How does the partner type in R&D alliances impact technological innovation performance? A study on the Korean biotechnology industry

The number of strategic alliances for R&D activities in the biotechnology industry is sharply increasing. Some studies show that each alliance partner type has different alliance motives, resources and capabilities, organizational structures and cultures, and degrees of competition with partners, which can lead to different performances of strategic alliances. In this regard, this study conducts an empirical analysis of the different impact of each type of alliance partner on technological innovation performance and finds the moderating effect of absorptive capacity and potential competition by categorizing strategic alliances for R&D activities in the biotechnology industry into three types: vertical-downstream alliances, vertical-upstream alliances, and horizontal alliances. This study analyzed 206 Korean biotechnology firms and their strategic alliances for a total of 292 R&D activities. The results of the analysis showed that vertical alliances have a positive impact on technological innovation performance, while horizontal alliances have an inverted U-shaped relationship with technological innovation performance caused by the effect of competition. Additionally, it was confirmed that the R&D intensity of biotechnology firms has a moderating effect of increasing the impact of vertical-upstream alliances on technological innovation performance.     

Mitigating the Challenges of Partner Knowledge Diversity While Enhancing Research & Development (R&D) Alliance Performance: The Role of Alliance Governance Mechanisms

This article explores the answers to the following unresolved research question: How do firms mitigate the collaboration challenges associated with partner knowledge diversity and enhance alliance performance? The study provides an alliance performance enhancing framework by identifying two types of partner knowledge diversity: (1) technology base diversity and (2) R&D process experience diversity, and links them with R&D alliance performance. Additionally, the moderating effects of the two types of alliance governance mechanisms (i.e., interactive and contractual mechanisms) were examined to investigate which alliance governance mechanism is conducive to mitigate the collaboration challenges and enhance alliance performance. Using a data set of 316 alliances in the biopharmaceuticals industry, the study found that a moderate degree (not too low or high) of technology base diversity between alliance partners contributes more to R&D alliance performance. Similarly, there was also an inverted U-shaped relationship between R&D process experience diversity and alliance performance; too much diversity in R&D process experience may increase the likelihood of partner opportunism, and therefore negatively affect alliance performance. Additionally, the results showed that alliance governance mechanisms played different roles in alliance collaboration; while the contractual alliance mechanisms help reduce relational uncertainty (e.g., opportunism), the interactive mechanisms promoting a more intensive interaction between partners mitigates task difficulty and facilitates complex technology activities. These findings extend the knowledge-based view (KBV) of strategic alliance and advance research on alliance governance design.     

R&D Cooperation,Partner Diversity,and Innovation Performance: An Empirical Analysis

Existing literature on research and development (R&D) alliances focuses on formation motives and performance impacts of these alliances but hardly on diversity of the partners' portfolio. Cooperation with a diverse set of partners leads to learning opportunities with regard to both cooperation and innovation skills and hence is expected to enhance the firm's innovation performance. This paper examines two research questions: (1) the impact of functional and geographical diversity of R&D partners on radical and incremental innovation performance of product innovating firms, and (2) the organizational determinants of partner diversity in R&D alliances. The empirical analysis is based on data from the Dutch Community Innovation Survey, R&D and Information and Communication Technology Surveys, and Production Statistics, which lead to a representative sample of 12,811 innovating firms in the period 1994–2006. Through random‐effects panel Tobit estimates, econometric models for both research questions are estimated. The results indicate that functional and geographical diversity act through different channels. Functional diversity leads to a variety of knowledge intake and synergetic effects necessary to develop and commercialize novel products. Geographical diversity results in successful adaption of existing products to different local requirements such as technical standards, market regulations, and customer preferences. The organizational determinants of both kinds of partner diversity are prior experience, patenting, and information technology infrastructure.     

