It’s How Widely You Search and From Where You Get the Pieces. How Search Scope and the Origins of Knowledge Impact Innovative Performance in R&D Alliances

Innovation is a fundamental source of competitive advantage, and a large literature has struggled to understand the drivers of innovation and how they should be managed to increase innovative performance (Brown and Eisenhardt, 1995). Evolutionary theorists and organizational scholars have taught us that innovation arises from the exploration of new trajectories, which in turn leads to the creation of new knowledge (Nelson and Winter, 1982; March, 1991). The new knowledge, however, typically results from novel combinations of existing pieces of knowledge obtained from multiple different, internal and external, sources (Schumpeter, 1934; Galunic and Rodan, 1998; Fleming, 2001). Based on this stylized picture of the innovation process, we argue that, in order to better understand what drives innovative performance, we need to focus both on how economic actors search for new knowledge (i.e., explore), and on the characteristics of the existing knowledge that is combined to generate innovation. In this paper we make a first step towards using the above framework for empirical research. In doing so, we start from the assumption that firms and their innovative activities are embedded in complex interpersonal and interorganizational networks that influence innovative performance at the firm, dyad, and network levels (Kreiner and Schultz, 1993; Liebeskind et al., 1996; Capaldo, 2007). Specifically, we focus on dyadic interfirm R&D alliances (R&D alliances hereinafter), which have been shown to be a tremendous source of innovation in previous literature (Shan, Walker and Kogut, 1994; Baum, Calabrese and Silverman, 2000). However, while the drivers of innovation performance at the firm level have been examined extensively (e.g. Stuart, 2000; Sampson, 2007), little is known about the factors that influence innovative performance at the dyad level. In an attempt to fill this gap, we focus on two relevant such factors, namely the scope of the search performed by the allied firms and the geographical and organizational origins of the knowledge resources that the participating organizations contribute to the alliance and integrate across their boundaries for the benefit of the relationship. We develop testable hypotheses about the (both separate and joint) impact of these factors on the innovative performance of R&D alliances, and we test them on a sample of 1912 R&D alliances established by ten multinationals operating in the Electric and Electronic Equipment (EEE) industry