Case Aims: To illustrate how alliances are formed to permit large incumbent firms to rapidly acquire new knowledge.
Characteristics of an era of ferment include a high level of uncertainty, new firm entry and technological diversity. During such periods, incumbents and start-up firms attempt to engage in radical innovations (Colombo et al. 2006). As radical innovations require new expertise, firms are likely to seek out new partners that can provide this new knowledge. The resources controlled by incumbent firms make them appealing as partners. During periods of industrial upheaval, start-ups usually possess the expertise necessary to develop radical innovations. In those situations, start-ups will likely have partnership offers from firms seeking access to new expertise.
Sierzchula et al. (2015) examined car industry alliances concerned with the development of electric vehicles during the period 2006-2011. The researchers analysed interfirm networks to determine which were to explorative versus exploitative alliances. The study identified seven key firms that had experience and knowledge about certain aspects of electric vehicle manufacturing: Coda Automotive, Leo Motors, Mia Electric, Tesla Motors, E-Wolf, Venturi and Zap. The four key knowledge areas within these firms were batteries, electric drivetrains, charging and infrastructure and new body materials. It was apparent that the large incumbent car firms formed a greater number of alliances than did start-ups, presumably to gain an ongoing competitive advantage made possible by their greater level of internal resources.