When More is Better: A Contingent View of Alliance Partner Multiplicity and A Focal Firm’s Product Innovation Performance in China

Abstract

Whereas strategic alliances have been widely used to foster product innovation, the extant literature offers inconsistent arguments and inconclusive empirical evidence regarding how the number of partners (i.e., partner multiplicity) in an alliance affects a focal firm’s product innovation performance. The resource-based view (RBV) posits that having more partners in an alliance should benefit a focal firm’s product innovation because of more diverse and a large shared knowledge pool among partners, whereas transaction cost economies (TCE) holds that alliance partner multiplicity may hurt a focal firm’s product innovation due to highex-ante and ex-post costs, and increased governance difficulty and coordination complexity. Building on the RBV and TCE, this study examines the contingent roles of partner-, alliance-, and industry-level factors (i.e., alliance foreignness, alliance duration, and industrial competition). Drawn from multi-informant survey data, the findings reveal that alliance partner multiplicity does not significantly affect a focal firm’s product innovation performance in an emerging market. However, such an effect becomes positive in alliances that involve only domestic partners, operate for relatively short durations, or operate in highly competitive industries. These findings yield new insights with which to disentangle inconsistent arguments in the existing literature and offer important implications for firms seeking innovation benefits from multilateral partnerships.