Between 2002 and 2011, companies around the world formed close to 42,000 alliances.1 That comes out to about 4,000 per year—a lot of time, energy, and money invested in collaboration. Clearly, executives and entrepreneurs believe that alliances, partnerships, and joint ventures—which we collectively refer to as “alliances”—are important tools for building competitive advantage.

As individual alliances have proliferated, firms in many industries have become connected in large “alliance networks.” These networks are like a system of roads connecting cities. Each city is like a potential alliance partner. In the same way you can get to far-off destinations by going either through selected major cities or minor hamlets, your firm can reach ...

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