The Alliance Experience Transfer Effect: The Case of Industry Convergence in the Telecommunications Equipment Industry

A central premise of the industry change literature is that firms change their strategic actions when an industry changes. Industry convergence (IC), the blending of boundaries between industries creating competition among firms that previously did not compete, is increasingly impacting many industries and is a salient case of industry change. Acquisitions are an important action shaping the course of IC because they trigger imitation and bandwagon effects further accelerating IC. This paper focuses on why and when learning from alliances reduces uncertainty resulting in acquisitions during IC: an ‘alliance experience transfer effect’. We demonstrate the utility of this mechanism for the substitution‐based form of IC that occurred between the telecommunications equipment and computer networking industries. Our key insight is that when the extent of IC is low there are significant transfer effects but, as the extent of IC increases, firms have access to an expanding volume and diversity of information sources that reduce uncertainty, thus weakening the transfer effect mechanism. We contribute to the alliance–acquisition relationship and learning literatures by demonstrating that the alliance experience transfer effect mechanism explains changes in firm strategic action (alliancing and acquiring) as the extent of IC changes. We also introduce a semi‐convergence perspective by directly measuring the extent of IC.