Motivations and Outcomes of Firms' Leveraging of Alliance Knowledge

Nowadays, firms increasingly rely on strategic alliances to reach out for unique technological knowledge that firms cannot develop internally. However, in previous literature, we find inconsistent findings regarding the drivers and outcomes of a firm’s leverage of alliance partners’ technological knowledge. In this dissertation, I consider opposite propositions in prior studies simultaneously and examine two research questions: 1) what motivates a firm to search technological knowledge from alliance partners? And 2) how configurations of alliance knowledge and alliance network affect firm innovation? I argue that alliance knowledge search motivation is determined by the allocation of managerial attention to local domains and distant domains. While distant attention motives alliance knowledge search, local attention suppresses the motivation. I hypothesize that innovation performance below the aspiration level intensifies both local and distant attentions and has an inverted U-shaped relationship with alliance knowledge search intensity. This curvilinear relationship is moderated by the focal firm’s knowledge stock size since firms with large knowledge stock are more likely to develop distant attention in the presence of poor innovation performance. I further argue that exploration and exploitation play key roles in the configurations of both alliance knowledge and alliance network. Alliance knowledge leveraging can contribute more to firm innovation, if the firm can establish a balance between exploration and exploitation. I propose that balancing exploration and exploitation within a single domain (e.g., search moderately explorative alliance knowledge) generates great managerial costs. However, firms can balance exploration and exploitation across domains: they can leverage explorative knowledge through exploitative alliances, such as repeated partnerships and strong ties. I test related hypotheses using longitudinal data from the U.S. biopharmaceutical industry. Results show that: 1) innovation performance below the aspiration level has an inverted U-shaped relationship with alliance knowledge search, demonstrating that both distant and local attention play important roles in developing the motivation for alliance knowledge search; 2) increasing knowledge stock size increases both positive and negative effects of innovation performance below aspiration; 3) technological distance of searched alliance knowledge has a linear negative effect on firm innovation; and 4) leveraging explorative knowledge from repeated partnership, but not strong ties, leads to superior innovation performance, supporting the idea of establishing the balance across domains. The findings make important contributions to alliance knowledge leveraging, aspiration, and exploration-exploitation literatures. The managerial implications of the study are also discussed. Motivations and Outcomes of Firms’ Leveraging of Alliance Knowledge Shihao Zhou GENERAL AUDIENCE ABSTRACT Nowadays, firms increasingly rely on strategic alliances to reach out for unique technological knowledge that firms cannot develop internally. By absorbing and utilizing these unique technologies, firms leverage alliance knowledge for their own technological innovation. However, in previous literature, we find inconsistent findings regarding the drivers and outcomes of alliance knowledge leverage. In this dissertation, I consider opposite propositions in prior studies simultaneously and examine the motivations and outcomes of a firm’s alliance knowledge leverage. First, I propose that the firm’s poor innovation performance is an important antecedent of alliance knowledge leverage. I hypothesize that, when a firm’s innovation performance is below the aspiration level, i.e., below the firm’s past innovation performance and/or the average innovation performance of peer firms, further innovation performance decrease would first increase and then decrease the firm’s alliance knowledge search intensity. Moreover, a firm with a larger knowledge stock would conduct more alliance knowledge search to respond to innovation performance decrease than a firm with a smaller knowledge stock. Second, I examine how alliance knowledge leverage influence firm innovation. I argue that alliance knowledge leveraging can contribute more to firm innovation, if the firm can establish a balance between exploration, which is captured by terms such as search, variation, risk-taking, and experimentation, and exploitation, which is defined as items regarding experiential refinement and reusing existing knowledge. I propose that balancing exploration and exploitation within a single domain (e.g., search moderately explorative alliance knowledge) generates great managerial costs. However, firms can balance exploration and exploitation across domains: they can leverage explorative knowledge through exploitative alliances, such as repeated partnerships