Chapter 4: Dynamic Knowledge Capabilities in Strategic Alliances

Firms have a variety of mechanisms for developing knowledge, with a key externally oriented one being the formation of strategic alliances with other firms. We hypothesize that the form of strategic alliance vehicle that is used is related to characteristics of the type of knowledge that is sought by the firm. We employ the theory of dynamic knowledge capabilities to explain how firms increase their knowledge to address strategic objectives and environmental stimuli. The data consist of the historical annual status reports from an important knowledge-generating practice of firms: research and development projects that involve alliances with external partners. Examining a 10-year longitudinal portfolio of strategic alliance projects from a North American utility company, we apply a typology of dynamic knowledge capabilities based on exploration versus exploitation and absorptive versus combinative capacity dimensions to test our hypotheses. We find that there is a relationship between the dynamic knowledge capabilities applied by a firm and the strategic alliance vehicles it enters into to acquire knowledge.