The Effect of Competition among a Firm’s Partners on its Knowledge Production Structure and Outcome

A large body of research suggests that firms benefit from alliances by recombining knowledge obtained from different alliance partners. However, this strategy is premised on the ability of the firm to cross-pollinate knowledge by sharing information freely within its boundaries. But such unrestricted knowledge flows can create leakage concerns for the firm’s alliance partners when the firm’s portfolio of alliance ties includes partners who compete with each other. Even inadvertently, interactions and communications among the firm’s knowledge workers can create a conduit for spillovers to competing partners. This opens up the possibility that to address its partners’ concerns, the firm might segregate its knowledge workers, in effect establishing structural safeguards. Using a sample of public bio-pharmaceutical firms, we demonstrate how competition among a firm’s alliance partners leads to such segregation among its knowledge workers, and show that the effect of such segregation is to undermine the very benefits of recombination by reducing the firm’s overall inventiveness. In doing so, our study contributes to the literature at the intersection of corporate strategy, organization design, and innovation.