New Challenges in Alliance Portfolio Management - Innovation and Marketing in the Pharmaceutical Industry - page 151

associated with alliance portfolio management (see Wassmer's 2010 review article
for a notable exception).
The fi rst portfolio descriptor relates to the scale of the alliance portfolio, mostly
operationalized as portfolio size (Goerzen 2007 ; Hoffmann 2007 ; Wuyts et al.
2004a ). Portfolio size is a simple count of the number of alliances that make up the
portfolio and gives a fi rst impression of access to external knowledge.
The second core descriptor relates to the partners that are selected for the respec-
tive alliances. Apart from some obvious partner descriptors, such as the need for
high-quality partners (Rothaermel 2001 ), the most prominent variable that describes
the mix of partners in an alliance portfolio is repeated partnering (Goerzen 2007 ;
Jiang et al. 2010 ; Wuyts et al. 2004a ). The key insight is that collaborating repeat-
edly with the same partners helps in transferring knowledge but constrains access-
ing novel knowledge. Wuyts et al. ( 2005 ) provided empirical support for an
inverted-U effect of repeated partnering on the value of learning.
The third key dimension relates to the governance of the alliances that make up
the alliance portfolio. Prior research shows that fi rms in knowledge-intensive indus-
tries should balance strong and weak ties because weak ties help fi rms stay ahead of
developments in novel knowledge domains (Uzzi 1997 ; Rowley et al. 2000 ).
A fourth key descriptor is the portfolio's technological diversity (Wuyts et al.
2004a ), sometimes referred to as effi ciency (Hoffmann 2007 ). Other scholars have
identifi ed other forms of diversity such as industry diversity (or dispersion, see
Hoffmann 2007 ), product market diversity (Ansoff 1958 ), and governance diversity
(Jiang et al. 2010 ).
The fi fth dimension of portfolio management, costs, has received less attention.
Portfolio management, however, requires not only opportunity management but
also cost management. Allying with new alliance partners increases partner qualifi -
cation, coordination, and governance costs; diversifying across technological fi elds
increases investment costs, such as training and educating employees, investing in
equipment and machinery, and initial investments in the alliance partner.
Finally, also the sixth dimension has received very little attention: alliance port-
folio management is intrinsically dynamic. On the one hand, fi rms should stay on
the lookout for new opportunities in rapidly developing fi elds and be prepared to
adapt to changes in the technological environment. On the other hand, even a snap-
shot of an alliance portfolio will reveal a dynamic aspect: alliances are signed at
different stages of the new drug development process. Early literature on technol-
ogy portfolio management in marketing already suggested that fi rms should strive
for a balanced allocation of resources along the stages of technology development
(Capon and Glazer 1987 , p. 10). Following a similar logic, one can infer that an
alliance portfolio should balance early and late stage alliance projects to sustain a
balanced drug pipeline. This inference, however, lacks empirical substantiation and
requires further study.
Assembling the pieces, alliance portfolio management should incorporate the
dimensions of scale, partners, governance, technology, costs, and dynamics (see
Fig. 5.1 ). Clearly, these dimensions are not orthogonal. A portfolio that covers a
large diversity of technologies tends to be very costly, which is illustrated by Wuyts