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Small firms’ partner selection is universally acknowledged as a critical stage of alliance formation. However, the performance implications of initial orientation towards a more diverse alliance portfolio are not well understood. Conflicting findings suggest a need for further understanding of what moderates the relationship between preferred alliance partner diversity and small firm performance. Hence, in this study we develop a preference-based measure of partner diversity and empirically test its effects on firms’ performance using an original survey dataset of 1077 Swedish small firms, micro-matched with register records. We show that a more diverse set of partner preferences - that reflect both the awareness of various partner types’ strength and weaknesses and the ability to align specific tasks with a particular partner type - indeed constitutes a competitive advantage for young growing ventures. However, small firms older than six years - especially the ones that experienced zero growth or declined in previous years - should consider fewer partners at the selection stage as they gain no or negative performance benefits from increasing their consideration set. We also show that entrepreneurial orientation positively moderates the effects of preferred partner diversity.

Purpose: This study investigates how small firms develop preferences for varying levels of alliance partner diversity by applying a behavioral perspective.

Design/methodology/approach: Data was collected via an original survey administered by the Swedish National Bureau of Statistics (SCB) of 1026 Swedish firms with 50 employees or less. Hypotheses were tested by specifying a series of fractional response regressions.

Findings: The results show a U-shaped relationship between experienced and preferred alliance partner diversity in small firms, and further show moderating effects of firm age, prior growth and environmental dynamism. The findings suggest that preferences towards diverse alliance portfolios in small firms may arise, not only from well-informed deliberate strategic thinking based on prior experience, but also as a consequence of cognitive bias.

Practical implications: Our findings suggest that: 1) small firms considering a wide variety of alliance partners should carefully investigate whether they are, in fact, capable of mastering a highly diverse alliance portfolio or if they are overconfident novices. 2) Holders of homogenous alliance portfolios should recurringly investigate whether homogeneity is due to informed strategy or inertia.

Originality/value: This study contributes to the literatures on alliance partner diversity and behavioral alliance portfolio configuration by shedding light on the learning mechanisms that shape alliance portfolio strategies of small firms by explicating the complexity of how different experience levels of partner variety affect current alliance portfolio preferences.

Digital platforms are arguably instrumental for the Circular Economy (CE), yet they frequently fail to deliver. An increasingly popular strategy for developing digital platforms is corporate incubation, where corporations invest in startups. Prior research has nonetheless paid scant attention to the role of corporate incubation in the evolution of digital platforms over time. To shed light on this, we conducted a qualitative case study of a digital platform incubated by one of the largest construction firms in Europe in the context of corporate incubation. Building on prior research suggesting that platform growth and platform scaling are distinct but often conflated phenomena, our analysis reveals four mechanisms through which corporate incubation enables platform growth and (ii) unpacks its role in transitioning to platform scaling. Drawing on boundary work theory, we offer a model explaining how the boundary work frames of organizational actors involved in corporate incubation influence the evolution of digital platforms over time. Our study contributes to the literature on digital platforms for CE by establishing corporate incubation as a promising yet challenging strategy for achieving platform growth, by deciphering the relational and temporal dynamics that condition platform scaling, and by conceptualizing digital platforms as entities performing boundary work.