Hans T. W. Frankort

The gloomy side of embeddedness: The effects of overembeddedness on inter-firm partnership formation

We discuss the ‘gloomy’ side of firms’ embeddedness in networks of inter-firm partnerships. We propose a nested understanding of the effects of three levels of overembeddedness – environmental, inter-organizational and dyadic overembeddedness – on subsequent inter-firm partnership formation and argue for a joint examination of these three levels and their interactions over time. As a whole, increases in firms’ embeddedness will generate decreasing returns to the firms involved, prompting (i) the search for and attachment to novel partners and (ii) the dissolution of extant partnerships. On the flipside, overembeddedness thus sparks network evolution – by cueing firms to look beyond their embedded partnerships.

Open Innovation Norms and Knowledge Transfer in Interfirm Technology Alliances: Evidence from Information Technology, 1980–1999

Firms tend to transfer more knowledge in technology joint ventures compared to contractual technology agreements. Using insights from new institutional economics, this chapter explores to what extent the alliance governance association with interfirm knowledge transfer is sensitive to an evolving industry norm of collaboration connected to the logic of open innovation. The chapter examines 1,888 dyad-year observations on firms engaged in technology alliances in the U.S. information technology industry during 1980–1999. Using fixed effects linear models, it analyzes longitudinal changes in the alliance governance association with interfirm knowledge transfer, and how such changes vary in magnitude across bilateral versus multipartner alliances, and across computers, telecommunications equipment, software, and microelectronics subsectors. Increases in industry-level alliance activity during 1980–1999 improved the knowledge transfer performance of contractual technology agreements relative to more hierarchical equity joint ventures. This effect was concentrated in bilateral rather than multipartner alliances, and in the software and microelectronics rather than computers and telecommunications equipment subsectors. Therefore, an evolving industry norm of collaboration may sometimes make more arms-length governance of a technology alliance a credible substitute for equity ownership, which can reduce the costs of interfirm R&D. Overall, the chapter shows that the performance of material practices that constitute innovation ecosystems, such as interfirm technology alliances, may differ over time subject to prevailing institutional norms of open innovation. This finding generates novel implications for the literatures on alliances, open innovation, and innovation ecosystems.

Technology alliance governance, partner selection, and firm innovativeness

While research has shown that joint ventures contribute more strongly to a firm’s innovativeness than contractual agreements, technology alliances are often governed by contractual agreements. Bridging alliance governance and partner selection research, this paper suggests how these apparently contradictory findings are fundamentally interrelated. By prevailing research, firms with joint ventures should be more innovative than those with contractual agreements. But as compared with contractual agreements, joint ventures will also reduce firms’ propensity for novel partners. Because novel partners enhance a firm’s innovativeness, joint ventures will therefore indirectly decrease its innovativeness. Finally, novel partners become more important when technological dynamism increases, which will in turn increase the innovative benefits of contractual agreements versus joint ventures. Application of a structural model to a panel of firms engaged in IT-related technology alliances during 1978–1999 generally supports the theory. Overall, the findings advance our understanding of the behavioral and performance consequences of alliance governance.