The impact of R&D‐specific factors on the attractiveness of small‐ and medium‐sized enterprises as partners vis‐à‐vis alliance formation in large emerging economies

This study examines the impact of research and development (R&D)‐specific factors in determining the likelihood of small‐ and medium‐sized enterprises (SMEs) from developed countries to be attractive partners vis‐à‐vis forming alliances with SMEs from large emerging economies (LEEs). This study is founded on the knowledge‐accessing theory of alliance formation, which emphasises the higher efficiency gains of knowledge application as opposed to knowledge generation. We extend this theory to SMEs on the basis that smaller firms, because of their resources constraints and drive to survive, are likely to use alliances to access external knowledge bases leading to new product development (NPD) opportunities because of the low feasibility of acquiring knowledge. As a mix of complex knowledge is necessary to develop most modern products and services, SMEs are also likely to adopt a more flexible operational approach and to accept compromises to forge knowledge‐accessing alliances. We illustrate this theoretical development using primary data collected from British and German biotechnology SMEs, declaring the intention prospectively to form alliances with their counterparts in Brazil. Binary logistic regression was used to identify the factors influencing the likelihood of a firm as an attractive alliance partner. Our results indicate that R&D‐specific factors influence the likelihood of firms to be attractive alliance partners. In particular, firms showing an in‐house innovation history focused on one or few products are more likely to be attractive alliance partners with LEE firms than those that do not. Another R&D‐specific predictor that enhances the chances of alliance partner attractiveness with LEE firms is the firm's focused searching and identifying capability relative to technology or equipment that demonstrates good prospects to improve the firm's line of products. A third predictor refers to the firm's awareness regarding non‐cost obstacles for its own technological development. Implications for policy makers and practitioners are also discussed.     

University‐industry collaboration and front‐end success: the moderating effects of innovativeness and parallel cross‐firm collaboration

Collaboration with science‐based and/or market‐based partners is a promising means for firms’ R&D groups to leverage complementary expertise and resources to generate innovative results. However, R&D managers face the dilemma which partner type to choose in different innovative contexts and whether to focus on one partner type or to integrate both types in early stage R&D. Using survey data from 166 heads of R&D groups, this study investigates university–industry collaboration’s impact on front‐end success depending on the degree of innovativeness and the interaction with other industry partners. The results confirm an overall positive relationship between university–industry collaboration and front‐end success. However, innovativeness increases complexity in this relationship. Parallel collaboration with firms and universities can have a mixed impact on front‐end success depending on the degree of innovativeness. This simultaneous collaboration with firms and universities strengthens front‐end success for more radical innovations, while parallel collaboration activities for more incremental innovations do not necessarily strengthen front‐end success. These findings imply that both collaboration types should be used simultaneously in the front end of radical innovation and that firms could reduce complexity by focusing on either firms or universities as partners for incremental innovations.     

Those Who Know,Do. Those Who Understand,Teach. Disseminative Capability and Knowledge Transfer in the Automotive Industry

Innovations in the automotive industry are increasingly building on contributions from different technological fields. Correspondingly, firms in this industry more than ever tend to form research and development (R&D) alliances that aim at innovating new products through integrating separate fields and transferring knowledge. While, in symmetrical R&D alliances, each partner intends to ultimately maintain their distinctive and specialized knowledge base, overlapping knowledge facilitates cooperation and ultimately alliance success. Thus, the capability for knowledge transfer between partners is crucial in such R&D alliances. The literature provides ample evidence that such knowledge transfer is more likely to succeed if the recipient firm has absorptive capability. However, whereas the characteristics of the knowledge transfer process and the recipient firm are well understood, limited attention has so far been given to the issue of the knowledge source firm's ability to transfer knowledge to R&D alliance partners. This study focuses on the impact of source firm capability on successful knowledge transfer in R&D alliances. The study develops a theoretical framework of disseminative capability consisting of five dimensions and tests it on a sample of 59 projects in R&D alliances in the automotive industry. To ensure content validity and avoid common source bias, data were collected from both alliance partners. To test the hypotheses, multiple regression analyses were performed. The results reveal that the source firm's disseminative capability including the attainment of expert knowledge, assessing the recipient firm's knowledge base, and encoding knowledge are positively related to knowledge transfer success, while, surprisingly, detaching knowledge and support of knowledge application in the recipient firm are negatively related. Intentionally or unintentionally, disseminating knowledge across firm boundaries is widely perceived as detrimental to a firm's competitive advantage. Accordingly, the literature tends to downplay disseminative capability as an important means of exploiting external knowledge in collaborative settings. By demonstrating potential benefits for the source firm to transfer knowledge to the allying R&D partner firm, this paper reinvigorates the collaborative dimension in knowledge transfer. Further, the paper is the first of this kind to theoretically explain and empirically show that dimensions of disseminative capability of collaborators in R&D alliances are important for knowledge transfer, whereas disseminative capability is the complementary inverse of an organization's absorptive capacity.     

