Management Question

Chapter Eight
Collaboration Strategies
Ending HIV? Sangamo Therapeutics and Gene Editing
In !””#, Edward Lanphier founded Sangamo Biosciences for the purpose of
developing zinc-finger nucleases (ZFNs), a technology that could edit the genetic
code of a living individual to correct genetically based diseases (e.g., hemophilia,
sickle cell anemia, Huntington’s disease, and many others) or to confer genetic
resistance to non genetically based diseases.
ZFNs work by cutting the DNA in a chosen spot. The cell then typically
attempts to repair the cut by either by polishing the two ends of DNA and sealing them back together or by copying the corresponding section of DNA in the
other$ half of the chromosome pair. Since many diseases occur because of a
gene on a single half of the chromosome pair, this “homologous substitution”
from the other chromosome corrects the faulty gene. Alternatively, scientists can
even provide a template gene sequence that they want to use to substitute for
the cleaved portion of the DNA (see Figure !).
Gene editing offered a radical new way to cure or prevent diseases, but it
required a significant amount of R&D work both to develop ZFNs that were precise and reliable enough to safely edit human genes and to develop a delivery
mechanism that would ensure the ZFNs penetrated enough of an individual’s
cells to make a difference. Clinical trials to establish the treatment’s safety and
efficacy to get FDA approval would also be a huge hurdle to overcome.
Since none of Sangamo’s products were commercially available yet, the company was entirely reliant upon grants and funding from partners for its survival.
Though the company’s ZFN technology had been overshadowed in the press
by CRISPR-Cas” in the last few years, interest in ZFNs appeared$to be heating
back up. In early %&!’, Gilead Sciences signed a $( billion deal with Sangamo
to develop a ZFN-based method of harnessing a patient’s own immune system
to battle cancer,a and Case Western University had received an$ $!! million
grant from the U.S. National Institute of Health work with Sangamo on its HIV
program.b The company was already almost a year into Phase II testing of one
of its HIV programs—was Sangamo at the precipice of curing HIV? And if so,
did it make more sense to try to commercialize the drug alone or to work with
a partner?
!”#

!”$ Part Two Formulating Technological Innovation Strategy

FIGURE !

Gene Editing with Nucleases
Nuclease
Chromosome
Cut

DNA repair matrix
Paste

Gene insertion
knock in

DNA repair matrix
Homologous
recombination

Nonhomologous end joining
(NHEJ)
Loss of few
base pairs

Paste

Gene repair

Gene inactivation
knock in

Correcting Monogenic Diseases
Monogenic diseases are diseases that are caused by a defect in a single gene.
One example is hemophilia. People with hemophilia lack sufficient clotting factors
in their blood, resulting in them bleeding longer after an injury. Internal bleeding,
in particular, can cause significant damage and be life threatening. Individuals
with hemophilia need regular infusions to replace the clotting factor in their
blood. Sangamo’s ZFN treatment offered the hope of a cure, rather than lifelong
treatment.c Sangamo had already demonstrated that its ZFN method for treating hemophilia worked in mice and was preparing to file an application to begin
clinical trials. Sangamo also had developed treatments for sickle cell anemia and
beta thalassemia, also monogenic diseases. Normally, patients with sickle cell
anemia or beta thalassemia require lifelong care or bone marrow transplants, at
great expense and risk. Sangamo, however, had shown in the laboratory that its
treatment could knock out the BCL!!A gene causing these diseases.
Another example of a monogenic disease is Huntington’s Disease (HD). HD
is a devastating neurologic disease in which people lose their motor coordination, cognition, and memory. The disease is progressive and usually fatal within
!&–%& years of onset. The disease is a result of a mutation in a single gene, the
huntingtin gene that results in a greater-than-usual number of repeats of the CAG
DNA sequence, resulting in a mutant form of the huntingtin protein accumulating

Chapter ! Collaboration Strategies !”%

in cells. Most individuals inherit only one copy of the faulty gene, and it takes only
one copy to produce the disease. Furthermore, #& percent of the children of an
HD sufferer also inherit the disease. Though previous research had explored
ways to decrease the huntingtin protein in cells, it turned out that the normal
form of the protein is essential, and mice lacking the normal huntingtin protein
died before birth. Sangamo, however, developed a ZFN method to identify and
“turn off” only the faulty gene. This meant that an individual would have only one
operational copy of the gene which would continue to produce the normal form
of the huntingtin protein.
Whereas there were treatments available that could at least stop or slow
the progression of hemophilia, sickle cell anemia, and beta thalassemia, there
were$no such treatments for Huntington’s—nothing had been found that could
halt its progression. Thus, Sangamo’s presentation of promising results for its HD
treatment was big news—its success could mean the difference between life
and death for sufferers of HD.

Drug Development and Clinical Trials
Drug development is hugely expensive and risky. Most studies indicate that it
costs at least $!.# billion and a decade of research to bring a new Food and
Drug Administration (FDA)–approved pharmaceutical product to market.d The
statistics on drug development costs are, in fact, an understatement because
they do not fully account for the costs of the many failed drugs that are abandoned earlier in the development process. In the pharmaceutical industry, only
one out of every #&&& compounds tested makes it to the pharmacist’s shelf,
and only one-third of those will be successful enough to recoup the investment
in researching and developing the original #&&& compounds. Accounting for
investment in failed drug efforts suggests that the cost of drug development is
much higher than is typically reported. A study of R&D spending and new drug
approvals published in Forbes in %&!%, for example, found that firms spent over
$) billion per approved drug (see Table !).e,f
Most studies suggested that the biggest cost in drug development was the
cost of clinical trials—a cost that is borne by the sponsoring organization (usually
the company that developed the drug). To be approved by the FDA in the United
States, most drugs have to go through several phases of trials. First, in preclinical
studies, the company will usually assess the safety and efficacy of the drug using
animals. In Phase ” trials, a single dose (smaller than what would be used to
provide the therapeutic treatment) is given to a small number (!& to!#) of human
subjects to evaluate what the drug does to the body. If successful, the drug may
be entered into Phase ! clinical trials, whereby the drug is given to a somewhat larger group of people (%& to ‘&) to evaluate its safety, determine dosage
ranges, and identify side effects. Phase ! trials are primarily to assess the safety
of the drug. In Phase # trials, the drug is given to larger groups of people (!&& to
(&&) to evaluate its effectiveness and further evaluate its safety and side effects.
Finally, in Phase $, the drug is given to very large groups of subjects (!&&& to
(&&&) to confirm its effectiveness compared to alternatives and gather still further information on its safety.

!#& Part Two Formulating Technological Innovation Strategy

TABLE !

Research Spending and New Drug Approvalsg
Number
of Drugs
Approved

Total R&D
Spending
!%%#–’&!! ($Mil)

R&D Spending
Per Drug ($Mil)

AstraZeneca

#

#’,”##

!!,*”&.”(

GlaxoSmithKline

!&

‘!,*&’

‘!*&.’!

Sanofi

‘

)(,%*+

*”&”.%)

Roche Holding

!!

‘#,’+!

*’&(.**

Pfizer

!+

!&’,!*’

**%*.&(

Johnson & Johnson

!#

”,%’#

#”#.)#

Eli Lilly & Co

!!

#&,(+*

+#**.&+

Abbott Laboratories

‘

(#,”*&

++”).%!

Merck & Co Inc

!)

)*,()&

+%&”.””

Bristol-Myers Squibb Co

!!

+#,)*#

+!#%.%)

Novartis

%!

‘(,)+)

(“‘(.!(

Amgen Inc

”

((,%%”

()”%.!+

AVERAGE

!!.($

“”,$#’.))

“!%%.$(

Company

Finally, if the drug successfully makes it through Phase ( clinical trials, the
sponsoring organization can apply for a New Drug Approval from the FDA. The
entire process typically takes at least !& to !% years, costs hundreds of millions
of dollars, and the vast majority of new drug projects do not make it through the
process successfully.

Competing Technologies
As if drug development was not risky enough, Sangamo also faced the threat
that its ZFN technology would be rendered obsolete by other gene editing
alternatives. In early %&!’, two other gene editing alternatives were gaining
traction: TALENs (transcription activator-like effector nucleases), and CRISPRCas” (clustered regularly interspaced short palindromic repeats). TALENs are
like ZFNs in that they are special nucleases that identify and bind to a specific
part of the DNA and cut the genome at a desired spot. The main difference
between the$two is how they identify the right DNA binding location. By %&!’,
ZFN technology was more mature and better developed, but TALEN technology
was considered more straightforward to design treatments with, and thus many
considered it to have an advantage in the longer term.h According to Stephen
Ekker, director of the Mayo Addiction Research Center at the Mayo Clinic Cancer
Center, while ZFNs had established the proof of principle for genome-editing
technology, “TALENs$ .$ .$ .$ do most of what ZFNs do, but cheaper, faster and
better.”i On the other hand, TALEN molecules were larger, which made them

Chapter ! Collaboration Strategies !#!

more difficult to deliver to chosen regions of the body (a particular challenge
was getting gene editing nucleases past the blood–brain barrier for treatment
of diseases such as Huntington’s). Since both technologies had advantages and
disadvantages, their sponsors would have to race to get effective treatments to
market ahead of each other.
CRISPR-Cas” was somewhat different. CRISPR technology harnessed a
natural defense system of bacteria that has evolved to recognize and eliminate foreign DNA, giving bacteria “adaptive immunity.” CRISPR was even more
simple and efficient than TALENs, fueling enormous excitement over its potential. CRISPR-Cas” was so simple and inexpensive, in fact, that high school and
college students were learning to do gene editing in school. However, because
CRISPR used a very short RNA sequence to guide its activity, some people
worried that its effects wouldn’t be precise enough—that is, it could result in “off
target” cleavages—a highly undesirable result!
As of early %&!’, CRISPR appeared to be the front runner, but a lengthy patent
battle over rights to the CRISPR technology, along with the ease at which anyone
could work with CRISPR had created some uncertainty about who would benefit
financially from the technology. Sangamo’s ZFN technology was patented and
had higher technological barriers to entry. These two traits posed both benefits
and costs to the development of ZFN technology.

