A knowledge-based view of strategic alliances

Journal of the Academy of Business and Economics, Jan, 2004 by Yongliang Han

When a firm participating in the knowledge-driven alliances gets the opportunity to transfer knowledge from its partners and redeploy it to areas outside of the scope of the alliances, the value generated from the knowledge will also depend on the firm's absorptive capacity. Cohen and Levinthal (1990) define absorptive capacity as "the ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends". They further argue that a firm's absorptive capacity is largely a function of the firm's level of prior related knowledge. Therefore from the same knowledge infused into the alliances, different firms may perceive different strategic values, depending on their ability to absorb and reuse the knowledge.

Market condition: A firm's perceived strategic value of acquired or newly-generated knowledge is also affected by the market condition. Firms usually enter knowledge-driven strategic alliances to solve the technological or organizational uncertainty they face. Mody (1993) argued that greater uncertainty increases the value of information and thus makes experimenting through alliances more desirable. Uncertainty may be conducive to high alliance activity, which they potentially declines as the uncertainty is reduced or resolved. Hagedoorn and Schakenraad (1990) observed that the number of new alliances in segments of the information technology, biotechnology, and new materials may have started to decline as the technological complementarities are becoming clearer.

Firms may perceive great strategic value from alliances when they face intensive competition. In the industries where competitive pressure is less severe, a firm may have sufficient time to develop and accumulate necessary knowledge from inside the organization. However, when competition is intensified, a firm has to get quick access to key knowledge and can not afford long-time in-house development. Moreover, when there are a number of suppliers of the desired knowledge in the market, a firm may not perceive its strategic value as high as when the supply of knowledge is controlled by a small number of firms. Therefore the market condition of both the knowledge-acquiring firms and the knowledge-supplying firms may affect the perceived strategic value of knowledge, and further lead to different incentives to establish strategic alliances.

2.2 Partner's Appropriability of the Focal Firm's Knowledge

Teece (1987) defined a regime of appropriability as the environmental factors, excluding firm and market structure, that govern an innovator's ability to capture the profits generated by an innovation. In the knowledge-driven strategic alliances, the appropriability of the focal firm's knowledge means to what extent its partner can redeploy the acquired or newly generated knowledge to areas beyond the scope of the current alliance in an unintended way and how it may adversely affect the focal firm's competitive position. The most important dimensions of appropriability are the nature of the knowledge, rivalry between the partners, the efficacy of legal mechanisms of protection, and complementarity of assets.