Incumbents’ Alliances and (Non-)Adaptation During the Pre-Commercialization Stage of a New Technology

Research on incumbent adaptation through alliances typically assumes that incumbents can entice partners to share proprietary knowledge in a new technology by offering access to valuable complementary assets. This assumption fits the commercialization stage of a new technology, when both proprietary knowledge and complementary assets hold high value. However, during the pre-commercialization stage—when proprietary knowledge in the new technology is valuable but incumbents’ complementary assets cannot yet be fully deployed to commercialize the new technology—this logic may not hold. We develop a framework that explains how stage-dependent shifts in the value of both proprietary knowledge and complementary assets alter the bargaining power between incumbents and knowledge-possessing firms, thereby reshaping the adaptive potential of alliances. Using data on the semiconductor industry during the emergence of nanotechnology, we found that alliances between semiconductor incumbents and nanotechnology-capable partners are less likely to form and, even when formed, are less likely to focus on the explicit transfer of proprietary knowledge in emerging nanotechnology. Moreover, these alliances are more likely to be structured as joint ventures, especially when the risk of knowledge leakage is heightened. Joint venture arrangements, in turn, impede semiconductor incumbents’ post-alliance nanotechnology invention more than contractual arrangements. Taken together, we develop insights into how incumbents may struggle to use alliances for adaptive learning during the pre-commercialization phase of a new technology.