. Prior studies on anchoring indicate that MNCs have the power to shape local relations because they often bring technological novelties and investment capacity (Agrawal and Cockburn, ).…”

“…Aharonson et al . (, this issue) build upon established literature that shows network centrality provides great access to resource and knowledge, both of which are crucial for any start‐up's survival. But the caveat is that to achieve this higher centrality, the start‐up firm needs to attract potential R&D partners and have an established reputation to begin with (i.e., the liability of newness) (Freeman, Carroll, and Hannan, ).…”

Domestic alliance networks and regional strategies of MNEs: A structural embeddedness perspective

“…The existing research explaining firms' international expansion from the standpoint of structural embeddedness is limited to effects of firms' positions in home country social structures on the likelihood to form an international joint venture (Al-Laham & Souitaris, 2008;Shi, Sun, Pinkham, & Peng, 2014) or to initiate foreign expansion (Guler & Guillén, 2010;Yu, Gilbert, & Oviatt, 2011). In addition, research on networks and international diversification has primarily focused on new ventures (Aharonson, Tzabbar, & Amburgey, 2016;Freeman, Edwards, & Schroder, 2006;Manolova, Manev, & Gyoshev, 2010;Yu et al, 2011) and small and medium-sized enterprises (Lin & Chaney, 2007;Zhou, Wu, & Luo, 2007). Laursen, Masciarelli, and Prencipe (2012) attempt to unfold the nature of the relationship between firms' involvement in foreign markets and the social capital that their managers and employees may bring from having external interpersonal ties.…”

The Influence of Multinational Corporations on International Alliance Formation Behavior of Colocated Start-Ups

“…The benefits of collaborations for start-ups have long been acknowledged. Researchers highlight that collaborations enhance financial returns (Vapola 2011), network attractiveness (Aharonson et al 2016), and innovation performance (Shan et al 1994). Start-ups can also profit from alliances by leveraging the brand and reputation of their alliance partners and from the access an alliance provides to technological competencies (Prashantham and Birkinshaw 2008).…”

“…Child (2001) explains that because of historical experiences and current institutional conditions, societies vary substantially in how they define and understand trust and how it impacts the establishment and management of global collaborations. Aharonson et al (2016) suggest that, compared with their domestic counterparts, foreign MNCs bring with them a set of foreign norms, values, views, and processes to their host country that are strongly influenced by the headquarters of MNCs.…”