Sangamo’s Partnerships
Biotechnology firms could spend years earning only losses while they developed their treatments. Sangamo was no exception—it had yet to make any
money from sale of its products. All of its revenues came from research grants
and collaboration agreements, and it outspent those revenues in R&D, accumulating losses in each year. This highlights the challenging nature of drug development: Though the company had developed ground breaking treatments that
could radically improve the lives of several different patient populations, it was
financially quite vulnerable.
As of %&!’, Sangamo had only !’% full-time employees; it did not have the
resources to do its own clinical testing, manufacturing, or marketing. For these
stages of drug development, Sangamo would be reliant on partnerships with
much larger firms. In addition to the partnerships with Gilead and Case Western University, Sangamo also had partnerships with Pfizer, Bioverativ, and Shire
Pharmaceuticals.
Pfizer was a New York City–based company with $#( billion in sales and
almost !&&,&&& employees. It was one of the largest pharmaceutical companies in the world. In May of %&!*, Sangamo had entered into an R&D alliance
and exclusive licensing agreement for Sangamo hemophilia A gene editing
treatment. The deal included upfront payments and royalty payments worth
about $#+# million. Then in early %&!’, Sangamo and Pfizer announced
they had also signed a $!)% million deal to work together to develop a treatment for the genetic version of amyotrophic lateral sclerosis (Lou Gherig’s
Disease).j Pfizer had clinical testing, manufacturing, and sales capabilities all
over the$world.

!#’ Part Two Formulating Technological Innovation Strategy

Bioverativ, a spinoff of Biogen, was a Waltham Massachusetts–based biotech firm with about +&& employees. Bioverative was working with Sangamo on
treatments for sickle cell anemia and beta thalassemia. Under the terms of the
deal, Bioverative would give Sangamo $%& million upfront and Sangamo would
be responsible for performing all of the R&D on the treatments until they could
be proven to work on humans. Then Bioverative would take over with clinical trials, manufacturing and marketing, and Sangamo would get milestone payments
of up to $(&& million and double digit royalties if the products earned sales.
In early %&!’, Bioverativ was acquired by the French pharmaceutical company
Sanofi. With more than !!&,&&& employees, Sanofi was slightly larger than
Pfizer and also had clinical trials, manufacturing, and distribution capabilities all
over the world.
Shire was one of the United Kingdom’s largest specialty biopharmaceutical
companies with just over $!# billion in revenues and about %%,&&& employees
in %&!*. One of its main products was Lamivudine, an antiretroviral therapy used
to treat HIV. Though the company earned the majority (*& percent) of its sales
in North America, it had direct operations in about (& countries and sold products to more than #& countries. Shire was known for being a highly acquisitive
company, having acquired NPS pharmaceuticals, ViroPharma, Janssen Pharmaceuticals, and Advanced BioHealing just in the last few years. Its two most wellknown drugs were treatments for attention-deficit/hyperactivity disorder (ADHD):
Vyvanse and Adderall.
In January %&!%, Sangamo entered into an agreement with Shire AG to further develop its ZNF treatments for hemophilia, Huntington’s disease, and other
diseases. Like the Biogen deal, Shire agreed to pay Sangamo an upfront fee,
plus milestone fees of up to $%!(.# million for each of seven targets.k However, in %&!# the firms revised their agreements so that Sangamo would have
exclusive worldwide rights to the hemophilia treatments and Shire would
have exclusive rights to the Huntington’s disease treatments.l

A World-Changing Opportunity: Creating Immunity to HIV
One of the most exciting potential applications of ZFNs was creating a treatment
that could cure HIV. In %&!#, approximately (* million people were living with
HIV/AIDS worldwide Figure %. However, a small percentage of people have a
mutation in their CCR% gene—a gene that makes a protein found on the surface
of cells. The mutation makes it difficult for HIV to enter their cells. Individuals
receive their genes in pairs—one on a specific chromosome from one parent,
and another on the paired chromosome from the other parent. Individuals with
one copy of the mutated gene have some protection against HIV infection and
experience a less severe form of the disease if infection occurs. Individuals with
two copies of the mutated CCR% gene are typically immune to HIV. These gene
mutations appear in up to %& percent of people of European descent (scientists
hypothesize that the gene mutation conferred resistance to the Bubonic plague
or smallpox epidemics, leading this gene to be more prevalent in populations of
people that survived such epidemics). People with the mutation appear to suffer
no health problems from the mutation.

Chapter ! Collaboration Strategies !#)

FIGURE ‘

HIV/AIDS Worldwide, 2015
Source: UNAIDS.

Adults and children estimated to be living with HIV | 2015
Eastern and Southern Africa

19.0

Western and Central Africa

6.5

Asia and Pacific

5.1

North America and Western and Central Europe

2.4

Latin America and the Caribbean

2.0

Eastern Europe and Central Asia

1.5

Middle East and North Africa

0.23
0

Total: 36.7 million

5

10

15

20

(in millions)

The potential for exploiting the CCR% mutation gained widespread attention
when a study published in %&!! revealed that an AIDS patient with leukemia
had received a bone marrow stem cell transplant from a donor with the CCR%
mutation and subsequently appeared to be cured of AIDS. After the bone marrow transplant, the patient was able to discontinue all antiretroviral therapy and
the virus did not reappear in his blood.m
Finding a bone marrow match with a CCR% mutation is extremely unlikely,
and getting a bone marrow transplant is risky. Sangamo thus decided to use its
ZFN gene editing technology to develop a simpler method by which individuals
could be given the mutation. Early results released by Sangamo in %&!+ were
promising: The treatment appeared to be well-tolerated and reduced the viral
load of several patients who had been taken off of their antiretroviral therapy
for !% weeks during the study.n However, the percent of cells showing the mutation declined over time, which meant further work needed to be done to find a
way to modify enough of the patients’ genes for the therapy to be a reliable and
permanent treatment.

The Future*.*.*.
Sangamo clearly had a lot on its plate. It had revolutionary treatments in clinical
trials for several major diseases, including the potential to create a cure for HIV
Figure (. In the short term, its business was focused on developing treatments

!#+ Part Two Formulating Technological Innovation Strategy

FIGURE )

Summary of
Sangamo’s
Research
Programs and
Drug Pipeline
Source: www
.sangamo.com

Lead Indication

Program

HIV (T cells)

SB-728-T

HIV (HSCs)

SB-728-HSPC

Hemophilia A

Pfizer

Hemophilia B

SB-FIX

MPS I

SB-318

MPS II

SB-913

Beta Thalassemia

Bioverativ

Sickle Cell Disease

Bioverativ

Fabry Disease

ST-920

Research Preclinical Phase 1

Phase 2

Phase 3

Huntington’s Disease Shire
Alzheimer’s Disease

Seeking partner

Oncology

Multiple

through early-stage clinical trials that it would hand over to partners who had
deeper pockets and were better positioned to conduct late stage clinical trials, production, and marketing. However, in the long run, Sangamo wanted to
be able to do all of its own clinical testing, production, and marketing, to better
capture the value of its innovative technologies. Sangamo had no revenues from
actual products—only grants from research foundations and cash from upfront
fees paid by its licensing partners. It was also spending over $)# million a year
on R&D, and posting huge losses, year after year. Sangamo thus had to carefully
weigh the pros and cons of developing its HIV treatment alone.

Discussion Questions
!. What were the pros and cons of Sangamo pursuing its gene editing programs alone versus working with a partner?
%. Does the HIV program offer any special opportunities or challenges?
(. What do you think Sangamo should do regarding the HIV program? Should
it license the technology to a large pharmaceutical? Should it form a joint
venture with another biotech or pharma company? If so, who?
a

Mishra, M., “Sangamo in $3 Billion Gene-Editing Deal with Gilead,” Reuters, (February 22, 2018).
Suttell, S., “Case Western Reserve, California Tech Company Receive $11 million NIH Grant,” Crain’s
Cleveland Business (February 7, 2018).
c
Hersher, R. 2012. A whole clot of hope for new hemophilia therapies. Nature Medicine. February 2.
d
See Joseph A. DiMasi & Henry G. Grabowski, The Costs of Biopharmaceutical R&D: Is Biotech Different?
28 Managerial & Decision Econ. 469, 469 (2007).
e
M Herper, The Truly Staggering Costs of Inventing New Drugs. Forbes, February 10th (2012).
b

Chapter ! Collaboration Strategies !#(
f

According to a study by the Manhattan Institute for Policy Research, the majority of the drug development expense is due to the extremely costly and time-consuming process of clinical trials: If analysis
is limited to drugs that are ultimately approved by the FDA, Phase 3 clinical trials represented over
90$ percent of the total cost of development (Project FDA Report, Manhattan Institute for Policy
Research, No. 5, April 2012).
g
Herper, M. 2012. The Truly Staggering Costs of Inventing New Drugs. Forbes, February 10.
h
Gaj, T, Gersbach, CA, Barbas, CF III, “ZFN, TALEN, and CRISPR/Cas-based methods for genome
engineering,” Trends Biotechnol, 31:397–405, July 2013; Pennisi, E, “The CRISPR Craze,” Science,
341:833–6, August 23, 2013.
i
J.M. Perkel. 2013. Genome editing with CRISPRs, TALENs, and ZFNs. Biocompare, August 27th.
j
A. Keown, “Sangamo, Pfizer Deepen Relationship with New $162M ALS R&D Pact,” Biospace,
January 3, 2018.
k
Renauer, C. 2014. How Sangamo BioSciences, Inc. is partnering to success. The Motley Fool, January 29th.
l
Sangamo press release, 2015.
m
Allers, K, Hugger, G, Hoffman, J, Loddenkemper, C, Riger, K, Thiel, E & Schneider, T. 2011. Evidence for the
cure of HIV infection by CCR5,32/,32 stem cell transplantation. Blood, 117:2791–9.
n
2014. Gene editing of CCR5 in autologous CD4 T-cells of persons infected with HIV. New England
Journal of Medicine, 370:897–906.

OVERVIEW
Firms frequently face difficult decisions about the scope of activities to perform inhouse, and whether to perform them alone as a solo venture or to perform them collaboratively with one or more partners. As mentioned in Chapter Two, a significant
portion of innovation arises not from any single individual or organization, but instead
from the collaborative efforts of multiple individuals or organizations. Collaboration
can often enable firms to achieve more, at a faster rate, and with less cost or risk
than they can achieve alone. However, collaboration also often entails relinquishing
some degree of control over development and some share of the expected rewards of
innovation, plus it can expose the firm to risk of malfeasance by its partner(s). In this
chapter, we will first consider the reasons that a firm might choose to engage in collaborative development or might choose to avoid it. We will then review some of the
most common types of collaborative arrangements and their specific advantages and
disadvantages.

