Do Scale Alliances With Competitors Improve Product Performance? A Study of the Aircraft Industry, 1949-2000

This paper investigates the performance impact of undertaking activities through scale alliances with competitors rather than undertaking these activities autonomously. Based on a governance and competence perspective, we propose that, when compared to autonomous production, scale alliances have a bi-directional effect on the performance of the activities they cover: while they improve the firms' ability to reach the activity minimum efficient scale through enhanced sales, they also create specific cooperation costs that increase this minimum efficient scale. We test our predictions on a sample of 225 aircraft projects undertaken either through scale alliances or on a single-firm basis. We find that, taking into account the endogeneity of the choice between collaborative and autonomous production, firms forming scale alliances achieve greater commercial success than if they had chosen to launch the same projects autonomously. However, collaborative projects incur higher up-front costs than similar projects undertaken by similar firms on their own.