Creating shareholder value via collaborative innovation: the role of industry and resource alignment in knowledge exploration

Collaborative innovation provides firms with a privileged opportunity to perform exploration in an externally oriented mode. The central challenges in exploration via collaborative innovation lie in the selection of relevant partners and in gaining access to potentially valuable external knowledge that the focal firm lacks. This article focuses on two aspects of inter-organizational alignment that affect knowledge differences and may thus help explaining the shareholder value implications arising from collaborative innovation: industry and resource alignment. Relying on data covering 97 bilateral collaborative innovations (194 innovation partners) in R&D intensive high-technology industries, we used event study methodology and follow-up hierarchical regression analyses to test our conceptual framework. With regard to industry alignment, results suggest that investors value greater industry distance between collaborating partners, especially when the partner firm provides high-level R&D resources. Furthermore, the results show a positive effect of supplementary resource alignment (i.e., a focal firm's R&D resources are supplemented by a partner firm's R&D resources) and, notably, a negative effect of complementary resource alignment (i.e., a focal firm's R&D resources are complemented by a partner firm's marketing resources) on investors' valuation of the collaboration's expected future performance. They, thus, contribute to research on shareholder value implications of collaborative innovation. From a managerial perspective, the study provides a better understanding of partner selection and shows how managers should position a collaboration to signal the shareholder value-creating potential to investors.     

Can entrepreneurial orientation improve R&D alliance performance? An absorptive capacity perspective

Research and Development (R&D) alliance studies maintain that alliance partners’ entrepreneurial interactions that pursue innovation opportunities through collective exploitation and exploration of knowledge resources lead to alliance success. Despite the importance of productive resource exchange and generation through such interactions, performance-by-alliance mechanisms remain under-researched. In this study, we develop a theoretical framework hypothesizing that the entrepreneurial orientation (EO) of alliance firms, which underlies their approach to seeking and utilizing resources productively, has a potential impact on their R&D alliance performance, depending on their absorptive capacity (AC). To specify the value creation and capture mechanism in the alliance, we adopt two performance indicators: technological competitiveness and business performance. Findings from a study of 218 small technology-intensive firms conducting R&D alliance projects show that EO translates into business performance through technological competitiveness and that AC leverages the alliance performance implications of EO. The results suggest that EO–AC complementarity is a strategic stimulant that triggers firms to extract greater benefits from R&D alliances.     

Technology alliances in emerging economies: persistence and interrelation in European firms' alliance formation

We analyse the patterns and determinants of technology alliance formation with partner firms from emerging economies with a focus on European firms' alliance strategies. We examine to what extent European firms' alliance formation with partners based in emerging economies is persistent – that is, to what extent prior collaborative experience determines new alliance formation – and we compare this pattern with alliance formation with developed country partners. Second, we examine to what extent prior engagement in international alliances with partners from developed countries increases the propensity to form technology alliances with partners based in emerging economies, and vice versa (interrelation). We find that both persistence and interrelation effects are present, and that they are generally not weaker for emerging economy alliances. Alliance formation with Indian and Chinese firms is significantly more likely if firms have prior alliance experience with Japanese firms. The findings suggest that building on their prior international alliance experience firms extend their alliance portfolios across both developed and emerging economies, increasing the geographical diversity of their alliance portfolios.     

Walking the tight rope of coopetition: Impact of competition and cooperation intensities and balance on firm innovation performance

This study empirically investigates an important question in the coopetition literature: to what extent does coopetition impact a firm's innovation performance? With a focus on the intensity of competition and intensity of cooperation of a focal firm with its alliance partners, our theory proposes that a moderate level of competition with alliance partners is more beneficial than a very high or a very low level of competition. We further develop the concept of “balance” in coopetition and examine how the interplay of competition and cooperation and the balance between the two matter for innovation performance. Results from our empirical study using data from the semiconductor industry show that competition and cooperation intensities have non-monotonic positive relationship with firm's coopetition-based innovation performance. Further, balanced coopetition (i.e., when competition is moderately high and cooperation is high) has a positive effect on innovation performance. A key contribution of this paper is the conceptualization and empirical demonstration of the effects of various aspects of coopetition such as competition dominant, cooperation dominant, and balanced coopetition on innovation performance.     

