Global innovation generation and financial performance in business-to-business relationships: the case of cross-border alliances in the pharmaceutical industry

Abstract

The past few decades have witnessed a significant increase in the number of cross-border strategic alliances among firms. We focus on the role of alliance expertise (alliance experience and diversity of partners) and alliance governance (horizontal vs. vertical alliances and joint venture vs. other alliances) in global innovation generation. We also examine the effect of these variables on the financial performance of the focal firm. The conceptual model is tested using an empirical analysis of cross-border alliances formed by U.S. pharmaceutical companies from 1985 to 2008. We find that while prior alliance experience has a positive association with global innovation generation, diversity of partners has a negative relationship. In addition, whether the alliance is horizontal or vertical has no bearing on the innovation generation, but joint ventures are associated with more global innovation generation than other types of alliances. Finally, as global innovation generation increases, financial performance increases up to a point but thereafter exhibits a negative relationship.

Innovation and organisational performance: A critical review of the instruments used to measure organisational performance

“…In contrast to the reasons provided for using accounting-based measures, Tobin's Q is used mainly because of its ability to capture the value of long-term investment, such as innovation investment (Padgett & Moura-Leite 2012;Sivakumar et al 2011;Talke et al 2011). Furthermore, Table 2 illustrates that financial instruments, such as operating cost, market to book, income, cash flow, basic earning power, inventory turnover and EPS are not so popular among innovation scholars, despite Selby (2010) presenting a good argument for the use of EPS as a measure of organisational performance, owing to its strength in capturing future expected earnings.…”

The Effects of Supplier Involvement and Knowledge Protection on Product Innovation in Customer–Supplier Relationships: A Study of Global Automotive Suppliers in China

“…In line with this managerial trend, there has been increasing scholarly interest on innovation generation in interorganizational context. Some important issues have been examined in the context of interfirm innovation: different governance mechanisms such as relationship norms including trust and commitments (Mooi and Frambach, ; Roy, Sivakumar, and Wilkinson, ), unilateral governance including contract power (Wang, Bradford, Xu, and Weitz, ), behavior and output control (Sivakumar, Roy, Zhu, and Hanvanich, ), the impact of alliance portfolio (Cui and O'Connor, ) and alliance expertise (Sivakumar et al., ) and its impact on global innovation generation. Nonetheless, there are some opportunities for research contributions on interfirm innovation in the current literature.…”

Strategic Implications for (Non-Equity) Alliance Performance

“…According to conceptual (Stata, 1989;Teece et al, 1997;Tushman and Nadler, 1986), empirical (Cohen and Levinthal, 1990;Henderson and Clark, 1990;Kenney and Gudergan, 2006;Sivakumar et al, 2011) and simulation research (Mezias and Glynn, 1993), both an organization's overall capacity to learn from its own history and experiences, as well as its competitive capabilities, enhance organizational innovation; please also see Berghman et al (in press). An organization's competitive capabilities (i.e., valuable and competitive resources, skills, etc.)…”