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

BY JEONGHO CHOI | PUBLISHED IN PDMA JPIM • VOL. 37, ISSUE 1 • JANUARY 2020

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.

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Practitioner Points

  • Collaborating with knowledge‐diversified alliance partners has a dual effect (i.e., positive and negative) because of collaboration challenges rising from the knowledge diversity between partners. Therefore, a moderate degree of knowledge diversity contributes to a better alliance performance.
  • In order to mitigate the collaboration challenges and enhance alliance performance, firms should be able to utilize different types of alliance governance mechanisms depending upon types of collaboration challenges.
  • When the collaboration challenges are associated with technology base diversity (e.g., the complexity of technology), it is important to utilize the interactive alliance mechanisms, rather than the contractual mechanisms, because it promotes in‐depth interaction between alliance partners and helps us better understand the technology domains of the partners.
  • In contrast, when the collaboration challenges (e.g., difficulties in accessing tacit knowledge) arise because of the diversity in R&D process experience, contractual mechanisms should be utilized to reduce relational uncertainty (e.g., opportunism) and enhance collaboration performance.