New firms face a number of performance obstacles created by their newness and small size. These obstacles include lack of legitimacy in the industry and marketplace, the challenge of raising sufficient capital, and the risks and uncertainties of new technology development. Yet, some entrepreneurs transform these obstacles into opportunities by using their newness, small size, and cutting edge technologies to attract other firms in cooperative relationships, called strategic alliances. The strategy of allying with other organizations has become increasingly prevalent, and yet little is known about the objective value of such relationships to new ventures. Using a longitudinal data base on a population of 102 new ventures in the U.S. semiconductor industry which have created 635 strategic alliances with other firms, this research tests a model of financial performance and strategic alliances. Among the variables to be investigated in the research as factors affecting financial performance are: (1) alliance partner attributes such as relative power, cultural distance, and prominence; (2) the number and type of strategic alliances formed; (3) technological innovativeness; (4) strength of the founding top management team; (5) organizational resources like investment capital raised; and (6) broader market conditions.