REASONS FOR GOING SOLO
A firm might choose to engage in solo development of a project for a number of reasons. First, the firm may perceive no need to collaborate with other organizations—it
may possess all the necessary capabilities and resources for a particular development
project in-house. Alternatively, the firm may prefer to obtain complementary skills or
resources from a partner, but there may be no available partner that is appropriate or
willing to collaborate. A firm might also choose to develop a project as a solo venture
if it is concerned that collaborating would put its proprietary technologies at risk, or if
it seeks to have full control over the project’s development and returns. Furthermore,
a firm’s solo development of a technological innovation might give it more opportunities to build and renew its capabilities.

!#” Part Two Formulating Technological Innovation Strategy

!. Availability of Capabilities
Whether a firm chooses to partner on a project is largely determined by the degree to
which it possesses all of the necessary capabilities in-house and the degree to which
one or more potential partners have necessary capabilities. If a firm has all of the necessary capabilities for a project, it may have little need to collaborate with others and
may opt to go it alone. Furthermore, if a firm finds that it lacks certain required capabilities but there are also no potential partners with such capabilities, it may be forced
to develop the capabilities on its own.
For example, in the late 1970s Monsanto was interested in developing food
crop seeds that were genetically modified to survive strong herbicides. Monsanto’s
Roundup, a powerful herbicide, had been introduced in 1974 and had been remarkably successful. However, Roundup killed almost all plants that it came into contact
with and thus had to be applied with great care. If crops could be developed that were
genetically modified to resist Roundup, the herbicide could be used more easily and
in larger quantities. The biotechnology industry was still quite young, so there were
no appropriate partners from which to acquire the necessary technologies. Monsanto
decided to pursue the opportunity as a solo internal venture and declared that biotechnology was its new strategic focus.1 In 1983, Monsanto successfully developed its
first transgenic plant, but it would not be until 1995 that it would have its first genetically modified crop seed, Roundup Ready soybeans, approved for commercialization.2
Though many environmental groups opposed both Roundup and the genetically modified Roundup Ready crops, the combination was enormously successful. By 2002,
more than 130 million acres worldwide were planted with Monsanto’s Roundup Ready
soybean, corn, cotton, and canola seed.3

‘. Protecting Proprietary Technologies

alliance

Alliance is a
general term that
can refer to any
type of relationship between
firms. Alliances
may be short or
long term and
may include formally contracted
agreements or be
entirely informal
in nature.

Firms sometimes avoid collaboration for fear of giving up proprietary technologies.
Working closely with a partner might expose the company’s existing proprietary
technologies to the prying eyes of a would-be competitor. Furthermore, the firm may
wish to have exclusive control over any proprietary technologies created during the
development project. Consider Sangamo’s decision about whether to collaborate in
its development of a gene editing approach to curing HIV as described in the opening
case. While collaborating would give Sangamo needed cash and access to valuable
testing, manufacturing, and marketing capabilities, it did not possess, collaborating
also meant that it would have to share the profit, control, and reputational effects from
developing the treatment.

). Controlling Technology Development and Use
Sometimes firms choose not to collaborate because they desire to have complete control over their development processes and the use of any resulting new technologies.
This desire might be for pragmatic reasons (e.g., the new technology is expected to
yield high margins and the firm does not wish to share rents with collaborators) or
cultural reasons (e.g., a company’s culture may emphasize independence and selfreliance). Both of these reasons are demonstrated by Honda in the development of its
hybrid-electric vehicle, the Insight. While other auto manufacturers were enthusiastically forming alliances to collaborate on automobile design and the development

Chapter ! Collaboration Strategies !##

of more efficient manufacturing processes, Honda was very cautious about forming
collaborative relationships. Honda’s decision not to join the Alliance of Automobile
Manufacturers, the industry trade group that leads the fight against tougher fuel and
emissions standards, had both pragmatic and cultural reasons. From a pragmatic standpoint, Honda worried that participating in the trade group would limit its discretion
over its development of environmentally friendly automobiles, an area where Honda
intended to be the market leader. This decision was reinforced by Honda’s culture that
emphasized retaining complete control over the firm’s technology development and
direction. This is illustrated by Honda President Hiroyuki Yoshino’s statement, “It’s
better for a person to decide about his own life rather than having it decided by others.”4

+. Building and Renewing Capabilities
Firms may also choose to engage in solo development even when partnering could save
time or money because they believe that development efforts are key to building and
renewing their capabilities. Solo development of a technological innovation challenges
the firm to develop new skills, resources, and market knowledge. As noted in Chapter
Seven, the potential for creating and enhancing the organization’s capabilities may be
more valuable than the innovation itself. This is aptly demonstrated in a quote from
Walt Gillette of Boeing about the development of the Sonic Cruiser: “Industry experience indicates that if the company doesn’t create a new airplane every 12 to 15!years,
the needed skills and experience will be gone. Too many of the people who created the
last new airplane will have retired or moved on to other companies, and their skills and
experience will not have been passed on to the next generation of Boeing employees.”5
Though there are several reasons a firm might choose to stick with solo development, there are also many reasons for firms to engage in collaborative development, and collaboration appears to be on the rise. In the next sections, we will discuss
the advantages of collaboration and the strengths and weaknesses of various types of
collaboration.

ADVANTAGES OF COLLABORATING
Collaborating on development projects can offer a firm a number of advantages,
including faster speed to market, greater flexibility, learning capabilities from other
firms, and building a coalition around a standard.

!. Acquiring Capabilities and Resources Quickly
It is not unusual for a company to lack some of the complementary assets required to
transform a body of technological knowledge into a commercial product. Given time,
the company can develop such complementary assets internally. However, doing so
extends cycle time.6 Instead, a company may be able to gain rapid access to important
complementary assets by entering into strategic alliances or licensing arrangements.7
For example, when Apple was developing its LaserWriter, a high-resolution laser
printer, it did not possess the technological expertise to produce the printer’s engine,
and developing such capabilities in-house would have taken a long time. Apple persuaded Canon, the market leader in printer engines, to collaborate on the project.8
With Canon’s help, Apple was able to bring the high-quality printer to market quickly.

!#$ Part Two Formulating Technological Innovation Strategy

‘. Increasing Flexibility
Obtaining some of the necessary capabilities or resources from a partner rather than
building them in-house can help a firm reduce its asset commitment and enhance its
flexibility. This can be particularly important in markets characterized by rapid technological change. High-speed technological change causes product markets to rapidly
transform. Product life cycles shorten, and innovation becomes the primary driver of
competition. When technology is progressing rapidly, firms may seek to avoid committing themselves to fixed assets that may rapidly become obsolete. They may choose
to become more narrowly specialized and to use linkages with other specialized firms
to access resources they do not possess in-house.

). Learning from Partners
Collaboration with partners can be an important source of learning for the firm. Close
contact with other firms can facilitate both the transfer of knowledge between firms
and the creation of new knowledge that individual firms could not have created alone.9
By pooling their technological resources and capabilities, firms may be able to expand
their knowledge bases and do so more quickly than they could without collaboration.

+. Resource and Risk Pooling
One primary reason firms collaborate on a development project is to share the costs
and risks of the project. This can be particularly important when a project is very
expensive or its outcome highly uncertain.10

(. Building a Coalition around a Shared Standard
Firms may also collaborate on a development project when such a collaboration would
facilitate the creation of a shared standard. For example, as of early 2018, there were
four major electric vehicle charging standards competing in the market: CHAdeMO
(used by most of the Japanese electric vehicle manufacturers), SAE Combined Charging System (used by most of the major European electric vehicle manufacturers plus
General Motors and Ford in the United States), GB/T (used by Chinese electric vehicle manufacturers such as BYD, SAIC, and Dongfeng), and Tesla Supercharger (used
by Tesla). Globally, in 2018 there were about 7000 CCS charging stations, 16,639
CHAdeMO charging stations (mostly in Japan and Europe), 8496 Tesla Superchargers
(mostly in the United States), and 127,434 GB/T charging stations (all in China). In
late 2017, Daimler, BMW, Ford, and Volkswagen group announced they would form
the Charging Interface Initiative (CharIN) to collaborate on building CCS charging
stations, hoping to build momentum for the standard. Tesla, meanwhile, had hedged its
bets by releasing its patents on the Supercharger standard so that others could adopt it,
and joining both the CharIN and CHAdeMO alliances. Furthermore, Tesla had created
adapters for its vehicles for both the CHAdeMO and GB/T standards.11

TYPES OF COLLABORATIVE ARRANGEMENTS
Collaboration can include partnering with suppliers, customers, competitors, complementors, organizations that offer similar products in different markets, organizations
that offer different products in similar markets, nonprofit organizations, government

Chapter ! Collaboration Strategies !#%

joint venture

organizations, universities, or others. Collaboration can also be used for many different
purposes, including manufacturing, services, marketing, or technology-based objectives.
In North America, as many as 23 percent of all alliances are for research and development activities, compared to 14 percent in Western Europe and 12 percent in Asia.12
Collaboration arrangements can also take many forms, from very informal alliances
to highly structured joint ventures or technology exchange agreements (licensing).
The most common forms of collaborative arrangements used in technological innovation include strategic alliances, joint ventures, licensing, outsourcing, and collective
research organizations.

licensing

Strategic Alliances

A partnership
between two
or more firms
involving a significant equity
stake by the partners and often
resulting in the
creation of a new
business entity.
A contractual
arrangement
whereby one
organization or
individual (the
licensee) obtains
the rights to use
the proprietary
technology (or
trademark,
or copyright,
etc.) of another
organization or
individual (the
licensor).

