However, empirical evidence to date provides little guidance on how firms can use this strategy effectively. 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.
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.