Collaborations that hurt firm performance but help employees’ careers

Abstract

Research Summary: When a firm and a competitor collaborate with the same partner, they compete for the shared partner's resources and attention. Such “peer competition” has been shown to negatively affect a firm's access to resources and its performance. One might expect that also the employees’ careers to suffer as a result. However, we argue that the firm's employees benefit from such collaborations. They leverage these collaborations to build social capital—helping their mobility and careers. We find empirical support for our theory using a large sample dataset of video game companies. Our study points to an important yet hitherto neglected agency conflict: employees seek interfirm collaborations that benefit them personally but hurt their firm. Managerial Summary: We show that some alliances can be detrimental to a firm's performance yet can benefit its employees. Specifically, we find that collaborating with the same partner as a competing firm hurts firm performance but can be leveraged by employees to advance their careers—by using the opportunity to connect with competing firms and find better job opportunities. We also find that firms often take on more collaboration than is good for them but entering many collaborations can benefit employees. Our study shows that the interests of firms and their employees are not always aligned when it comes to interfirm collaborations.