Abstract

This paper demonstrates the existence of bidirectional relationships between interfirm collaboration and business sales. Controlling for factors that influence whether firms form collaborative relationships, the analysis shows that entry and post-entry collaboration often contribute to superior performance, which in turn attracts more partners. However, the performance influences vary across types of collaborators and collaborations, with differences among entrant and incumbent partners, between marketing and R&D partnerships, by partner size, and across time. The empirical analysis examines businesses that operated in the U.S. hospital software systems industry between 1961 and 1991. Copyright © 2005 John Wiley & Sons, Ltd. Interfirm collaboration and firm performance have a complex relationship, each affecting the other. Economics, organization, and strategy research argue that businesses often benefit from collaborative relationships (e.g., Burt, 1983; Coase, 1937; Dyer and Singh, 1998; Williamson, 1975, 1991), while recent empirical studies have identified some of the conditions under which collaborations are or are not beneficial (Baum, Calabrese, and Silverman, 2000; Khanna, Gulati, and Nohria, 1998; Singh, 1997; Singh and Mitchell, 1996). Nonetheless, the systematic nature of the relationship between collaboration and performance—in particular, for our discussion in this study, sales performance—is not clear. Several studies identify relationships between collaboration and greater sales, but do not establish whether greater business sales induce collaborative relationships or

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