Abstract
In a world where no advantages seem to be sustainable for long, prowess in forming and managing strategic alliances has become one of the most important sources of competitive advantage that firms can develop. Strategic alliances have changed the U.S. industrial landscape as dramatically as the telegraph and railroads did in their respective eras of innovation. Use of strategic alliances has precipitated enduring industry changes — the disruptive impacts of which have been exacerbated by the technological changes that they facilitated. As strategic alliances have become more commonplace, managers have learned to take their transformative powers for granted; they now treat strategic alliances as yet another trait characterizing competitive behaviors with which they must cope in order for their firms to survive and thrive.
Industry structure evolves due to changes in demand traits as well as due to changes that were instigated by firms' investments in order to satisfy the evolving nature of demand. Because strategic alliances enabled competitors to share the use of costly physical assets by pooling their respective demand (in order to operate said assets at breakeven volumes, or better), strategic alliances facilitated the serving of small market segments whose needs would otherwise be underserved — making customer demand more heterogeneous (and industry structures more fragmented) within those industries where they were utilized. Strategic alliances accelerated the speed with which customers adopted innovative products by reducing customer uncertainty through the creation of technology standards and support of technological platforms. Buyer learning about product applications was diffused faster through jointly-sponsored projects. Strategic alliances legitimized new processes for product development, e.g., bio-technology for making pharmaceuticals, and changed the structures of adjacent industries through the use of vertical strategic alliances. Most importantly, strategic alliances allowed unexpected firms with unforeseen resources to enter and compete within attractive, ongoing industries — potentially changing the ticket of admission for all subsequent would-be entrants — and they also facilitated firms' exits (through "fade-out" ventures) from industries that had become less hospitable in their structures and less profitable in the competitive behaviors utilized therein.