Information Flow and Knowledge Creation: The Roles of Structural Embeddedness and Knowledge Embeddedness in Alliance Networks

Abstract

Researchers have not yet investigated how alliance networks influence the value of a firm's patents (inventions), despite evidence that this is an important contributor to financial performance. Our paper addresses this gap in the literature. Specifically, we suggest that characteristics of the knowledge contained in a firm's inter-organizational network and the structure of the network will both affect the value of its inventions. Two different dimensions of a firm's network are important. A firm's position within a network, i.e. its structural embeddedness, determines its access to information circulating among members. Characteristics of a firm's direct contacts describe its knowledge embeddedness and determine its access to more fine-grained (tacit, complex) knowledge. We propose that the context (e.g. the difficulty of learning from external sources) and the type of innovation being considered (e.g. entrepreneurship as brokerage versus creation) have implications for how structural and knowledge embeddedness affect invention value. Longitudinal patent and alliance data from the pharmaceutical industry provides support for these ideas.

Keywords: Product Innovation, Strategic Alliance, Social Network, Knowledge Transfer, Structural Embeddedness, Knowledge Embeddedness