External technology sourcing: The effect of uncertainty on governance mode choice
What this paper is about
Although all these sourcing modes are important for firms to consider, prior studies have
often limited their attention to one or two governance modes in particular.
In spite of our focus on this broad array of external technology acquisition modes we will pay
particular attention to the effect of exogenous and endogenous uncertainty on the choice
between different governance modes for external technology sourcing.
First, we will provide a more detailed background to develop some hypotheses on how
different types of uncertainty affect the choice for more or less integrated governance
modes.
What you can learn
CVC investments, minority holdings and M. As are favored over joint ventures, and minority
holdings are preferred over M. As, but the data show no significant differential effect of
environmental turbulence on the preference for CVC investments over minority holdings or
M. As a result, the first hypothesis is partly supported by the data, as strategic alliances are
the most favorable option, but we did not find a linear ranking from less to more integrated
governance modes.
However, the results also imply that when the technology is new, CVC investments are
preferred over non-equity alliances and minority holdings, which in turn are preferred over
joint ventures and M. Thus, contrary to our expectations, technological newness leads only
to some extent to the use of less integrated governance modes: while M. As and joint
ventures become less attractive, there is a clear preference for the companies in this study
to choose CVC investments over all other governance modes. This result shows that the
uncertainty related to the newness of partners' technology is considered by the focal firms
as different from technological turbulence.
However, technological distance between partners does also lead to a preference for nonequity alliances over minority holdings, and no differential effect is found between nonequity alliances and joint ventures and M. The odds ratios in furthermore show that when
technological distance between firms increases, there is an increased tendency to use CVC
investments over non-equity alliances and non-equity alliances over minority holdings.
holdings, and M. As, but no effect on the choice of joint ventures.
In this study we have tested the effect of both exogenous and endogenous uncertainty on
the choice between nonequity technology alliances, corporate venture capital investments,
minority holdings, joint ventures and mergers and acquisitions.
For instance, prior cooperation might interact with the effect of different types of
uncertainty on governance mode choice.