When Institutions collide: Firms' innovation in alliances under institutional relatedness and knowledge ambiguity

Keywords: institutional relatedness, institutional development, knowledge complexity, knowledge specificity, alliance exploration

Abstract: Can too much institutional relatedness be detrimental to firm’s exploration in alliances? In this study we investigate whether firms’ orientations toward exploration in partnerships reflects the characteristics of their knowledge resources and whether these characteristics are determined by firms’ institutional relatedness (captured by the number and strength of institutional ties). We first hypothesize that institutional relatedness increases the complexity and specificity of firms’ knowledge stock and that this effect is stronger in less developed societies. We walk the logic path farther and hypothesize that as complexity and specificity of firms’ knowledge pool increases, firms’ orientation towards exploratory alliances decreases as a result of difficulties in understanding and application of this knowledge. This study integrates institutional theory and intra-organizational knowledge transfer research by developing a model of institutional relatedness, knowledge ambiguity, and firms’ alliance orientation.