Absorptive Capacity and Ambidexterity in R&D: Linking Technology Alliance Diversity and Firm Innovation

• Author: Stephen Roper,Abel Lucena
• DOI: http://doi.org/10.1111/emre.12074
• Date: 01 September 2016
• Published date: 01 September 2016

Absorptive Capacity and Ambidexterity in

R&D: Linking Technology Alliance Diversity

and Firm Innovation

ABEL LUCENA

1

and STEPHEN ROPER

2

1

Business EconomicsDepartment, University of the Balearic Islands, Palma, Spain

2

Enterprise ResearchCentre and Warwick Business School, University of Warwick, Coventry,UK

The aim of this study is to examine how firms realize the benefits associated with a diverse range of technology

alliances.We propose and testthe hypothesis that firms’knowledge combinativecapabilities mediate the relationship

between technology alliancediversity and innovation.Using panel data for Spanishmanufacturing companiesduring

the period 2004–2011, we provide evidence that firms’absorptive capacity and ambidexterity in R&D serve as

mediating mechanisms between technology alliance diversity and innovative performance. Our study advances the

literature on technology alliances by showing how firms use their portfolios of technology alliances to form their

combinative capabilities, and subsequently, to enhance innovation outcomes.

Keywords: absorptive capacity; ambidexterity; technology-alliance diversity; firm innovation; mediation analysis

Introduction

Innovation is the process through which firms find

solutions which meet market needs through knowledge

search (Katila and Ahuja, 2002). The generation of

solutions in this process depends critically on firms’

ability to combine existing knowledge in new ways

and/or reconfigure how new and existing knowledge is

combined (Henderson and Clark, 1990). As shown by

prior studies, technology partnerships play a potentially

important role in enhancing firms’knowledge

recombination capabilities (Rosenkopf and Almeida,

2003; Grant and Baden-Fuller, 2004). Involvement in

technology alliances enables firms to extend their

knowledge search activities outside their organizational

boundaries, encouraging the formation of novel

combinations of knowledge (Rothaermel and Alexandre,

2009; Rosenkopf and McGrath, 2011). Recent studies

have identifiedthe diversity of firms’technologyalliances

as an important factor in shaping innovative performance

by enhancing the opportunities for new knowledge

combinations (Faems et al., 2005; Sampson, 2007;

Oerlemanset a l.,2013; Wuyts and Dutta, 2014).Diversity

in this context refers to the degree of differentiation –

defined in terms of a given trait –among the set of

alliances formed by a firm. This may relate, for instance,

to the presence of different partner types along the

innovation value chain (e.g., upstream, downstream,

horizontal links), or across distinct geographic contexts

(e.g., regional, national, international) (Powell et al.,

1996; Nieto and Santamaria, 2007; Duystersand Lokshin,

2011; Faems et al., 2012; van Beers and Zand, 2014).

Empirical studies on technology alliance diversity

confirm that new knowledge combinations resulting from

links with different partner types shape firms’innovation

outcomes. Some studies find evidence indicating the

presence of positive innovation performance effects

linked to technological alliance diversity (Nieto and

Santamaria, 2007; van Beers and Zand, 2014; Wuyts

and Dutta, 2014). Other studies report that the effects of

technology alliance diversity are significant, but limited

by the presence of important liabilities, such as the

learning difficulties and management costs associated

with highly diverse alliance portfolios (Sampson, 2007;

Duystersand Lokshin, 2011; de Leeuw et al., 2014). More

recently, studies have suggested the potential value of a

contingency perspective to uncover the factors that

influence the technology alliance diversity–innovation

relationship (Faems et al., 2012). Firms’technology

management capabilities (Oerlemans et al., 2013), the

configuration of the firm’s internal knowledge bases

(Wuyts and Dutta, 2014), and firms’experience in

Correspondence: Abel Lucena, Business Economics Department,

University of the Balearic Islands, Campus UIB, 07122, Palma, Spain.

E-mail: abel.lucena@uib.eu

European Management Review, Vol. 13, 159–178, (2016)

DOI: 10.1111/emre.12074

©2016 European Academy of Management

managing diverse external knowledge sources (Love

et al., 2013) have all been identified as potentially

important factors in moderating the impact of technology

alliance diversity on innovative performance.

