ALLIANCE-BASED COMPETITIVE DYNAMICS BRIAN S.

Do rivals ' alliances increase or decrease the competitive pressure experienced by a firm? Linking ecological and economic research on organizations, we propose that the effects of rivals ' horizontal, upstream, and downstream alliances are determined by the degree to which they (1) foreclose a focal firm's alliance opportunities and (2) increase industry carrying capacity. We also hypothesize that firms can co-opt rivals' alliances by partnering with well-linked rivals. An analysis of Canadian biotechnology firms supports these predictions. In technology-based industries, do rivals ' alliances increase or decrease the competitive pressure experienced by a firm? If rivals ' alliances increase competitive pressure, what if anything can a firm do to counteract these effects? Although the last decade has witnessed an explosion of research concerning the effects of alliances on the firms that participate in them, the literature is virtually silent regarding their competitive effects on rivals. Yet these implications are crucial for scholarly understanding of the competitive dynamics of technolo-gy-based industries, as well as for managers competing in such environments. There is by now some consensus, based on research rooted in transaction cost economics (TCE) and the resource-based view (RBV), that firms pursue collaborative arrangements to gain more efficient or timely access to scarce resources (Hennart, 1988; Kogut, 1988; Williamson, 1991). But to the extent that competitive dynamics of alliances have been considered, the literature has produced varying theoretical predictions. According to one line of reasoning, in a world of limited potential partners, a firm's alliances weaken its rivals by denying them access to desirable partners and resources (Gomes-Casseres, 1994). An alternate line of argument