Linking alliance portfolios to recombinant innovation: The combined effects of diversity and alliance experience

Innovating firms establish alliance portfolios in hopes of creating recombinant innovation, an outcome of combining new ideas from diverse technological domains. We draw on research in alliances, social networks, and knowledge spillovers to identify the configuration of alliance portfolio that links to recombinant innovation. Our longitudinal analysis of firms in the biotechnology industry shows that the technological diversity of a firm's alliance portfolio has a positive impact on the breadth of recombinant innovation produced by the firm. This relationship is strengthened in the presence of explorative alliance experience, rather than exploitative alliance experience, between the firm and its portfolio partners and among the portfolio partners. However, the positive influence of alliance experience in general diminishes when more than half of portfolio partners have prior ties with the firm. Finally, our licensing revenue data show that the breadth of recombinant innovation is strongly related to the economic value of the innovation. Our findings suggest that innovating firms need to manage the balancing act between sourcing for ideas from unfamiliar domains and leveraging alliance experience in configuring their alliances in aggregate. This study offers new insight into the composition and the collective experience of alliance portfolios, extending our understanding of alliance performance beyond the outcome of bilateral alliances.