Information Environment and Interfirm Alliance

Interfirm alliances require effective mechanisms that facilitate the integration of pertinent knowledge between independent firms. This paper examines whether a firm’s information environment helps improve collaborative outcomes. Using a large panel of firms engaging in global research and development (R&D) collaboration, we find that firms with better information environments are associated with a higher level of collaborative outputs and a broader scope of collaborative networks. The improvements in collaborative outcomes are more pronounced when alliance partners have a greater reliance on informal relationships instead of formal contracts. Further analysis shows that a better information environment helps foster a more durable relationship between partners. Lastly, a path analysis shows that facilitating interfirm collaboration is one of the main channels through which transparency boosts a firm’s innovative productivity. Overall, our findings suggest that the quality of a firm’s information environment plays a crucial role in sustaining efficient relational contracting in interfirm alliances