Incumbent's Advantage Through Exploiting Complementary Assets Via Interfirm Cooperation

I argue that incumbent firms may adapt to a radical innovation through interfirm cooperation with new entrants. In particular, I suggest that incumbent firms may leverage their pre-innovation complementary assets via exploitation alliances with new entrants. Thus, exploitation alliances are proposed to have a more immediate and stronger impact than exploration alliances on incumbent performance within the new technological paradigm. I test these notions on 889 strategic alliances entered by global pharmaceutical companies with providers of the new biotechnology knowledge. Incumbents that focus on exploitation rather than exploration perform better. However, there are limits to this alliance strategy due to diminishing returns to alliance intensity and due to inter-temporal dynamics