Knowledge Behind Firewalls: How Rivalry Among Alliance Partners Constrains Innovation Inside Firms

Organizations can gain substantial knowledge synergies from their alliance portfolios, and research suggests firms may benefit even more when their partners compete directly with each other. However, firms can only capture such synergies if their own inventors are allowed to freely exchange knowledge obtained from these partners to create novel combinations. We challenge this premise and argue that, because partners in such configurations are more concerned about the risks of knowledge leakage to their rivals, they will pressure the focal firm into imposing credible safeguards that restrict the access and handling of knowledge inside its organization. We predict that the constraints imposed by these safeguards will be reflected in a higher disconnectedness in the focal firm’s inventor collaboration network, with the extent of these constraints tied to the relative technological bargaining power the focal firm holds over its partners. Importantly, these safeguards are not costless, and we predict that the disconnectedness induced will affect the focal firm’s innovation performance by undermining its ability to create and appropriate inventive value. Using a longitudinal sample of pharmaceutical firms, we find consistent support for these arguments. Our study contributes to research on interfirm alliances, intraorganizational networks, and innovation while offering practical insights for managers. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2022.17230 .