A strategic alliance is a temporary relationship that can take many forms. It can be
formalized in a contract or an informal agreement. It can be a short-term agreement or
a long-term agreement, and it can include an equity investment made by the partners
in each other (termed equity alliances, discussed later in the chapter). Most alliances
(with the exception of joint ventures that establish a new legal subsidiary) are considered temporary agreements, and thus offer a good way for firms to flexibly combine
their efforts and resources. Firms may use strategic alliances to access a critical capability that is not possessed in-house or to more fully exploit their own capabilities
by leveraging them in another firm’s development efforts. Firms with different capabilities necessary for developing a new technology or penetrating a new market might
form alliances to pool their resources so that collectively they can develop the product
or market faster or less expensively. Even firms that have similar capabilities may
collaborate in their development activities in order to share the risk of a venture or to
speed up market development and penetration. Large firms might form alliances with
small firms in order to take a limited stake in the smaller firm’s development efforts,
while small firms might form alliances with large firms to tap the larger firm’s greater
capital resources, distribution and marketing capabilities, or credibility.13 For example,
many large pharmaceutical firms have allied with small biotechnology firms for their
mutual benefit: The pharmaceutical firms gain access to the drug discoveries of the
biotechnology companies, and the biotechnology companies gain access to the capital
resources, manufacturing, and distribution capabilities of the pharmaceutical firms.
Through an alliance, firms can establish a limited stake in a venture while maintaining the flexibility to either increase their commitment later or shift these resources to
another opportunity.14 Firms can use alliances to gain an early window on emerging
opportunities that they may want to commit to more fully in the future. Alliances also
enable a firm to rapidly adjust the type and scale of capabilities the firm can access,
which can be very valuable in rapidly changing markets.15
Alliances are also used to enable partners to learn from each other and develop new
competencies. Alliance partners may hope to transfer knowledge between the firms or
to combine their skills and resources to jointly create new knowledge. However, alliance relationships often lack the shared language, routines, and coordination that facilitate the transfer of knowledge—particularly the complex and tacit knowledge that is
most likely to lead to sustainable competitive advantages.16 To use alliances for learning requires a serious commitment of resources, such as a pool of dedicated people
willing to travel between the home firm and partner firm, test-bed facilities, and active

!$& Part Two Formulating Technological Innovation Strategy

FIGURE $.!

Technology Alliance Strategies
Source: Y. Doz and G. Hamel, 1997, “The Use of Alliances in Implementing Technology Strategies.” In M. L. Tushman and P. Anderson,
Managing Strategic Innovation and Change, 1997.

Individual Alliance Network of Alliances
Capability
Complementation
Capability Transfer

capability
complementation
Combining
(“pooling”) the
capabilities and
other resources
of partner firms,
but not necessarily transferring
those resources
between the
partners.

capability
transfer

Exchange of
capabilities
across firms in
such a manner
that partners
can internalize
the capabilities
and use them
independently
of the particular
development
project.

A
GE-SNECMA
alliance
C
Thomson-JVC
alliance

B
Corning Glass
alliances
D
Aspla

procedures for internalizing what has been learned.17 Alliances can thus also be costly.
They require monitoring and coordination. There is also a risk of partners taking the
firm’s intellectual property for their own advantage.18
Yves Doz and Gary Hamel argue that it is useful to categorize a firm’s alliance
strategy along two dimensions.19 The first dimension is the degree to which alliances
practice capability complementation versus capability transfer. The second
dimension is whether the firm manages each alliance individually or manages a collective network of alliances (see Figure!8.1).
In quadrant A are firms that forge an individual alliance to combine complementary
technologies or skills needed for a project. For example, in the mid-1970s, General
Electric (GE) and SNECMA (a French jet engine producer) formed a joint venture
called CFM International to develop a new jet engine. The venture would combine
GE’s F101 turbojet with SNECMA’s low-pressure fan expertise to create a powerful
and fuel-efficient engine. Because the F101 was considered a sensitive military technology by the U.S. Air Force, the venture was set up to carefully avoid the exchange
of proprietary technology between the firms. GE would build the F101 portion as a
sealed “black box,” which could then be shipped to a separate assembly location. The
resulting engine, the CFM-56, became the most successful jet engine in the history
of!aviation.20
In quadrant B are firms that use a network of alliances to combine complementary skills and resources. For example, Corning, known primarily as a producer of
glass products, has created a web of alliances with partners that have complementary
skills in order to extend its glass technology into fields as diverse as medical products,
computer products, and fiber optics. Instead of attempting to internalize its partners’
technologies, Corning views its relationships with its partners as a form of extended
enterprise that forms a flexible and egalitarian network of independent businesses.21
In quadrant C are firms that use individual alliances to transfer capabilities between
them. Doz and Hamel provide the example of the alliance between JVC and Thomson.
While both companies produce VCRs, Thomson wanted to glean product technology
and manufacturing expertise from JVC, whereas JVC needed to learn how to penetrate
the European market from Thomson. Both sides perceived an equitable opportunity
for gain from exchanging capabilities.

Chapter ! Collaboration Strategies !$!

In quadrant D are firms that use a network of alliances to exchange capabilities
and jointly develop new capabilities. The collective research organizations described
later in the chapter (including Aspla and the National Center for Manufacturing Sciences) are examples of alliance networks in which a formal body has been created to
govern the network. These organizations are designed to enable their member organizations to collectively create, share, and utilize knowledge. In building an alliance
portfolio, managers should think carefully about competitive effects, complementing
effects, and network structure effects. First, if multiple alliances are serving the same
strategic needs, there is a risk of redundant resources investment, or competitive conflict between partners. The costs and benefits of this should be carefully weighed as
alliance partners could become adversaries. Second, complementary alliances can be
super-additive if carefully managed. For example, a pharmaceutical firm might be
using an alliance to develop a drug target with one partner, and another alliance to
develop a delivery method for that same drug, enabling it to bring the product to market faster.22 In this situation, the benefits of each alliance are accentuated by the benefits of the other. Finally, managers should consider how their portfolio of alliances
positions them in the web of relationships that connects their firm, their partners, and
their partners’ partners.23 Such networks can be very influential in the diffusion of
information and other resources, and being positioned well in an alliance network can
confer significant advantages (see the Research Brief on “Strategic Positions in Collaborative Networks” later in this chapter).
The opportunities and flexibility that can be gained through using alliances can
come at a cost. The potential for opportunism and self-interest exists for all parties
of an alliance due to limited levels of mutual commitment.24 Studies suggests that
between 30 percent and 70 percent of alliances fail by neither meeting the goals of
the partners nor delivering the operational or strategic benefits for which they were
intended.25 Firms need to be constantly on guard to ensure that the alliance does not
inadvertently result in giving too much away to a potential competitor. According to
Doz and Hamel, while collegiality between partners can facilitate trust and communication, too much collegiality may be a warning sign that information gatekeepers
within the firm are not being sufficiently vigilant.26 Employees at all levels should be
regularly informed about what information and resources are off-limits to the partner,
and the firm should stringently monitor what information the partner requests and
receives.27

Joint Ventures
Joint ventures are a particular type of strategic alliance that entails significant structure and commitment. While a strategic alliance can be any type of formal or informal
relationship between two or more firms, a joint venture involves a significant equity
investment from each partner and often results in establishment of a new separate
entity. The capital and other resources to be committed by each partner are usually
specified in carefully constructed contractual arrangements, as is the division of any
profits earned by the venture.
For example, in April of 2018, Tencent Holdings (a Chinese multinational conglomerate that specializes in Internet-related services such as social media, music
streaming, mobile games, and more) announced it was forming a joint venture which

!”# Part Two Formulating Technological Innovation Strategy

Chinese state–owned Changan Automobile Company to develop Internet-connected
autonomous driving technology that would utilize artificial intelligence. Tencent
would invest 102 million yuan (about $16.2 million) for a 51 percent share of the venture, and Changan would invest 98 million yuan for the remaining 49 percent share.
Changan had already completed a 2000 kilometer road test from Chongqing to Beijing, and said it had received clearance to start testing autonomous vehicles on public
roads in the U.S. state of California.28

Licensing
Licensing is a contractual arrangement whereby one organization or individual (the
licensee) obtains the rights to use the proprietary technology (or trademark, copyright, etc.) of another organization or individual (the licensor). Licensing enables a
firm to rapidly acquire a technology (or other resource or capability) it does not possess. For example, when Microsoft realized it had lost precious time to Netscape and
needed to get a Web browser to market fast, it licensed the software it needed to produce Internet Explorer from Spyglass Inc. Microsoft also bought several companies
(including Vermeer Technologies, Colusa Software, and eShop Inc.) to provide other
Internet utilities.
For the licensor, licensing can enable the firm’s technology to penetrate a wider
range of markets than it could on its own. For example, Delphi Automotive, a supplier to the automotive industry, had developed a software program that can simulate
various aspects of machining, including turning, milling, and drilling. The software
enabled manufacturers that do high-volume machining to identify ways of improving
their machining processes. Delphi had developed the software for its own use, but then
realized it could make more money by licensing the software to others.29
Licensing a technology from another firm is typically much less expensive for a
licensee than developing a new technology in-house. As discussed in earlier chapters,
new product development is both expensive and risky; through licensing, a firm can
obtain a technology that is already technically or commercially proven. Though it is
often presumed that a technology available for license is an unlikely source of advantage (because it is typically available to many potential licensees), Procter & Gamble’s
experience shows that this need not be the case. Through its “Connect and Develop”
program, it focuses on sourcing ideas and technologies external to the firm that it can
then add value to in its labs. Thus, while a licensed technology provides the foundation
for a new product, the product that arrives to market typically draws on the deep (and
difficult to imitate) expertise and other resources P&G possesses.30 This approach is
emblematic of the “Open Innovation” approach now being used by many firms.31
Licensing agreements typically impose many restrictions on the licensee, enabling
the licensor to retain control over how the technology is used. However, over time,
licensees may gain valuable knowledge from working with the licensed technology
that can enable them to later develop their own proprietary technologies. In the long
run, the licensor’s control over the technology may erode.
Sometimes firms license their technologies to preempt their competitors from
developing their own competing technologies. This can be particularly important if
competitors are likely to be able to imitate the primary features of the technology
or if the industry has strong pressures for the adoption of a single dominant design

Chapter ! Collaboration Strategies !”$

(see!Chapter Four). By licensing out the technology to potential competitors, the licensor gives up the ability to earn monopoly rents on the technology. However, doing so
may prevent potential competitors from developing their own proprietary technologies. Thus, licensing enables a firm to opt for a steady stream of royalties rather than
gambling on the big gain—or big loss—of having its technology compete against others for market dominance.

Outsourcing

contract
manufacturing
When a firm
hires another
firm (often a
specialized
manufacturer) to
manufacture its
products.

