Collaboration Between Technology Entrepreneurs and Large Corporations: Key Design and Management Issue

The l990's witnessed an explosive growth in strategic alliance activity.Today, strategic alliances are a central element in the growth strategies of technology entrepreneurs and emerging technology companies.In many instances, these alliances involve a large corporate partner.This phenomenon has been accelerated by the explosion in corporate venturing activity in recent years.On a conceptual level, alliances between small entrepreneurial firms and large corporations can provide significant benefits to both parties.d small technology company can leverage the research, manufacturing, marketing and Jinancial resources of the large partner while ihe lauer can tap into the innovative capacity of the smaller partner.On a practical level, however these alliances pose some significant design and management challenges.This article examines these challenges and outlines actions that the technology entrepreneur can take to respond to them. Journal of Small Business StrategvVol. ll, No.2 Fall/Winter 2000 a formal and mutually agreed commercial collaboration between companies.The partners pool, exchange or integrate specific business resources for mutual gain.Yet the partners remain separate businesses (Lewis, 1990).Collaboration with large partners ranges from informal cooperative agreements and joint projects to more formal arrangements (e.g.licensing, distribution agreements, joint procurement, new product development, R&D, etc.).When equity investment is involved, it can range from minority shareholding to a full-scale joint venture.Surveys show that executives of small technology companies are acutely aware of the need to partner:Almost 90% of executives from small information technology companies believe that alliances will be critical in their future business strategies (Kelly & Schaan, 1996).e Among future alternative strategies, biotechnology industry executives assigned top priority to the formation of alliances.(Coopers & Lybrand, 1998).This paper examines the importance of alliances from the perspective of the small entrepreneurial technology company, typically employing less than 50 employees.It focuses on the unique benefits and managerial challenges inherent in collaborative arrangements with large partners. WHY SMALL TECHONOLOGY FIRMS & LARGE FIRMS ENTER ALLIANCES?Alliance Benefits to Small Technology Firms Small companies face significant hurdles to commercializing their early-stage technology or products.Roadblocks are numerous but significant ones include access to resources or capabilities such as capital, manufacturing and marketing skills, distribution channels, etc.A key challenge is to develop a new product or service while simultaneously generating enough capital to keep a business afloat, either by selling product or accessing other sources of financing.Many fail this challenge.It is estimated that 85 percent of start-up companies fail in their first five years.Highly innovative products never make it to potential customers because Journal of Small Business Strata/0 Vol./l, No.2 Fall/Winter 2000 Ventures.For Juniper this represents a partnership with companies that collectively represent more that $75 billion in annual sales to virtually every major networking customer.The relationship provides a foundation for the delivery of Juniper's technology around the world.ln return, corporate investors are able to integrate Juniper's leading edge technology with their existing product lines and services worldwide.Table I: Potential benefits of alliances with large firms Activity Benefits Financing Access financial resources-equity, royalties, R&D funding, etc. Reduce costs R&D/ New product v Utilize market intelligence development Access to extensive publications library Obtain technological insights ~Leverage core competencies Access complementary technologies Access to labs and test facilities Manufacturing Receive manufacturing knowledge and capabilities Capitalize on component purchasing power Access Quality assurance capabilities Marketing/ ~Improve market access (distribution channels, global Distribution networks) v Access and established and loyal customer base Acquire market research and personal insights ~Reduce cycle time Increase credibility Ties to a partner capable of driving industry standards l.egal/

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