Industry Cognitive Distance in Alliances and Firm Innovation Performance

This paper focuses on the role of industry cognitive distance in innovation alliances on firm innovation performance. Drawing from the literature on technological cognitive distance in alliances we elaborate on the role of industry cognitive distance between partners and its impact on managerial attention to investigate the role of numbers of alliances of low (intra-industry) and high (inter-industry) industry cognitive distance on firm innovation performance. Intra-industry alliances offer lower opportunities for innovation compared to inter-industry alliances and are less demanding on firm management due to higher cognitive similarity between partners from the same industry. We propose that trade-offs between innovation opportunities and management efforts result in an inverted U and a U shaped relationship between the number of intra- and inter- industry alliances and innovation performance respectively. We find support for both hypotheses in the context of the UK bio-pharmaceutical sector