Firms that develop new technological innovations do not always possess the competencies, facilities, or scale to perform all the value-chain activities for the new innovation effectively or efficiently. Such firms might outsource activities to other firms.
One common form of outsourcing is the use of contract manufacturers. Contract
manufacturing allows firms to meet the scale of market demand without committing
to long-term capital investments or an increase in the labor force, thus giving the firm
greater flexibility.32 It also enables firms to specialize in those activities central to their
competitive advantage while other firms provide necessary support and specialized
resources the firm does not possess. Contract manufacturing further enables a firm
to tap the greater economies of scale and faster response time of a dedicated manufacturer, thereby reducing costs and increasing organizational responsiveness to the
environment.33 For example, when Apple redesigned a screen for its iPhone just weeks
before it was due on the shelves, it was able to call a foreman at a Chinese factory it
was working with, who woke up the 8000 workers sleeping in dormitories. The workers were given biscuits and tea, and immediately started a 12-hour shift fitting glass
screens into beveled frames. Within 96 hours, the plant was manufacturing more
than 10,000 iPhones a day. “The speed is breathtaking,” an Apple executive noted.
“There’s no American plant that can match that.” Whereas Apple directly employs
43,000 people in the United States and 20,000 people in other countries, an additional
700,000!people work for Apple’s contractors, engineering, building, and assembling
Apple products. In response to a query from U.S. President Barack Obama of “What
would it take to make iPhones in the United States?” Steve Jobs replied, “Those jobs
aren’t coming back.” Apple executives noted that the vast scale of overseas factories, and the flexibility, diligence, and industrial skills of their workers had outpaced
American counterparts. But in response to criticisms about what this had done to
employment in the United States, the executives explained, “We sell iPhones in over
a hundred countries.!.!.!. Our only obligation is making the best product possible.”34
Other activities, such as product design, process design, marketing, information
technology, or distribution can also be outsourced from external providers. For example, large contract manufacturers such as Flextronics and Solectron now often help
firms design products in addition to manufacturing them. Companies such as IBM
or Siemens will provide a company with a complete information technology solution, while United Parcel Service will take care of a company’s logistics and distribution needs. Outsourcing can have a number of downsides, however. Reliance on
outsourcing may cause the firm to forfeit important learning opportunities, potentially
putting it at a disadvantage in the long run.35 By not investing in development of inhouse capabilities, a firm might not develop many of the skills and resources related
to its products that enable the development of future product platforms. The firm risks

!”% Part Two Formulating Technological Innovation Strategy

becoming hollow.36 In fact, Prahalad and Hamel argue that Korean firms such as Goldstar, Samsung, and Daewoo have explicit missions to capture investment initiative
away from potential competitors by serving as contract manufacturers for them. This
allows the Korean firms to use would-be competitors’ funds to accelerate their own
competence development, while the competitors’ competencies erode.37
Outsourcing can also impose significant transaction costs for a firm.38 Contract
manufacturing, for example, requires a well-specified contract: Product design, cost,
and quantity requirements must be clearly communicated and generally specified up
front. The contracting firm may also have to go to great lengths to protect itself from
having any proprietary technology expropriated by the contract manufacturer. In addition, the contract manufacturer may bear significant costs in ramping up production for
a particular firm, and must therefore specify the contract to avoid being held up by the
contracting firm after the manufacturer has made investments specific to the contract.39

Collective Research Organizations
In some industries, multiple organizations have established cooperative research and
development organizations such as the Semiconductor Research Corporation or the
American Iron and Steel Institute.40 Collective research organizations may take a number of forms, including trade associations, university-based centers, or private research
corporations.
Many of these organizations are formed through government or industry association initiatives. For example, the National Center for Manufacturing Sciences (NCMS)
was formed in 1986 by the U.S. Defense Department, the Association for Manufacturing Technology, the Manufacturing Studies Board, General Motors, and 20 other
manufacturing companies. Its purpose was to promote collaborations among industry, government, and academic organizations. By 2012, the center had 175 U.S.,
Canadian, and Mexican corporate members. Typical NCMS projects involve 15 to
20!organizations and run for two to four years.41
Other collective research organizations have been formed solely through the initiative of private companies. For example, in 2002, six Japanese electronics manufacturers (Fujitsu, Hitachi, Matsushita Electric Industrial, Mitsubishi Electric, NEC,
and Toshiba) set up a collective research company called Aspla to develop designs
for more advanced computer chips. Global competition had driven down margins on
chips, resulting in major losses for many of the major Japanese electronics makers.
Furthermore, research in advanced chip designs had become extremely expensive. The
collaborative research organization would enable the companies to share the development expense and help the Japanese semiconductor industry retain its competitive
edge. Each of the companies initially invested 150 million yen ($1.3 million) in the
organization, and plans were for each to contribute about $85 million annually toward
joint research.42 The Japanese government also agreed to contribute $268 million.

CHOOSING A MODE OF COLLABORATION
Figure!8.2 summarizes some of the trade-offs between solo internal development and
various modes of collaboration. Solo internal development is, on average, a relatively
slow and expensive way of developing a technology. The firm bears all the costs and

Chapter ! Collaboration Strategies !”&

FIGURE “.#

Summary of Trade-Offs between Different Modes of Development

Speed

Cost

Control

Potential for
Leveraging
Existing
Competencies

Potential for
Developing New
Competencies

Potential for
Accessing
Other Firms’
Competencies

Solo Internal
Development

Low

High

High

Yes

Yes

No

Strategic
Alliances

Varies

Varies

Low

Yes

Yes

Sometimes

Joint Ventures

Low

Shared

Shared

Yes

Yes

Yes

Licensing In

High

Medium

Low

Sometimes

Sometimes

Sometimes

Licensing Out

High

Low

Medium

Yes

No

Sometimes

Outsourcing

Medium/High

Medium

Medium

Sometimes

No

Yes

Collective
Research
Organizations

Low

Varies

Varies

Yes

Yes

Yes

risks, and may spend considerable time learning about the new technology, refining its
designs, and developing production or service processes to implement the new technology. However, a firm that engages in solo internal development retains total control
over how the technology is developed and used. Solo internal development also offers
great potential for the firm to leverage its existing competencies and to develop new
competencies, but offers little to no potential for accessing another firm’s competencies. Therefore, solo internal development might make sense for a firm that has strong
competencies related to the new technology, has access to capital, and is not under
great time pressure.
Because strategic alliances can take many forms, the speed, cost, and degree of control they offer vary considerably. Some strategic alliances may enable a firm to relatively quickly and cheaply gain access to another firm’s technology, but give the firm
a low level of control over that technology. Other strategic alliances might be aimed at
utilizing the firm’s own technology in a broader range of markets, which can be fast
and cost-effective, and still enable the firm to retain a considerable amount of control.
Most alliances offer opportunities for leveraging existing competencies or developing
new competencies. Strategic alliances may or may not offer potential for accessing
another firm’s competencies, depending on the alliance’s purpose and structure.
By comparison, a joint venture is much more structured. While a joint venture typically involves developing a new technology and can take almost as long as solo internal
development, it may be slightly faster due to the combination of the capabilities of
multiple firms. Joint ventures enable partners to share the cost of the development
effort, but they must also share control. Because joint ventures typically entail a longterm relationship between two or more firms that results in the development of a new
product or business, joint ventures offer great potential for leveraging a firm’s existing
competencies, developing new competencies, and accessing its partners’ competencies.

!”‘ Part Two Formulating Technological Innovation Strategy

Joint ventures may be more appropriate than a strategic alliance or solo internal development when the firm places great importance on access to other firms’ competencies.
Licensing in technology offers a fast way to access a new technology that is typically lower in cost than developing it internally. The firm typically has limited discretion over what it can do with the technology, however, and thus has a low degree of
control. Depending on the firm’s capability mix and the nature of what it has licensed,
licensing can sometimes offer the potential of leveraging a firm’s existing competencies, developing new competencies, and accessing another organization’s competencies. For example, many potential drugs or medical therapies are first developed
in university research centers or medical schools. Pharmaceutical and biotechnology
firms then license the right to explore whether the discovery has potential as a commercially viable medical treatment using their own drug development, testing, and
manufacturing capabilities. Licensing the promising compounds or therapies enables
the pharmaceutical and biotechnology firms to obtain drug targets quickly, thus helping them keep their pipelines full. It also helps the firms focus their development
efforts on projects that have already demonstrated some treatment potential.
Licensing can also be a good way for a firm to obtain enabling technologies that are
necessary for its products or services, but that are not central to the firm’s competitive
advantage. For example, while producers of digital cameras need to be able to incorporate batteries that are long-lasting, light, and affordable in their camera designs,
most camera producers do not perceive battery power as being central to their competitive advantage, and thus rely on externally sourced technology to meet this need.
Licensing can also be an effective way for a firm that lacks technological expertise to
gain initial market entry and experience that it can later build upon in developing its
own technological capabilities.
Licensing out a technology offers a fast way for a firm to extend the reach of its technology that is nearly free and offers the potential for royalties. The firm relinquishes
some control over the technology, but also retains a moderate amount of control through
restrictions in the license agreement. Licensing out a technology explicitly leverages
the firm’s existing competencies by enabling the technology to be deployed in a wider
range of products or markets than the firm participates in itself. It offers little opportunity for developing new competencies, however. Sometimes licensing out a technology
is a way of accessing another firm’s competencies, as when a firm uses licensing to
expand its technology into products or markets in which it has little expertise.
When a firm outsources design, production, or distribution of its technology, it is
intentionally giving up a moderate amount of control to rapidly gain access to another
firm’s expertise and/or lower cost structure. While the firm pays to outsource activities, it typically pays less than it would to develop the capability of performing those
activities in-house, and it gains access to those activities more quickly than it could
develop them in-house. While outsourcing offers little opportunity for building new
competencies, it can leverage the firm’s existing competencies by enabling it to focus
on those activities in which it earns its greatest returns. For example, Nike’s strategy
of outsourcing nearly all its athletic shoe production to contract manufacturers in Asia
enables Nike to focus on its competitive advantages in design and marketing while
tapping the lower labor and capital costs of its manufacturers. Thus, outsourcing might
sometimes be appropriate for (a) firm activities that are not central to its competitive

Chapter ! Collaboration Strategies !”(

advantage, (b) activities that would cause the firm to give up crucial flexibility if performed in-house, or (c) activities in which the firm is at a cost or quality disadvantage.
Participation in a collective research organization is typically a long-term commitment rather than an effort to rapidly access capabilities or technology. As with
strategic alliances, the nature of a firm’s participation in a collective research organization can take many forms; thus, cost and control can vary significantly. Collective
research organizations can be very valuable ways for the firm to leverage and build
upon its existing competencies, as well as to learn from other participating organizations. Though collective research organizations may not yield immediate returns in the
form of new products or services, participating in collective research organizations
can be extremely useful in industries that have complex technologies and require considerable investment in basic science. By pooling their knowledge and effort, firms in
collective research organizations can share the cost and risk of basic research, while
accelerating the rate at which it yields useful new solutions.

