Competence and Governance in Strategic Collaboration: The Differential Effect of Network Structure on the Creation of Core and Noncore Technology

Abstract

Whereas most of the literature on the benefits of alliances for learning and innovation has taken on a competence perspective, this paper provides an alternative integrated framework based on both a competence and governance point of view. The former focuses on the role of knowledge flows as means to access new knowledge, whereas the latter is centered around the core concepts of opportunism and freeridership in knowledge exchange situations. Although it has generally been acknowledged that competence-based benefits of collaboration may come at a price of elevated risks due to knowledge spillovers and freeridership, such a governance view remains understudied. This paper explains how a firm's alliance network structure affects benefits as well as risks of collaboration in the context of the creation of core and noncore technology. In the case of core technology, firms attach more value to reducing governance-based risks relative to obtaining competence-based benefits. The opposite is found when firms develop noncore technology. This paper contributes to the existing literature by going beyond the common idea that competence and governance perspectives are either complementary or competing. Instead, this study shows that for technology-based collaboration, they can both apply at the same time, implying a trade-off in some cases and offering synergy in other cases. Based on an empirical test in three different industries (pharmaceuticals, chemicals, and automotive), there is support for most of our hypotheses. Direct ties have an inverted U-shaped effect on both core and noncore technology, and the effect is relatively stronger for the former. The results furthermore show that indirect ties play a positive role in noncore technology development and that this effect is not hampered by the number of direct ties a firm has. In contrast, indirect ties seem to hamper core competence development when companies have a lot of direct ties. Finally, firms are found to benefit from nonredundancy in their alliance network in their efforts to strengthen their core technology. The joint effect of these three network characteristics leads to optimal results for core and noncore technologies under quite different alliance network structures. This poses a problem for the ambidexterity of companies, when they simultaneously try to strengthen core and noncore technologies.