Make-and-Ally and Performance: Evidence from the Korean TV Drama Industry

Strategy & Business Policy

Speaker: Evan Rawley 
Associate Professor of Strategic Management & Entrepreneurship , Carlson School of Business- University of Minnesota

HEC Campus - Jouy-En-Josas - Buil. S - Room S218

Make-and-ally governance, where integrated firms develop new products internally while simultaneously collaborating on new product development with suppliers, is becoming increasingly common in knowledge-based industries. Yet, there is little theory or evidence to explain the prevalence of this governance mode. In this paper, we propose that, when downstream commercialization is concentrated relative to upstream product development, make-and-ally governance improves market performance of knowledge-based products and facilitates value capture for the integrated firm. Using data from the Korean TV drama industry, we find qualitative and quantitative evidence that collaborative development between network companies and independent production companies improves viewership ratings of TV dramas. The results suggest that make-and-ally governance is driven partly by efficiency and partly by market power considerations.