Prior studies postulate a direct relationship between

technology alliance diversity and firms’innovation

outcomes. Knowledge recombination and its associated

complementarities are widely recognized as the predominant

mechanism driving this relationship. Yet, previous research

tends to conceive of knowledge recombination as a ‘black

box process’, in which the focus is on determining the

connection between inputs (technology alliance diversity)

and outputs (innovation outcomes) rather than explaining

how firms actually undertake knowledge recombination.

More research is therefore needed to uncover the

mechanisms through which technology alliance diversity

shapes firms’innovative performance.

In this paper, we aim to fill this gap by proposing a

theoretical framework for how firms’knowledge

combinative capabilities mediate the connection between

technology alliance diversity and innovative outputs. Our

goal is to determine whether the relationship between

technology alliance diversity and innovation outcomes

occurs indirectly through the development of these

capabilities. We define technology alliance diversity as

the combination of two attributes: the position of firms’

partnerships across the innovation value chain and the

geographic scope of their partnerships. We also focus on

the mediating role played by two specific knowledge

combinative capabilities: firms’absorptive capacity

(ACAP) and their ambidexterity in research and

technological development (R&D). Using rich panel data

on Spanish manufacturing companies for the period,

2004–2011, our evidence shows greater technology

alliance diversity helps firms to improve their ACAP and

ambidexterity in R&D. This increases firms’ability to take

advantage of both internally and externally based

knowledge and knowledge generated by different learning

processes (exploration vs. exploitation). We then provide

evidence indicating that, by influencing firms’knowledge

combinative capabilities, technology alliance diversity

enhances innovative performance

Our research extends the previous literature in the

following respects. To the best of our knowledge, this is

the first study that integrates research on ACAP and

ambidexterityto explain how firms create value fromtheir

technology alliances. Compared to other studies on

alliance diversity (Faems et al., 2005, Sampson, 2007,

Duysters and Lokshin, 2011, de Leeuw et al., 2014, van

Beers and Zand, 2014) our research demonstrates that

ACAP and ambidexterity in R&D are important in

enablingfirms to realize the benefits ofdiverse technology

alliances. Somestudies have started to consider mediating

mechanisms to link alliance formation and firm

innovation. For instance, Fosfuri and Tribó (2008)

analyze how alliance formation drives a firm’spotential

ACAP, and then, its innovative performance. However,

they ignore the role of alliance diversity as an influence

on firms’knowledge combinative capabilities. Simsek

(2009) proposes a model in which network diversity

impacts firms’organizational ambidexterity, and

subsequently, its perf ormance but does not empir ically

validate these relationships. Together, these contributions

provide only a fragmented view of the relationship

between alliance diversity and firm performance and the

potential mediatingrole of both ACAP and ambidexterity.

Our study identifies technology alliance diversity as a

new antecedent of firms’ambidexterity extending previous

studies which have focused on intra-organizational

characteristics and environmental conditions as the main

determinants of ambidexterity in exploration and

exploitation (Gupta et al., 2006; Jansen et al., 2006; Raisch

and Birkinshaw, 2008). Our study also offers new

evidence to indicate that technology alliance diversity can

contribute to ACAP. Several prior studies have theorized

about this linkage (Cohen and Levinthal, 1990; Nicholls-

Nixon, 1995; Zahra and George, 2002) but very few

have actually provided empirical evidence about the

impact of technology alliance diversity on ACAP (George

et al., 2001).

Our study is not only the first to assess the indirect effects

of technology alliance diversity on firms’innovative

performance through its ACAP and ambidexterity in

R&D, but we also conduct this assessment using panel

data. Thus, compared to other studies (George et al.,

2001; Fosfuri and Tribó, 2008) we are able to establish

causality and to avoid problems, such as the presence of

common method bias, which might affect the validity of

the reported results. In addition, our research exploits rich

data on firms’alliance portfolios that allows an examination

of the effects of diversity arising not only from R&D

collaboration but also from market-based agreements. In

doing so, this study generates new evidence about the

impact of alliance diversity arising from market-based

agreements on innovation outcomes.

The paper is organized as follows. The next section

presents the theoretical foundations for studying the links

between technology alliance diversity, knowledge

combinative capabilities and innovation. In subsequent

sections, data, methods and results of the study are

described and concluding remarks are discussed in detail.

Theoretical background

Explainingthe links between technology alliancediversity

and success in innovation

We postulate that firms realize the benefits of technology

alliance diversity when diversity contributes to the

160 A. Lucena and S. Roper

©2016 European Academy of Management