Cooperative R&D and vertical product differentiation

A partial equilibrium model with vertical product differentiation, Coumot competition and quality determined by R&D expenses is analysed. Cooperative agreements on R&D entail higher levels of R&D, quality, output and welfare than at the non-cooperative equilibrium, under well denned conditions on spillover rates. This confirms, in a new setting, a well-known outcome of models with cost reducing R&D. Further, cooperation in R&D allows a larger number of firms to operate in the industry than in the non-cooperative case. Via a reduction in prices, a new source of social gains from cooperative research is identified.     

Growing with the market: How changing conditions during market growth affect formation and evolution of interfirm ties

Research Summary: Market conditions are known to matter for firm performance and growth. This study explores how changing levels of uncertainty and competition affect interfirm ties of entrepreneurial firms as markets transition from nascent to growth stage. Tracing six entrepreneurial game publishers during the growth stage of the U.S. wireless gaming market, the findings reveal that in a growth stage market, as uncertainty decreases, certain ties of entrepreneurial firms are terminated. First, existing partners may cut ties and become competitors after entering the market directly. This is a “winner's curse” as more successful firms are more likely to entice their partners to enter the market directly. Second, ties may be terminated as prominent firms that are “overwhelmed” with too many partners cut ties with low to mediocre performance, while their remaining partners enter a positive spiral of tie strength and performance. Finally, as uncertainty decreases, new firms may enter the market as competitors to prominent firms. While entrepreneurial firms with high‐ and low‐performing ties to prominent partners may find ties with these new entrants attractive, those with mediocre ties to few prominent partners find this move too risky and wait for a first mover to legitimate it. Overall, the findings show that changing levels of uncertainty and competition in growth stage markets can have different consequences for firms due to heterogeneity in their ties and power relative to partners. The findings provide several contributions to literature regarding the relationship among interfirm ties, firm performance, and market evolution. Managerial Summary: Based on interviews at six entrepreneurial game publishers in the United States and their partners, this study shows how changing levels of uncertainty and competition in growing markets can have different consequences for firms based on the different types of alliances in their portfolio and their power relative to partners. The findings highlight the importance of managing partners differently based on alliance type and goal of the partner. They advocate remaining flexible in alliance management as information asymmetries, intentions and bargaining power of partners can change and lead to abrupt alliance dissolution. They show that alliance portfolio management goes beyond a firm's capability of managing individual alliances, and provide a tool for managers to evaluate their alliance portfolios and take the necessary precautions.     

R&D competition versus R&D cooperation in oligopolistic markets with evolving structure

This paper considers investment behavior of duopolistic firms subject to technological progress. It is assumed that initially both firms offer a homogeneous product, but after a stochastic waiting time they are able to implement a product innovation. Production capacities of both firms are product specific. It is shown that firms anticipate a future product innovation by under-investing (if the new product is a substitute to the established product) and higher profits, and over-investing (in case of complements) and lower profits, compared to the corresponding standard capital accumulation game. This anticipation effect is stronger in the case of R&D cooperation. Furthermore, since due to R&D cooperation firms introduce the new product at the same time, this leads to intensified competition and lower firm profits right after the new product has been introduced. In addition, we show that under R&D competition the firm that innovates first, overshoots in new-product capacity buildup in order to exploit its temporary monopoly position. Taking into account all these effects, the result is that, if the new product is neither a close substitute nor a strong complement of the established product, positive synergy effects in R&D cooperation are necessary to make it more profitable for firms than R&D competition.     

R&D Partnerships and Innovation Performance: Can There Be too Much of a Good Thing?

