Chapter 1: Leveraging Multipartner Alliances in Technology-Driven Industries

Multipartner alliances have become a popular vehicle for coordinating firms’ strategies in technology-driven industries. They play an important role in promoting industry standards, yet very few firms have been able to successfully leverage their involvement in these complex organizations. Apparently, a firm’s experience with bilateral alliances is insufficient for managing the tradeoffs entailed in engagement in multilateral relationships. This chapter analyzes the benefits, costs, and risks associated with multipartner alliances. It offers guidance for five key decisions throughout the alliance lifecycle: whether to join a multipartner alliance, which multipartner alliance to join, when to enter a multipartner alliance, how to become involved in a multipartner alliance, and when to exit a multipartner alliance. The case of multipartner alliances in the Wireless Local Area Network (WLAN) industry serves to illustrate the insights. For instance, firms are advised to join a multipartner alliance either at an early stage or later in their lifecycle in order to gain from their membership in the alliance. Furthermore, extensive organizational involvement in the multipartner alliance generates common benefits to all partners, yet does not guarantee private benefits to the firm that assumes a leadership role. Firms that carefully consider their steps instead of following the herd in making these decisions can find the right balance between contributing to the overall success of the multipartner alliance and capturing value from their involvement in that alliance.