Rachelle Sampson

In response to competitive pressures, firms increasingly use R&D alliances to complement in-house R&D efforts. However, empirical evidence to date provides little guidance on how firms can use this strategy effectively. Here, I examine why some R&D alliances contribute more than others to firm innovative performance. I suggest that technological diversity, or differences in technological capabilities between partners, determines firm benefits from such alliances. Further, I argue that how partners organize their alliance activities influences this relationship between technological diversity and firm innovation. To test these relationships, I use a unique measure of technological diversity to capture the hypothesized effects on firm patenting performance. With a sample of 464 R&D alliances in the telecommunications equipment industry, I find that alliances contribute far more to firm innovative performance when technological diversity is moderate, rather than low or high. Some diversity is required, or firms have nothing to learn from their partners. However, when very diverse, firms have difficulty learning from their partners. While this relationship holds irrespective of alliance organization, I find that hierarchical organization, such as the equity joint venture, improves firm benefits from alliances with high levels of technological diversity. I conclude that alliance organization influences partner ability and incentives to share information, which affects performance.