The relationship between variety and new product development in multi partner alliances : The moderating effect of power asymmetry

Power asymmetry exists in almost all multi-partner alliances. Literature on interpersonal teams suggests that these power differences influence the degree to which variety in partners’ functional purpose and characteristics results in successful new product development. However, little is known about power asymmetry in multi-partner alliances in general, and its effect on the relationship between variety and new product development in specific. Therefore, we investigate the moderation effect of power asymmetry on the relationship between functional, organizational, and industry variety and new product development in multi-partner alliances. For this purpose, we use a database of 409 alliances with multiple partners granted funding from the Netherlands Technology Foundation STW between 2000 and 2004. We find that the negative and positive effects of functional and organizational variety on new product development success in multi-partner alliances are amplified, if power asymmetry is high rather than low. Furthermore, we show that high industry variety increases the chance that a multi-partner alliance will result in new product development success as well as failure, if power asymmetry is low. In addition, we find that the odds of new product development success are usually higher regardless of the level of industry variety, if power asymmetry is high. These results suggest that to get a clear understanding of the benefits (or costs) of variety in multi-partner alliances, future research should always take power asymmetry into account. Moreover, they highlight that business managers should carefully design their multi-partner alliances, both in terms of variety and power relations.