Cooperation between vendor firms is a significant feature of technology intensive industries such as computers (hardware and software) and data communications. We provide a coherent framework to understand the dynamics of coalition formation in the Information Technology (IT) industry. Key research questions include the following: (i) What are the major factors that lead to coalitions in the IT industry? Such factors include the diversity of technology characteristics perceived as important by consumers, risks in IT related R&D, complementarity between hardware, software and networking technologies, and coordination costs. (ii) How do the open networking standards of the Internet and its technologies affect coalitions (e.g., formation, break-up, and payoff distribution) in the IT industry?