Technological diversity and organizational structure both shape an alliance’s potential payoff.
Should birds of a feather flock together? Not if the goal is to promote innovation, says Rachelle C. Sampson, assistant professor of logistics, business and public policy at the University of Maryland’s Robert H. Smith School of Business. After studying hundreds of research and development (R&D) alliances, Sampson reports in her 2004 working paper R&D Alliances and Firm Performance: The Impact of Technological Diversity and Alliance Organization on Innovation that alliances work best when there are moderate differences in technological capabilities between the partners. What’s more, she finds, the organizational form of an alliance can have a significant effect on the amount of innovation it yields.
Alliances have become increasingly popular as companies look for a higher return on their R&D investments. Alliances provide access to complementary capabilities, as well as economies of scope and scale. They often offer a nimbler alternative to that of in-house development, while allowing companies to share risks and costs. But many alliances fall short of their founders’ expectations. Knowledge transfer is a tricky business, particularly when knowledge is complex or tacit. Moreover, mutual distrust often hinders learning within alliances. Today’s partner, after all, may turn out to be tomorrow’s competitor.