EXPLORATORY INNOVATION THROUGH GAINING KNOWLEDGE FROM ALLIANCE PORTFOLIO: INTERPLAY BETWEEN NETWORK STRUCTURE AND KNOWLEDGE COMPOSITION

Abstract

Building an alliance portfolio is an important knowledge-sourcing strategy for firms to create exploratory innovation. By proposing a framework of knowledge flow and search flexibility, we examine the effects of a firm’s network position and knowledge composition of the alliance portfolio on the creation of exploratory innovation. Particularly, we explore their interactions that create synergy and offset mutual disadvantages. Using panel data of 142 pharmaceutical companies from 1996 to 2010, we find that central and brokering positions have an inverted U-shape relationship with the creation of exploratory innovation. We also find two combinations of network position and knowledge composition advantageous for increasing exploratory innovation: a central position with partners’ wide scope of new knowledge, and a brokering position with partners’ wide scope of shared knowledge. This study contributes to the literature by identifying interaction effects between social network theory and the knowledge-based view and suggests implications for designing a firm’s alliance strategy.