The Impact of a Firm\u27s Alliance Portfolio Diversity on Its Innovation and Performance in the Software Industry

A firm is embedded in networks of relationships that often provide resources beyond those available from internal sources alone. The most important of a firm\u27s network of relationships are termed strategic alliances. A firm\u27s entry into strategic alliances is about leveraging the value of its internal resources with the external resources of its partners. In this study, the diversity of the industries in which a firm constructs its strategic alliances is considered firm\u27s alliance portfolio. From this portfolio, a firm may draw upon the resources those alliances generate to introduce new technologies or products to the market. Using a sample of 49 firms in the software industry, this study proposes that a more diverse alliance portfolio enhances a firm\u27s innovation and performance. For the measurement of industry diversity, this study uses the Standard Industrial Classification codes of the allying firms. Using multiple linear regression, controlling for firm\u27s age and size, the results show that alliance portfolio diversity has positive effects on both firm\u27s innovation and performance