Abstract
This study investigates how technology-intensive new ventures shape and manage their relationships with incumbents to successfully develop new products. We undertake the dynamic views of business relationship to reveal under what conditions new ventures should emphasize more on transactional contract or alliance approach to develop their relationships with incumbents. Using longitudinal multiple case analysis, we show that transactional contract is less effective during discovery and development stages to facilitate knowledge share and collaborative learning between new ventures and incumbents. However, adopting transactional contract is essential during commercialization to strengthen the relationship, minimize the drawbacks of social bonds, and motivate both parties to engage in new projects. The results show that tensions between exchange partners are likely to increase when the incumbent is flexible to re-negotiate and share the fair benefits during the commercialization stage. Our findings provide new insights about the evolution of new ventures’ relationships with incumbents across NPD stages.