Abstract

The high failure rate of startups is well known. One way to overcome this liability of newness is to form an alliance. An alliance provides access to a partner’s resources, but we argue that it may also inhibit the development of a startup’s own resources. A startup thus faces a trade-off not only whether but also when to partner. We study this trade-off using data on media entrepreneurs launching new channels on YouTube and the alliances they form with Multi-Channel Networks (e.g., for product development, programming, funding, partner management, digital rights management, and monetization). We argue that younger and weaker startups benefit less from forming alliances than older and stronger startups do. We find this is the case and that younger and weaker startups incur performance penalties in the order of 10–30% when forming an alliance compared to not forming an alliance