Opening Up but Staying Local: Insights from Partnership Formations between Established and Startup Firms

Thomas Klueter, IESE Business School, and Lori Rosenkopf, Vice Dean of the Wharton Undergraduate Division, The Wharton School

Abstract: In this paper, we develop a theoretical framework that considers that firms may be subject to both spatial and temporal myopia when crossing organizational boundaries and have a history of failures and successes in solving R&D problems. We use this framework to clarify how established firms search for and select among emerging partnering opportunities. We argue that prior failures and successes differ in the extent to which they challenge firms’ conventional ways of solving problems and in the degree to which they allow firms to balance long- and short-term organizational demands. As a result, prior failures and successes may affect spatial and temporal myopia very differently. We test our predictions with a sample of large established bio-pharmaceutical firms exposed to partnering opportunities from nascent biotechnology startups and find broad support for myopia in partnership formations. We further find that the different types of myopia can be both attenuated and magnified by prior failures and successes in R&D. The study argues for the value of integrating perspectives on myopia with studies examining failures and successes in the context of technological search.

Read the full paper here.