Industry cognitive distance in alliances and firm innovation performance

Abstract

This paper focuses on the role of industry cognitive distance in innovation alliances on firm innovation performance. Drawing from the literature on technological cognitive distance in alliances, we elaborate on the role of industry cognitive distance between partners and its impact on managerial attention to investigate the role of numbers of alliances of low (intra-industry) and high (inter-industry) industry cognitive distance on firm innovation performance. Intra-industry alliances offer lower opportunities for innovation compared to inter-industry alliances and are less demanding on firm management due to higher cognitive similarity between partners from the same industry. We propose that trade-offs between innovation opportunities and management efforts result in an inverted U and a U-shaped relationship between the number of intra-and inter-industry alliances and innovation performance, respectively. We find support for both hypotheses in the context of the UK bio-pharmaceutical sector.Industry cognitive distance in alliances R&D Management , 4, 2018

Alliance Network Diversity and Innovation Ambidexterity: The Differential Roles of Industrial Diversity, Geographical Diversity, and Functional Diversity

“…Meanwhile, grounding on the knowledge-based view, they also pointed out that industrial diversity provides knowledge access benefits, which may promote firm innovation. Considering that, they proposed a U or inverted U correlation between alliance network industrial diversity and firm innovation [26,30,40,41] and verified it empirically.…”

“…Previous scholars have found that the utilization of external knowledge depends on organizational learning and absorptive capacity [39] and partners from the same industry with high technological similarity, familiar routines, and cooperation synergies can more easily integrate knowledge [26,40]. Driving from transaction cost theory, most scholars argued that alliance network industrial diversity might cause resource misfits or lack of synergies, which may increase the collaboration difficulties and impede the alliance performance.…”

“…Industrial heterogeneity reflects the differentiation of technical knowledge [30]. It enhances the possibilities of identifying fruitful and novel knowledge combinations that lead to exploratory innovation [40]. Thus, it helps improve innovation ambidexterity.…”

“…Besides, grounding on organizational learning theory, allying with diversified inter-industry alliances helps to develop experience, awareness, and understanding of differences among partners and make focal firms more attentive in recognizing and addressing ambiguity and complexity in their egocentric alliance network [44]. Firms become more accustomed to identifying and resolving tensions in alliances and in addressing these by modifying existing alliance routines and develop new ones [40]. In this sense, industrial diversity may not increase transaction costs as firms become more adept at dealing with such costs through learning.…”

“…Meanwhile, the managerial attention gets distributed with increased diversification in alliance network as too much engagement in exploitation activities means that less attention is distributed to knowledge exploration. Furthermore, from the perspective of transaction cost theory, the coordination and transaction costs get increased during the diversification of alliance function [26,30,40]. As such, functional diversity exceeding an optimal level does harm to exploratory innovation and decreases ambidexterity.…”