KNOWLEDGE FLOW AND VALUE CREATION: INTEGRATING STRUCTURAL EMBEDDEDNESS AND KNOWLEDGE EMBEDDEDNESS IN ALLIANCE NETWORKS

Scholars in a variety of disciplines, including organizational theory, strategic management, and economics, have devoted substantial attention to the question: why are some firms more innovative than others? It has been largely accepted that when the knowledge base of an industry is both complex and expanding and the sources of expertise are widely dispersed, the locus of innovation will be found in networks of inter-organizational collaborations than individual firms. Strategy researchers have recently begun to explore how inter-firm networking affects organizational innovation performance, and reported intriguing yet conflicting findings. Drawing perspectives from strategic alliance, social networks, and technology innovation, I proposed an integrative framework to investigate the combined effects of a firms network centrality and structural hole on organizational innovation performance. Furthermore, I examine the innovation performance both in terms of innovation rate and innovation value.I conducted a longitudinal study on a population of firms from 1990 to 1999 in pharmaceutical industry (SIC 2834). The results of the study indicate that: 1) Network centrality helps a firm to increase its rate of innovation, and structural hole helps to improve its value of innovation, while both effects are non-linear. 2) Network centrality positively moderates the relationship between structural hole and innovation value. 3) Structural hole negatively moderates the effect of network centrality on innovation rate. The joint effects suggest that firms with advantageous network positions are more capable of making wise technology selections and focusing their efforts on innovations of greater value.