CHOOSING AND MONITORING PARTNERS
Gaining access to another firm’s skills or resources through collaboration is not without risks.43 It may be difficult to determine if the resources provided by the partner are
a good fit, particularly when the resource gained through the collaboration is something as difficult to assess as experience or knowledge. It is also possible that a collaboration partner will exploit the relationship, expropriating the company’s knowledge
while giving little in return. Furthermore, since managers can monitor and effectively
manage only a limited number of collaborations, the firm’s effectiveness at managing
its collaborations will decline with the number of collaborations to which it is committed. This raises the possibility of not only diminishing returns to the number of
collaborations, but also negative returns as the number of collaborations grows too
large.44 These risks can be minimized if the company limits the number of collaborations in which it engages, chooses its partners very carefully, and establishes appropriate monitoring and governance mechanisms to limit opportunism.45

Partner Selection
The success of collaborations will depend in large part on the partners chosen. A number of factors can influence how well suited partners are to each other, including their
relative size and strength, the complementarity of their resources, the alignment of
their objectives, and the similarity of their values and culture.46 These factors can be
boiled down to two dimensions: resource fit and strategic fit.47
Resource fit refers to the degree to which potential partners have resources that
can be effectively integrated into a strategy that creates value.48 Such resources may
be either complementary or supplementary. Most collaborations are motivated by the
need to access resources the firm does not possess; such collaborations are based on
the combination of complementary resources. Most of the examples in this chapter
have entailed complementary resources, such as the combination of Apple’s computer
technology with Canon’s printer engine technology, or the combination of Sangamo’s
gene editing technology with the clinical testing and manufacturing expertise of larger

!”” Part Two Formulating Technological Innovation Strategy

biotechnology and pharmaceutical firms. Other collaborations seek supplementary
stocks of resources that are similar to those possessed by the firm. The pooling of
supplementary resources can enable partners to achieve market power or economies
of scale. For example, British Petroleum and Mobil consolidated many of their operations in Europe to gain economies of scale and lower their cost structure.49
Strategic fit refers to the degree to which partners have compatible objectives and
styles. The objectives of the partners need not be the same as long as the objectives can be
achieved without harming the alliance or the partners. Not knowing a partner’s true objectives or forging an alliance with a partner with incompatible objectives can result in conflict, wasted resources, and forfeited opportunities. Das and Teng provide an example of an
alliance forged between General Motors and South Korea’s Daewoo. While GM desired to
use the alliance to drive down costs on its existing automobile models, Daewoo’s objective
was to develop new technologies and design new models. The alliance ultimately failed
because of the incompatibility of GM’s cost orientation and Daewoo’s R&D orientation.50
Firms can also evaluate potential partners using many of the same tools used to
evaluate the firm’s own position and strategic direction (for a review of these, see
Chapter Six). This includes assessing how collaboration with the partner is likely to
impact the firm’s opportunities and threats in its external environment; its internal
strengths, weaknesses, or potential for sustainable competitive advantage; and the
firm’s ability to achieve its strategic intent.

Impact on Opportunities and Threats in the External Environment
Assessing the collaboration’s impact on the firm’s opportunities and threats includes
asking such questions as:
” How would the collaboration change the bargaining power of customers or suppliers?
” Would the collaboration impact the threat of entry? For example, is the partner
likely to become a new competitor? Does the partnership raise barriers to entry for
other potential entrants?
” Would the collaboration impact the firm’s position vis-à-vis its rivals?
” Would the collaboration influence the availability of complementary goods or the
threat of substitutes?

Impact on Internal Strengths and Weaknesses
Assessing the collaboration’s impact on the firm’s strengths and weaknesses includes
asking such questions as:
” How would the collaboration leverage or enhance the firm’s strengths? Does the
collaboration put any of those strengths at risk?
” How would the collaboration help the firm overcome its weaknesses?
” Is the collaboration likely to yield a position of competitive advantage that is difficult for competitors to imitate? Is such a competitive advantage achievable without
collaborating?
” Would the collaboration leverage or enhance the firm’s core capabilities?
” Is the collaboration likely to impact the firm’s financial strengths or weaknesses?

Chapter ! Collaboration Strategies !”)

Research Brief

Strategic Positions in Collaborative Networksa

A growing body of research suggests that a firm’s
position within a collaborative network influences
its access to information and other resources, and
its influence over desired outcomes. For example,
a firm with a highly central position in the network
is typically expected to have access to a greater
amount of information and to be able to access
that information more quickly than a firm in a more
peripheral role. A firm that occupies a key brokerage role in a network (e.g., a firm that serves as
a bridge between two otherwise disconnected
groups of firms) is thought to benefit both by having exposure to diverse information (assuming the
two groups of firms have quite distinct information resources) and by occupying a key gatekeeping position that controls the flow of information
between the two groups. A firm’s position within the
network may also serve as a valuable signal to other
potential partners about the value of its resources.
For example, if a firm is young or small but has alliances with important and innovative firms, these
alliances can serve as reputation endorsements
when the quality of the firm is otherwise difficult
to assess.b Such endorsements may enhance the
firm’s likelihood of receiving financing or attracting
other important alliances.
Consider Figure” !.#, which shows the “main
component” (the largest connected group) of the
global technology collaboration network in $%%!
(based on R&D alliances, cross-technology transfer agreements, and cross-licensing agreements
formed from $%%& to $%%!, as reported by SDC’s
alliance database).c The large group on the top
of the network is mostly composed of organizations in industries whose underlying technology is
electronics-based (computer hardware and software, communication equipment and service, transportation equipment, etc.), and the group on the
bottom is dominated by organizations in the chemical and medical-based industries (pharmaceuticals,
chemicals, health services, medical equipment, etc.).
This grouping also includes a large concentration

of educational organizations (primarily universities).
As can be seen, some firms (e.g., IBM, Toshiba, Eli
Lilly) have significantly more alliances than others. The number of links an organization has in a
network is known as its “degree centrality.” In general, the degree centrality of an organization tends
to be strongly related to its size and prominence.
The size and prominence of an organization help
to determine how attractive it is to potential partners, and only large organizations typically have the
resources necessary to manage a large number of
alliances. An organization does not, however, have
to be large or prominent to occupy a key brokerage
position. Brokerage refers to how crucial an organization is to the transmission of information or other
resources through the network. It is often measured
with “betweenness centrality,” which is the number
of times an organization lies on the shortest path
between other pairs of organizations. The three
organizations with the highest betweenness centrality scores in this network are IBM, Eli Lilly, and
PPD (Pharmaceutical Product Development Inc., a
contract research organization). PPD had only three
alliances during the $%%& to $%%! time period, but
Figure”!.# shows just how important those alliances
were to the overall connectivity of the network.
IBM’s link to PPD and PPD’s link to Eli Lilly provide
a bridge from the center of the electronics group to
the center of the chemical/medical group. This link
is one of only three observed bridges between the
two groups, and is the most central of those three.
There is still considerable debate about the relative benefits of centrality and brokerage. While many
scholars argue that highly central firms have the
greatest access to information and influence over
information transmission, others argue that highly
central firms are constrained by their many relationships to other organizations and suggest that it is
better to occupy a brokerage role. There are similar
debates about brokerage—while a broker is likely to
have access to diverse information and serves as a
key gatekeeper for the transmission of information
continued

!)* Part Two Formulating Technological Innovation Strategy

concluded

FIGURE “.$

The Global Technology Collaboration Network (Main Component) in 1998d
Adapted from Schilling, “The Global Technology Collaboration Network: Structure, Trends, and Implications.”

Informix Software Inc.
Fulcrum Technologies Inc.

Toshiba Corp.
IBM Corp.
Belmont Research Inc.
PPD Inc.

Texaco Inc.

Abbott Laboratories
Eli Lilly & Co.

between otherwise disconnected groups, it is
unclear to what degree brokers typically benefit from
this position. Some have argued that brokers can
have difficulty assimilating and utilizing such diverse
information, and that it might be better to be fully
embedded in one group rather than be the only
bridge between multiple groups. In other words, it
might be better to have a relationship with a broker
than to be the broker. There generally is consensus,
however, that it is less desirable to be isolated (i.e.,
not connected to the network) or in a “pendulum”

position (i.e., have only one link, and thus hang from
the network like a pendulum).
a

Adapted from M. A. Schilling, “The Global Technology
Collaboration Network: Structure, Trends, and Implications,” New York University working paper, ‘((%.
b
T. Stuart, “Interorganizational Alliances and the Performance of Firms: A Study of Growth and Innovation Rates,”
Strategic Management Journal ‘$ (‘(((), pp.”)%$–!$$.
c
Adapted from Schilling, “The Global Technology Collaboration Network: Structure, Trends, and Implications.”
d
Ibid.

Chapter ! Collaboration Strategies !)!

Impact on Strategic Direction
Assessing the fit of the collaboration with the firm’s strategic direction includes asking such questions as:
” How does this collaboration fit with the firm’s statement of strategic intent?
” Is the collaboration likely to help the firm close any resource or technology gap
between where it is now and where it would like to be?
” Are the objectives of the collaboration likely to change over time? How are
such changes likely to be compatible or incompatible with the firm’s strategic
direction?

Partner Monitoring and Governance
governance

The act or process of exerting
authority and/or
control.

alliance
contracts

Legally binding
contractual
arrangements
to ensure that
partners (a) are
fully aware of
their rights and
obligations in the
collaboration and
(b) have legal
remedies available if a partner
should violate
the agreement.

equity
ownership

When each partner contributes
capital and owns
a specified right
to a percentage
of the proceeds
from the alliance.

