Enhancing the Innovation Performance of Firms by Balancing Cohesiveness and Bridging Ties

This article examines how firms can construct their alliance portfolio to obtain higher rates of innovation. The study develops around the idea that cohesive and sparse relationships are at the same time structurally contradictory and functionally interdependent. Their structural contradiction lies in their illustrating opposite patterns of firm partners’ interconnectedness: cohesive alliances imply that a firms’ alliance partners are in turn highly connected among each other, whereas sparse alliances imply that the partners in these alliances are actually disconnected from each other. But they are functionally interdependent in that they provide different (and complementary) types of contribution to a firm’s innovation performance. On the one hand, by facilitating trust building and cooperation, cohesive alliances provide a normative environment that guarantees the actual execution of knowledge recombinant processes. On the other by exposing firms to novel and varied knowledge flows, sparse alliances break the tendency of cohesive alliances to produce redundancy, and make it possible for the knowledge recombinations that take place across cohesive relationships to actually bear the fruits of innovation. By illustrating the mechanisms whereby the synergies between cohesive and sparse alliances can be obtained and exploited, this study suggests the development of a dual alliance network structure, made up of both cohesive and sparse alliances, as the normative ideal for innovation. The empirical results support this insight, showing that alliance portfolios made up of both types of alliances provide higher rates of innovation than those from either pattern alone. The article demonstrates these findings in the US mobile phone industry in the 1990s, a domain where firms engaged systematically in innovation processes and strategic alliance activities.