Alliance Portfolio Diversity and Technological Diversification within Firms: An Empirical Exploration of the Pharmaceutical Industry

Whereas existing studies have examined the impact of alliance portfolio diversity on firms' technological performance (i.e. number of patent applications), this study will analyse its effect on firms' technological diversification (i.e. variety of patent applications in terms of technological classes). In this way, we are able to evaluate the impact of alliance portfolios on the quality of technology portfolios rather than its impact on the quantitative output. Merging data from the Thomson SDC database and the EPO database, we create a unique panel dataset (i.e. between 1995 and 2002) for the 43 largest Pharmaceutical firms. The results show that alliance portfolio industry diversity has a positive impact, while alliance portfolio functional diversity has a U-shape relationship with firms' technological diversification. Jointly, these findings indicate that alliance portfolios can be used as a strategic tool to diversify firms' technological capabilities.