Successful collaboration agreements typically have clear, yet flexible, monitoring
and governance mechanisms.51 Not surprisingly, the more resources put at risk by
the collaboration (e.g., the greater the upfront investment or the more valuable the
intellectual property contributed to the collaboration), the more governance structure partner firms are likely to impose on the relationship.52 There are three main
types of governance mechanisms organizations use to manage their collaborative
relationships: alliance contracts, equity ownership, and relational governance.53
Alliance contracts are legally binding contractual arrangements to ensure that
partners (a) are fully aware of their rights and obligations in the collaboration and
(b)! have legal remedies available if a partner should violate the agreement. Such
contracts typically include:
” What each partner is obligated to contribute to the collaboration, including money,
services, equipment, intellectual property, and so on.
” How much control each partner has in the arrangement. For example, the contract
may stipulate whether partners have the right to admit new partners to the relationship or change the terms of the agreement. It may also stipulate the rights partners
will have over any proprietary products or processes developed in the course of the
collaboration.
” When and how proceeds of the collaboration will be distributed. For example, the
collaboration agreement may stipulate whether cash, intellectual property rights, or
other assets will be distributed and the schedule of such distribution.
Such contracts also often include mechanisms for monitoring each partner’s adherence to the agreement, such as through regular review and reporting requirements.54
Some collaboration agreements include provisions for periodic auditing either by the
partner organizations or by a third party. Many agreements also include provisions for
terminating the relationship if the need for the alliance ends (e.g., if the mission of
the alliance is completed or the goals of the partner firms have changed) or partners
encounter disputes they cannot resolve.55 Markets and strategies change over time,
and effective collaboration agreements should be flexible enough to be adapted in the
event of change and provide a graceful exit strategy for members that no longer wish
to participate in the collaboration.
Many alliances involve shared equity ownership, that is, each partner contributes
capital and owns a share of the equity in the alliance. Equity ownership helps to align

!)# Part Two Formulating Technological Innovation Strategy

relational
governance

the incentives of the partners (because the returns to their equity stake are a function of
the success of the alliance) and provides a sense of ownership and commitment to the
project that can facilitate supervision and monitoring of the alliance.
Finally, many alliances also rely on relational governance. Relational governance is the self-enforcing governance based on the goodwill, trust, and reputation of
the partners that is built over time through shared experiences of repeatedly working
together. Research suggests that relational governance can help to reduce contracting
and monitoring costs of managing an alliance, and facilitate more extensive cooperation, sharing, and learning by alliance partners.56

Summary
of
Chapter

1. A number of factors will influence whether a firm chooses to collaborate on an innovation. Some of the most important include whether the firm (or a potential partner)
has the required capabilities or other resources, the degree to which collaboration
would make proprietary technologies vulnerable to expropriation by a potential
competitor, the importance the firm places on controlling the development process
and any innovation produced, and the role of the development project in building the
firm’s own capabilities or permitting it to access another firm’s capabilities.
2. Firms may choose to avoid collaboration when they already possess the necessary
capabilities and other resources in-house, they are worried about protecting proprietary technologies and controlling the development process, or they prefer to
build capabilities in-house rather than access a partner firm’s capabilities.
3. Some of the advantages of collaboration include sharing costs and risks of development, combining complementary skills and resources, enabling the transfer of
knowledge between firms and the joint creation of new knowledge, and facilitating the creation of shared standards.
4. The term strategic alliances refers to a broad class of collaboration activities that
may range from highly structured (e.g., joint ventures) to informal. Strategic alliances can enable simple pooling of complementary resources for a particular project, or they may enable the transfer of capabilities between partners. The transfer
of capabilities often requires extensive coordination and cooperation.
5. A joint venture is a partnership between firms that entails a significant equity
investment and often results in the creation of a new separate entity. Joint ventures
are usually designed to enable partners to share the costs and risks of a project, and
they have great potential for pooling or transferring capabilities between firms.
6. Licensing involves the selling of rights to use a particular technology (or other
resource) from a licensor to a licensee. Licensing is a fast way of accessing (for
the licensee) or leveraging (for the licensor) a technology, but offers little opportunity for the development of new capabilities.
7. Outsourcing enables a firm to rapidly access another firm’s expertise, scale, or
other advantages. Firms might outsource particular activities so that they can avoid
the fixed asset commitment of performing those activities in-house. Outsourcing
can give a firm more flexibility and enable it to focus on its core competencies.
Overreliance on outsourcing, however, can make the firm hollow.

Self-enforcing
norms based on
goodwill, trust,
and reputation
of the partners.
These typically
emerge over time
through repeated
experiences of
working together.

Chapter ! Collaboration Strategies !)$

8. Groups of organizations may form collective research organizations to jointly
work on advanced research projects that are particularly large or risky.
9. Each form of collaboration mode poses a different set of trade-offs in terms of speed,
cost, control, potential for leveraging existing competencies, potential for developing new competencies, or potential for accessing another firm’s competencies. An
organization should evaluate these trade-offs in formulating a collaboration strategy.
10. Successful collaboration requires choosing partners that have both a resource fit
and a strategic fit.
11. Successful collaboration also requires developing clear and flexible monitoring
and governance mechanisms to ensure that partners understand their rights and
obligations, and have methods of evaluating and enforcing each partner’s adherence to these rights and obligations.

Discussion
Questions

1. What are some advantages and disadvantages of collaborating on a development
project?
2. How does the mode of collaborating (e.g., strategic alliance, joint venture, licensing, outsourcing, collective research organization) influence the success of a
collaboration?
3. Identify an example of collaboration between two or more organizations. What
were the advantages and disadvantages of collaboration versus solo development?
What collaboration mode did the partners choose? What were the advantages and
disadvantages of the collaboration mode?
4. If a firm decides it is in its best interest to collaborate on a development project,
how would you recommend the firm choose a partner, a collaboration mode, and
governance structure for the relationship?

Suggested
Further
Reading

Classics
Chesbrough, H., Open Innovation: The New Imperative for Creating and Profiting
from Technology (Boston: Harvard Business School Press, 2003).
Hagedoorn, J., “Understanding the Rationale of Strategic Technology Partnering:
Interorganizational Modes of Cooperation and Sectoral Differences,” Strategic Management Journal 14 (1993), pp. 371–86.
Powell, W. W., K. W. Koput, and L. Smith-Doerr, “Interorganizational Collaboration
and the Locus of Innovation: Networks of Learning in Biotechnology,” Administrative
Science Quarterly 41 (1966), pp. 116–45.
Rothaermel, F. T., Hitt, M. A., and Jobe, L. A. “Balancing Vertical Integration and
Strategic Outsourcing: Effects on Product Portfolio, Product Success, and Firm Performance,” Strategic Management Journal 27 (2006), pp. 1033–56.
Sampson, R., “The Cost of Misaligned Governance in R&D Alliances,” Journal of
Law, Economics, and Organization 20 (2004), pp. 484–526.
Schilling, M. A., and C. Phelps, “Interfirm Collaboration Networks: The Impact of
Large-Scale Network Structure on Firm Innovation,” Management Science 53 (2007),
pp. 1113–26.

!)% Part Two Formulating Technological Innovation Strategy

Recent Work
Bouncken, R. B., T. Claus, and V. Fredrich, “Product Innovation through Coopetition
in Alliances: Singular or Plural Governance?” Industrial Marketing Management, 53
(2016):77–90.
Schilling, M. A., “Technology Shocks, Technological Collaboration, and Innovation
Outcomes,” Organization Science 26 (2015):668–86.
West, J., and M. Bogers, “Leveraging External Sources of Innovation: A Review
of Research on Open Innovation,” Journal of Product Innovation Management, 31
(2014):814–831.

Endnotes

1. C. W. L. Hill, “Monsanto: Building a Life Sciences Company,” in Cases in Strategic Management, eds. C. W. L. Hill and G. Jones (Boston: Houghton Mifflin, 2004); and S. Brooks, M. A.
Schilling, and J. Scrofani, “Monsanto: Better Living through Genetic Engineering?” in Strategic Management, Competitiveness and Globalization, 5th ed., eds. M. Hitt, R. Hoskisson, and
R. D. Ireland (Minneapolis/St. Paul: West Publishing, 2002).
2. R. T. Fraley, S. B. Rogers, and R. B. Horsch, “Use of a Chimeric Gene to Confer Antibiotic
Resistance to Plant Cells. Advances in Gene Technology: Molecular Genetics of Plants and
Animals,” Miami Winter Symposia 20 (1983a), pp. 211–21.
3. R. Melcer, “Monsanto Wants to Sow a Genetically Modified Future,” St. Louis Post Dispatch,
February 24, 2003.
4. M. Takanashi, J. Sul, J. Johng, Y. Kang, and M. A. Schilling, “Honda Insight: Personal Hybrid,”
New York University teaching case, 2003; and “Toyota, Honda Forge Ahead in Hybrid Vehicle
Development,” AP Newswire, March 13, 2002.
5. L. Gunter, “The Need for Speed,” Boeing Frontiers. Retrieved November 20, 2002, from www
.boeing.com/news/frontiers/archive/2002/july/i_ca2.html.
6. Su Han Chan, W. John Kensinger, J. Arthur Keown, and D. John Martin, “Do Strategic Alliances Create Value?” Journal of Financial Economics 46 (1997), pp. 199–221.
7. G. Hamel, Y. L. Doz, and C. K. Prahalad, “Collaborate with Your Competitors—and Win,”
Harvard Business Review, January–February 1989, pp. 133–39; W. Shan, “An Empirical Analysis of Organizational Strategies by Entrepreneurial High-Technology,” Strategic Management
Journal 11 (1990), pp. 129–39; G. P. Pisano, “The R&D Boundaries of the Firm: An Empirical
Analysis,” Administrative Science Quarterly 35 (1990), pp. 153–76; and R. Venkatesan, “Strategic Sourcing: To Make or Not to Make,” Harvard Business Review 70, no. 6 (1992), pp.!98–107.
8. D. Teece, “Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing and Public Policy,” Research Policy 15 (1986), pp. 285–305.
9. D. C. Mowery, J. E. Oxley, and B. S. Silverman, “Technological Overlap and Interfirm Cooperation: Implications for the Resource-Based View of the Firm,” Research Policy 27 (1998),
pp.! 507–24; J. A. C. Baum, T. Calabrese, and B. S. Silverman, “Don’t Go It Alone: Alliance
Network Composition and Startups’ Performance in Canadian Biotechnology,” Strategic Management Journal 21 (2000), p. 267; J. P. Liebeskind, A. L. Oliver, L. Zucker, and M. Brewer, “Social
Networks, Learning, and Flexibility: Sourcing Scientific Knowledge in New Biotechnology
Firms,” Organization Science 7 (1996), pp. 428–44; and L. Rosenkopf and P. Almeida, “Overcoming Local Search through Alliances and Mobility,” Management Science 49 (2003), p.!751.
10. J. Hagerdoon, A. N. Link, and N. S. Vonortas, “Research Partnerships,” Research Policy 29
(2000), pp. 567–86.
11.

