Ozcan, Pinar (2018) Growing with the market : how changing conditions during market growth affect formation and evolution of interfirm ties. Strategic Management Journal, 39 (2). pp. 295-328. doi:10.1002/smj.2740

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Abstract

Research Summary:
Market conditions are known to matter for firm performance and growth. This study explores how changing levels of uncertainty and competition affect interfirm ties of entrepreneurial firms as markets transition from nascent to growth stage. Tracing 6 entrepreneurial game publishers during the growth stage of the US wireless gaming market, the findings reveal that in a growth stage market, as uncertainty decreases, certain ties of entrepreneurial firms are terminated. First, existing partners may cut ties and become competitors after entering the market directly. This is a “winner's curse” as more successful firms are more likely to entice their partners to enter the market directly. Second, ties may be terminated as prominent firms that are “overwhelmed” with too many partners cut ties with low to mediocre performance while their remaining partners enter a positive spiral of tie strength and performance. Finally, as uncertainty decreases, new firms may enter the market as competitors to prominent firms. While entrepreneurial firms with high and low performing ties to prominent partners may find ties with these new entrants attractive, those with mediocre ties to few prominent partners find this move too risky and wait for a first mover to legitimate it. Overall, the findings show that changing levels of uncertainty and competition in growth stage markets can have different consequences for firms due to heterogeneity in their ties and power relative to partners. The findings provide several contributions to literature regarding the relationship between interfirm ties, firm performance, and market evolution.

Managerial Summary:
Based on interviews at 6 entrepreneurial game publishers in the US and their partners, this study shows how changing levels of uncertainty and competition in growing markets can have different consequences for firms based on the different types of alliances in their portfolio and their power relative to partners. The findings highlight the importance of managing partners differently based on alliance type and goal of the partner. They advocate remaining flexible in alliance management as information asymmetries, intentions and bargaining power of partners can change and lead to abrupt alliance dissolution. They show that alliance portfolio management goes beyond a firm's capability of managing individual alliances, and provide a tool for managers to evaluate their alliance portfolios and take the necessary precautions.

Item Type:	Journal Article
Subjects:	H Social Sciences > HD Industries. Land use. Labor
Divisions:	Faculty of Social Sciences > Warwick Business School > Strategy & International Business Faculty of Social Sciences > Warwick Business School
Library of Congress Subject Headings (LCSH):	Electronic games industry -- United States, Entrepreneurship -- Economic aspects
Journal or Publication Title:	Strategic Management Journal
Publisher:	John Wiley & Sons Ltd.
ISSN:	0143-2095
Official Date:	February 2018
Dates:	Date Event February 2018 Published 25 November 2017 Available 28 August 2017 Accepted
Date of first compliant deposit:	30 November 2017
Volume:	39
Number:	2
Page Range:	pp. 295-328
DOI:	10.1002/smj.2740
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access
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