R&D collaboration facilitates the pooling of complementary skills, learning from the partner as well as the sharing of risks and costs. Research therefore stresses the positive relationship between collaborative R&D and innovation performance. Fewer studies address the potential drawbacks of collaborative R&D. Collaborative R&D comes at the cost of coordination and monitoring, requires knowledge disclosure, and involves the risk of opportunistic behavior by the partners. Thus, while for lower collaboration intensities the net gains can be high, costs may start to outweigh benefits if firms perform a higher share of their innovation projects collaboratively. For a sample of 2735 firms located in Germany and active in a broad range of manufacturing and service sectors, this study finds that increasing the share of collaborative R&D projects in total R&D projects is associated with a higher probability of product innovation and with a higher market success of new products. While this confirms previous findings on the gains for innovation performance, the results also show that collaboration has decreasing and even negative returns on product innovation if its intensity increases above a certain threshold. Thus, the relationship between collaboration intensity and innovation follows an inverted‐U shape and, on average, costs start to outweigh benefits if a firm pursues more than about two‐thirds of its R&D projects in collaboration. This result is robust to conditioning market success to the introduction of new products and to accounting for the selection into collaborating. This threshold is, however, contingent on firm characteristics. Smaller and younger as well as resource‐constrained firms benefit from relatively higher collaboration intensities. For firms with higher collaboration complexities in terms of different partners and different stages of the R&D process at which collaboration takes place, returns start to decrease already at lower collaboration intensities.     

Learning to collaborate through collaboration: How allying with expert firms influences collaborative innovation within novice firms

Research summary : Strategic alliances have been recognized as a means for firms to learn their partners' proprietary knowledge; such alliances are also valuable opportunities for partner firms to learn tacit organizational routines from their counterparts. We consider how relatively novice technology firms can learn intraorganizational collaborative routines from more experienced alliance partners and then deploy them independently for their own innovative pursuits. We examine the alliance relationships between Eli Lilly & Co. (Lilly), a recognized expert in collaborative innovation, and 55 small biotech partner firms. Using three levels of analysis (firm, patent, and inventor dyad), we find that greater social interaction between the partner firm and Lilly subsequently increases internal collaboration among the partner firm's inventors. Managerial summary : Can collaborating externally advance internal collaboration? Yes. Our research found that collaboration among scientists at small, early‐stage biotechnology firms significantly increased after these firms formed highly interactive R&D alliances with a large pharmaceutical company known for its expertise in such collaboration. It is well known that alliances help new firms learn specific new technologies and commercialize innovations. Our study broadens the scope of potential benefits of alliances. New firms can also learn collaboration techniques, deploying them internally to enhance their own abilities in collaborative innovation. Managers should take this additional benefit into consideration in developing their alliance strategies. Pursuing alliance partners with expertise in collaboration and keeping a high level of mutual interactions with partner firm personnel should be important considerations to extract this value. Copyright © 2015 John Wiley & Sons, Ltd.     

The intra‐alliance division of value created through collaboration

The differential benefits reaped by individual partners are a major determinant of the impact of strategic alliances on firm performance and an important (dis)incentive for alliance partners to collaborate in value creation. Theoretically, we lack an explicit theory of intra‐alliance value division; empirically, previous analysis has been hampered by methodological challenges. We propose a bargaining framework for intra‐alliance value appropriation, as well as a measure for capturing its variation. We test our hypotheses on a sample of 200 biotechnology R&D alliances, and are able to explain variation in value appropriation across alliance partners, partner types, and individual firms of each type. Copyright © 2010 John Wiley & Sons, Ltd.     

How Central Is Too Central? Organizing Interorganizational Collaboration Networks for Breakthrough Innovation

Firms increasingly look to collaboration with alliance partners in their quest for breakthrough innovation. But how does the position of a firm in its alliance network weighted by the centrality of its partners—a concept which we term “partner‐weighted alliance centrality”—and the heterogeneities in the types of partners that it cooperates with—in terms of its private‐public collaboration—influence this quest? Using longitudinal data from the U.S. pharmaceutical industry, we build alliance networks in the period 1985–2001 to investigate these questions. We show that, for breakthrough innovation, collaborating with more partners that are more central in alliance networks the better, but only to a point. Beyond that point, we find that the likelihood of achieving breakthrough innovation drops. Furthermore, and looking at the kinds of knowledge provided by the partners in each firm's alliances, we report that firms with a greater share of private partners, relative to public partners, suffer less from the diminishing benefits of collaboration with central partners when developing breakthrough innovation. Taken together, we make novel contributions about how to organize for breakthrough innovation, and provide actionable managerial advice in terms of selecting collaborative partners in alliance networks.     