Chapter ! Collaboration Strategies !)&

12. N. H. Kang and K. Sakai, “International Strategic Alliances: Their Role in Industrial Globalisation,” Paris, Organisation for Economic Co-operation and Development, Directorate for Science, Technology, and Industry, working paper 2000/5.
13. Teece, “Profiting from Technological Innovation.”
14. R. McGrath, “A Real Options Logic for Initiating Technology Positioning Investments,”
Academy of Management Review 22 (1997), pp. 974–96.
15. M. A. Schilling, “Technology Shocks, Technological Collaboration, and Innovation Outcomes,”
Organization Science, 26 (2015), pp. 668–686.
16. S. Ghoshal and P. Moran, “Bad for Practice: A Critique of the Transaction Cost Theory,”
Academy of Management Review 21 (1996), pp. 13–47.
17. C. K. Prahalad and G. Hamel, “The Core Competence of the Corporation,” Harvard Business
Review, May–June 1990, pp. 79–91; and Hamel, Doz, and Prahalad, “Collaborate with Your
Competitors—and Win.”
18. H. Hottenrott and C. Lopes-Bento, “R&D Partnerships and Innovation Performance: Can
There Be too Much of a Good Thing?” Journal of Product Innovation Management, 33 (2016),
pp.!773–794; M. A. Schilling, “Technology Shocks, Technological Collaboration, and Innovation Outcomes,” Organization Science, 26 (2015), pp. 668–686.
19. Y. Doz and G. Hamel, “The Use of Alliances in Implementing Technology Strategies,” in Managing Strategic Innovation and Change, eds. M. L. Tushman and P. Anderson (Oxford, U.K.:
Oxford University Press, 1997).
20. G. W. Weiss, “The Jet Engine That Broke All the Records: The GE-SNECMA CFM-56,” Case
Studies in Technology Transfer and National Security; and P. Siekman, “GE Bets Big on Jet
Engines,” Fortune, December 19, 2002.
21. A. Nanda and C. A. Bartlett, “Corning Incorporated: A Network of Alliances,” Harvard Business School case no. 9-391-102, 1990.
22. P. Kale and H. Singh, “Managing Strategic Alliances: What Do We Know Now, and Where Do
We Go From Here?” Academy of Management Perspectives (2009) August, pp. 45–62.
23. M. A. Schilling and C. Phelps, “Interfirm Collaboration Networks: The Impact of Large-Scale
Network Structure on Firm Innovation,” Management Science 53 (2007), pp. 1113–26.
24. K. R. Harrigan, “Strategic Alliances: Their New Role in Global Competition,” Columbia Journal of World Business 22, no. 2 (1987), pp. 67–70.
25. P. Kale and H. Singh, “Managing Strategic Alliances: What Do We Know Now, and Where Do
We Go From Here?” Academy of Management Perspectives (2009) August, pp. 45–62. See also
J. Bamford, B. Gomes-Casseres, and M. Robinson, “Envisioning collaboration: Mastering alliance strategies.” San Francisco: Jossey-Bass.
26. Hamel, Doz, and Prahalad, “Collaborate with Your Competitors—and Win.”
27. Ibid.
28. J. Tan, “Quick Take: Tencent, Changan Auto Announce Autonomous Vehicle Joint Venture,”
Caixin, April 13 2018
29. P. E. Teague, “Other People’s Breakthroughs,” Design News 58, no. 2 (2003), pp. 55–56.
30. L. Huston and N. Sakkab, “Connect and Develop: Inside Procter & Gamble’s New Model for
Innovation,” Harvard Business Review, (2006), March 1st.
31. H. W. Chesbrough, Open Innivation: The New Imperative for Creating and Profiting From
Technology. (2003) Boston: Harvard Business School Press.
32. J. Holmes, “The Organization and Locational Structure of Production Subcontracting,” in Production,
Work, Territory: The Geographical Anatomy of Industrial Capitalism, eds. M. Storper and A. J. Scott
(Boston: Allen and Unwin, 1986), pp. 80–106; and Teece, “Profiting from Technological Innovation.”
33.

!)’ Part Two Formulating Technological Innovation Strategy

34. C. Duhigg and K. Bradsher, “How U.S. Lost Out on IPhone Work,” The New York Times,
January 22, 2012, pp. 1, 20–21.
35. D. Lei and M. A. Hitt, “Strategic Restructuring and Outsourcing: The Effect of Mergers and
Acquisitions and LBOs on Building Firm Skills and Capabilities,” Journal of Management 21
(1995), pp. 835–60.
36. Prahalad and Hamel, “The Core Competence of the Corporation.”
37. Ibid.
38. Pisano, “The R&D Boundaries of the Firm.”
39. Schilling and Steensma, “The Use of Modular Organizational Forms.”
40. V. K. Narayanan, Managing Technology and Innovation for Competitive Advantage (Upper
Saddle River, NJ: Prentice Hall, 2001).
41. C. Pellerin, “Consortia: Free Enterprise Meets Cooperation and the Results Can Be Good for
Robotics,” The Industrial Robot 22, no. 1 (1995), p. 31.
42. Associated Press, July 11, 2002.
43. C. W. L. Hill, “Strategies for Exploiting Technological Innovations: When and When Not to
License,” Organization Science 3 (1992), pp. 428–41; W. Shan, “An Empirical Analysis of
Organizational Strategies by Entrepreneurial High-Technology,” Strategic Management Journal 11 (1990), pp. 129–39; and Teece, “Profiting from Technological Innovation.”
44. M. A. Schilling and C. W. L. Hill, “Managing the New Product Development Process: Strategic
Imperatives,” Academy of Management Executive 12, no. 3 (1998), pp. 67–81.
45. O. E. Williamson, The Economic Institutions of Capitalism (New York: Free Press, 1985).
46. J. Bleeke and D. Ernst, “Is Your Strategic Alliance Really a Sale?” Harvard Business Review
73, no.!l (1995), pp. 97–105; T. K. Das and B. Teng, “Between Trust and Control: Developing
Confidence in Partner Cooperation in Alliances,” Academy of Management Review 23 (1998b),
pp.! 491–512; R. M. Kanter, “Collaborative Advantage: The Art of Alliances,” Harvard Business
Review 72, no. 4 (1994), pp. 96–108; and B. Uzzi, “Social Structure and Competition in Interfirm
Networks: The Paradox of Embeddedness,” Administrative Science Quarterly 42 (1997), pp.!35–67.
47. T. K. Das and B. S. Teng, “Managing Risks in Strategic Alliances,” Academy of Management
Executive 13, no. 4 (1999), pp. 50–62.
48. Ibid.
49. J. G. Crump, “Strategic Alliances Fit Pattern of Industry Innovation,” Oil & Gas Journal,
March 31, 1997, p. 59; and Das and Teng, “Managing Risks in Strategic Alliances.”
50. Das and Teng, “Managing Risks in Strategic Alliances.”
51. T. Pietras and C. Stormer, “Making Strategic Alliances Work,” Business and Economic Review
47, no. 4 (2001), pp. 9–12.
52. R. Gulati and H. Singh, “The Architecture of Cooperation: Managing Coordination Costs and
Appropriation Concerns in Strategic Alliances,” Administrative Science Quarterly 43 (1998),
pp. 781–814.
53. P. Kale and H. Singh, “Managing Strategic Alliances: What Do We Know Now, and Where Do
We Go From Here?” Academy of Management Perspectives (2009) August, pp. 45–62.
54. L. Segil, “Strategic Alliances for the 21st Century,” Strategy & Leadership 26, no. 4 (1998), pp.!12–16.
55. Pietras and Stormer, “Making Strategic Alliances Work.”
56. I. Filatotchev, J. Stephan, and B. Jindra. “Ownership Structure, Strategic Controls and Export
Intensity of Foreign Invested Firms in Emerging Economies.” Journal of International Business
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(1995), pp. 85–112; and B. Uzzi. “Social Structure and Competition in Interfirm Networks: The
Paradox of Embeddedness,” Administrative Science Quarterly 42 (1997), pp. 35–67.

‫المملكة العربية السعودية‬
‫وزارة التعليم‬
‫الجامعة السعودية اإللكترونية‬

Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University

College of Administrative and Financial Sciences

Assignment 2
Management of Technology (MGT 325)
Due Date: 02/11/2024 @ 23:59

Course Name: Management of Technology

Student’s Name:

Course Code: MGT325

Student’s ID Number:

Semester: 1 Semester

CRN:
Academic Year:2024-25

For Instructor’s Use only
Instructor’s Name: Dr. XXXXXXXXXXXXXX
Students’ Grade: 00 /10
Level of Marks: High/Middle/Low

Instructions – PLEASE READ THEM CAREFULLY
• The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work clear and well presented, marks may be
reduced for poor presentation. This includes filling your information on the cover page.
• Students must mention question number clearly in their answer.
• Late submission will NOT be accepted.
• Avoid plagiarism, the work should be in your own words, copying from students or
other resources without proper referencing will result in ZERO marks. No exceptions.
• All answered must be typed using Times New Roman (size 12, double-spaced) font.
No pictures containing text will be accepted and will be considered plagiarism).
• Submissions without this cover page will NOT be accepted.

Restricted – ‫مقيد‬

Course Learning Outcomes-Covered
➢ Explain of the concepts, models for formulating strategies, defining the organizational
strategic directions and crafting a deployment strategy.

Reference Source:
Textbook:Schilling M.A (2020),Strategic Management of Technology Innovation (6th Edition). McGraw Hill Education. Electronic Version: ISBN-13: 978-1260087956 ISBN-10:
1260087956, Printed Version: ISBN-13: 978-1260087956 ISBN-10: 1260087956

Assignment 2

Weight: 10 Marks

NEOM’s Collaborative Innovation in the KSA
NEOM is an ambitious Saudi Arabian project that aims to create a technologically
advanced, sustainable city, attracting global talent and investment. The project is designed to
be a hub for industries such as renewable energy, biotech, advanced manufacturing, and
digital technologies. Given the complexity and scale of this endeavour, NEOM has engaged
in multiple strategic collaborations with international partners, ranging from technology
firms to research institutions, to bring together the necessary capabilities and resources.
As part of this case study assignment, you are required to analyse NEOM’s approach to
collaboration based on the concepts discussed in Chapter 8.

Assignment Questions
Note: Include a brief introduction and conclusion that summarize your analysis.
(1 marks)
1. Evaluating Collaborative Goals and Advantages (3 Marks) (250-400 words)
✓ Identify and discuss the key strategic goals that NEOM aims to achieve through
its collaborative partnerships. How do these goals align with the reasons for
collaboration as discussed in Chapter 8?

Restricted – ‫مقيد‬

✓ Evaluate the advantages NEOM gains by collaborating with international
technology companies, research institutions, and other partners. Consider
aspects like acquiring capabilities, resource pooling, learning, and coalitionbuilding.
2. Types of …
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