Abstract

Alliances between service firms and manufacturers in pursuit of joint hybrid innovations face both advantages and challenges. This study analyzes the ambivalence in service firm-manufacturer alliances via complementarities versus divergences. The mixed method approach consists of a multiple case study of 12 firms, regression analysis, and a fuzzy-set qualitative comparative analysis (fsQCA) of a sample of 190 firms. The three methods deliver consistent and robust results that complement each other. Findings are that a service firm’s entrepreneurial orientation enhances joint hybrid innovation and alliances with manufacturers. Divergences between firms have ambivalent influences on joint hybrid innovation, depending on the service firm’s entrepreneurial orientation and the equity arrangement of the alliance.

Introduction

Researchers have turned their attention towards hybrid innovation between service firms and manufacturers (Kindström, Kowalkowski, & Sandberg, 2013). Hybrid innovations can make use of the strengths of service firms in handling information, communication technology, intangible assets, service-related knowledge, and external resources (Tether & Tajar, 2008). Generally, innovation increases by a firm’s entrepreneurial orientation, which explains a firm’s search for innovative solutions, willingness to take risks, and proactiveness (Covin & Slevin, 1989; Lumpkin & Dess, 1996). Prior studies on manufacturers show that internal innovation increases with greater EO (Rauch, Wiklund, Lumpkin, & Frese, 2009). Only a few studies consider how entrepreneurial orientation influences innovation in alliances (Bouncken, Plüschke, Pesch, & Kraus, 2016), but neglect service firms and hybrid innovation. On the one hand, entrepreneurial orientation facilitates a proactive and risk-taking integration of services with a manufacturer’s products towards joint hybrid innovation. On the other hand, service firms differ from manufacturers while divergences increase with high entrepreneurial orientation. Alliance research shows that organizational divergences reduce alliance performance (Lavie, Haunschild, & Khanna, 2012). The configuration of the divergences between service firms and manufacturers might jeopardize their interfirm complementarities that lead to joint hybrid innovation.