Cooperative R&D with product market competition

A simple model RJV is presented to examine the private and social incentives for cooperative R&D in the presence of product market competition. The key assumption to our analysis was that the spillover rate increases with cooperation in R&D and total industry profit decreases as the spillover rate increases due to intensified post-innovation competition. This leads to a negative impact of cooperative R&D, introducing a trade-off in the model. It is shown that private firms prefer a cooperative R&D to non-cooperative R&D competition when spillover rates are high and that the private incentive for cooperative R&D is less than the social incentive.     

Does peripheral knowledge complement control? An empirical test in technology outsourcing alliances

While the normative logic for forming technology outsourcing alliances is that such alliances allow outsourcing firms to specialize deeper in their domain of core competence without being distracted by noncore activities, recent empirical studies have reported the puzzling phenomenon of some firms continuing to invest in R&D in domains that are fully outsourced to specialized alliance partners. An underlying—and widely made—assertion that can potentially reconcile this contradiction is that ‘peripheral’ knowledge (specialized knowledge in the domain of outsourced activities) complements control in technology outsourcing alliances. However, this assertion is untested; and empirically testing it is the objective of this research study. Using data from 59 software services outsourcing alliances, we show that such peripheral knowledge and alliance control are imperfect complements: peripheral knowledge complements outcomes‐based formal control but not process‐based control. Thus, outsourcing firms might sometimes need knowledge outside their core domain because such knowledge facilitates effective alliance governance. Our theoretical elaboration and empirical testing of the assumed complementarities between peripheral knowledge and control in technology outsourcing alliances has significant implications for strategy theory and practice, which are also discussed. Copyright © 2007 John Wiley & Sons, Ltd.     

Types of R&D Collaborations and Process Innovation: The Benefit of Collaborating Upstream in the Knowledge Chain

This paper explains how research and development (R&D) collaborations impact process innovation; given the differences in innovation mechanisms, prior insights from studies of product innovation do not necessarily apply to process innovation. Extending the knowledge‐based view of the firm, this paper classifies four types of R&D collaborations—with universities, suppliers, competitors, and customers—in terms of two knowledge dimensions: position in the knowledge chain and contextual knowledge distance. Position in the knowledge chain is the position of the R&D collaboration partner in the knowledge chain of the industry—the input–output sequence of activities that result in the transformation of raw materials into products that are used by end customers. Based on this knowledge chain, this paper considers universities and suppliers as upstream R&D collaborators, and competitors and customers as downstream R&D collaborators. Contextual knowledge distance is the difference in industry‐related contexts of operation of the R&D collaboration partners and the firm. Based on this, this paper views R&D collaborators that are suppliers and competitors as having low contextual knowledge distance to the firm, and R&D collaborators that are customers and universities as having high contextual knowledge distance to the firm. Using this classification, this paper proposes a ranking of R&D collaborations in terms of their impact on process innovation: R&D collaborations with suppliers have the highest impact, followed by R&D collaborations with universities, then R&D collaborations with competitors, and finally R&D collaborations with customers. These arguments are tested on a four‐year panel of 781 manufacturing firms. The results of the analyses indicate that R&D collaborations with suppliers and universities appear to have a positive impact on process innovation, R&D collaborations with customers appear to have no impact, and R&D collaborations with competitors appear to have a negative impact. As a consequence, the main driver of the impact of R&D collaborations on process innovation appears to be position in the knowledge chain rather than contextual knowledge distance. These novel ideas and findings contribute to the literature on process innovation. Even though process innovation tends to be internal and tacit to the firm, it can still benefit from external R&D collaborations; this paper is the first to analyze this relationship and provide a theoretical framework for understanding why this would be the case. This study also has important managerial implications. It suggests that managers need to be careful in choosing the partners for their firms' R&D collaborations. Engaging in R&D collaborations with universities and suppliers appears to be helpful for process innovation, whereas conducting R&D collaborations with competitors may potentially harm process innovation.