The Art of Hollywood Alliances
Tuesday, September 27, 2016
"There’s an art to how large and small alliance partners can best work together. As with many things in life, moderation is the key.”
—Aks Zaheer, Curtis L. Carlson Chair in Strategic Management
Professor Aks Zaheer has a secret that might surprise even the most dedicated cinema buff. While your favorite movie might have been released by say, Warner Bros. or Universal Pictures, there’s a fair possibility that those studios didn’t actually make the film.
Why? Because Hollywood has embraced what’s known as interfirm alliances. As their name suggests, these are relationships in which two companies collaborate on a project. “The essential idea is that firms can expand and prosper to a much greater degree when they form alliances,” says Zaheer. “The movie industry has six powerful studios and hundreds of smaller independent ones. That makes it ideal for study alliances.”
As Zaheer adds, Hollywood alliances typically take the shape of a larger studio distributing the work of a smaller, independent one. That led him to a pair of key questions: Which partner gains more from the alliance? And what conditions contribute to optimal gains?
For answers, he and his research team examined relationships between large and small studios over a 20-year period. “The smaller ones were particularly successful,” he says. “One big reason was because they could leverage the large studios’ assets and distribution reach.”
But Zaheer also says that it pays not to overdo alliances. “When independents linked up with too many larger studios, they were not as effective,” he explains. “If you form too many alliances, a larger studio could well think you’re not focusing enough on it, get suspicious and withhold resources.”
And for all of larger studios’ resources and power, selecting a small alliance partner is often a delicate task. “You don’t want a relationship with an independent that already has alliances with other big studios,” Zaheer says. “And yet you want to find independents with alliance experience. Our research suggests that those firms are better able to leverage and manage the alliance relationship.”
Watch Zaheer further describe his findings:
“Alliance Partners and Firm Capability: Evidence from the Motion Picture Industry”
Vandaie, R., Zaheer, A., Organization Science (2015)