SME-supplier alliance activity in manufacturing: Contingent benefits and perceptions

We address the following two questions: how upstream vertical alliance (UVA) activity affects the performance of small and medium-sized enterprises (SMEs); and how SME perceptions of that relationship influence the choice to engage in UVA activity. Using responses from a recent survey of business unit managers representing 200 SMEs, we find that UVA activity benefits SME performance when self-selection effects are controlled. Instead of being a source of differentiation advantages, UVA activity leverages the SME's existing advantages. And, while SME perceptions appear to drive the self-selection of UVA activity, those perceptions are inaccurate; the result is that the SMEs likely to benefit less from such activity engage in it more. Copyright (c) 2006 John Wiley & Sons, Ltd.