Dancing with the Stars or Preying on the Weak?
Partnering for Growth
Companies, big and small, often engage in partnering arrangements. The degree of involvement in various joint initiatives differs, and the reasons for joining the efforts with others are many. Yet, the common thread behind many partnering moves seems to be finding a way to stimulate growth. This is especially true when innovation is conceived to be the medium for growth, and the commonly held assumption is that leading firms often engage in technological alliances so as to encourage innovativeness, facilitate learning, and achieve major breakthroughs in the way resources are utilized. Although there is nothing technically wrong with such a picture of the world, it is, unfortunately, lopsided in that it paints growth as being the province of technological leaders.
This, according to Entrepreneurship Professor Sergey Anokhin from Kent State University, is inaccurate. Laggards stand to gain much more from engaging in technologically-oriented alliances. While they are less likely to push the frontier for everyone, they are in a position to improve their own effectiveness dramatically by learning from the innovators. The real question, suggests Dr. Anokhin, is where they prefer to sources their ideas for development. Corporations can partner up with other incumbents or with small growth-oriented technologically minded startups. Do they learn more by dancing with the stars – that is, working with large technological leaders – or by preying on the weak – that is, engaging with smaller, younger, weaker startups that may have great ideas but lack the means to protect them from misappropriation?
What does the Data Show?
To answer these questions, Professor Sergey Anokhin and his fellow-researchers conducted a large-scale investigation where they studied partner networks of over 150 large public corporations who worked together with other incumbents and growth-oriented startups. The results are unambiguous: laggards engaged in technology alliances improve their effectiveness at a much faster pace than do industry leaders, and this improvement is mainly attributed to their misappropriation of ideas from their smaller, weaker counterparts. At the very least, each time an incumbent finds itself in a courtroom for (an alleged) violation of intellectual property rights, it is much more likely to be associated with how actively it works with startups and not with other incumbents.
What it all means
There are two important takeaways from Professor Anokhin’s study. First, if you’re interested in growth opportunities for a specific corporation and not in creating new frontiers for everybody, underperformaing laggards engaged in partnering are a safe bet. Second, if you are a startup seeking technology partners who may also help with access to the market and/or particular expertise, such laggards are exactly the partners to avoid. Attractive as they might be in all other respects, when it comes to dealing with the sensitive new ideas that new ventures might support, laggards all too often enthusiastically claim them as their own. That is, hard as it may be, new ventures seeking technological partners would do much better working with true technological leaders if they want to keep, maintain, and develop the technology they possess.