Alliance Portfolio Effects on New Venture’s Performance

This study investigates the effects of an alliance portfolio on a new venture’s performance. Specifically, this paper draws on the legitimacy perspective. It presents a model that aims to understand the influence of an alliance portfolio’s different characteristics on a new venture’s performance. The paper also considers the contingent role of the equity market environment. These relationships are investigated in a cross-industry sample of 123 new ventures with pre-IPO alliances. The data has been compiled from various databases selected for their comprehensiveness and extensive use in Strategy research. Hierarchical Multiple Regression models are run to analyze the data. This study suggests that new ventures can potentially send important signals regarding their quality by virtue of their partnership formations. The most important characteristic of the alliance portfolio that affects the value of the new venture is size. Consistent with prior research, this study finds that new ventures with prestigious underwriters have higher valuations at IPO across all industries. The results also extend this line of inquiry by showing that relationships with prominent underwriters, VCs and alliance partners are not prestigious equivalent relationships. This study also shows interesting results contrary to prior research that stable partner relationship benefits are not relevant. Based on these findings, this study provides key managerial implications by providing managers insight into how they should develop their venture’s alliance portfolio to enhance the venture’s legitimacy and thereby its IPO performance.