1. Cameron M. Weber, discussant for “The Impact of Alliance Portfolio Composition and Content Diversity on Firm Financial Performance” by Olga Bruyaka and Turanay Caner

2. On “The impact of alliance portfolio composition and… firm financial performance” by Bruyaka and Caner Paper contributes to investment and portfolio theory, corporate finance and theory of the firm. Authors find weakness to date in way researchers measure firm returns to composition (“partners”) and content (“ties”) relationships in the value chain. Paper separates-out definitions of (data elements for) composition and content relations in order to find highest performing diversity strategy(s)

3. On “The impact of alliance portfolio composition and… firm financial performance” by Bruyaka and Caner Composition diversity (leading to competitive advantage) relates to partners’ industry and geographic diversity, and variances in resources, capabilities and industry experience. Is form of “quasi-outsourcing” Content diversity relates to R&D, marketing, licensing, manufacturing alliances, patents, clinical trials. (Case study is from biopharmaceutical industry.)

4. On “The impact of alliance portfolio composition and… firm financial performance” by Bruyaka and Caner Authors use Tobins Q (equity market value / equity book value) to measure relative firm financial performance. Authors use inverse of the Herfindahl index (the Herfindahl index measures market concentration so the inverse measures market diversification) to measure content and composition diversity in a firm’s alliance portfolio

5. On “The impact of alliance portfolio composition and … firm financial performance” by Bruyaka and Caner Authors test hypotheses using data from 253 US biopharmaceutical companies for the years 1995-2007 Data sources include Compustat, Thomson Reuters Recap, USPTO and firm websites Authors create “two-dimensional construct” with an angled vector to map a firm’s alliance portfolio diversity in terms of content and composition diversity.

6. Horizontal axis measures “content diversity (alliance ties)”, vertical axis measures “composition diversity (alliance partners)”. Results: It’s better to be in C than B (composition diversity outperforms content diversity), A and D are relatively equivalent in terms of financial returns and are better than C or B

7. On “The impact of alliance portfolio composition and … firm financial performance” by Bruyaka and Caner Authors also reiterate that there are costs associated with the creation and maintenance of alliances, 1) potential free-riding and associated monitoring costs 2) diversity alliances may become unwieldy and create gap between tacit knowledge and alliance knowledge (problem of “knowledge absorption”)

8. On “The impact of alliance portfolio composition and… firm financial performance” by Bruyaka and Caner Authors also reiterate that there are costs associated with the creation and maintenance of alliances (cont.), Suggestion: could add that within firm resource allocation is more political and therefore less efficient than resource allocation based on market-oriented pricing (as found in results showing greater composition diversity returns than content diversity returns).

9. On “The impact of Alliance Portfolio Composition and … firm financial performance” by Bruyaka and Caner Critique of paper 1)Elegant and creative use of visual representation of data 2)Honest in finding that more portfolio diversity is not always for the best 3)Of interest to those in corporate leadership and industry analysis professions and economists working on industrial organization 4)Could be more precise in narrative describing exactly what is a “tie” (content alliance) and what is a “partner” (composition alliance) 5)Would be good to see analysis applied to another sector (transportation, energy, robotics?)