Managing the paradox of inter‐firm learning: the role of governance mechanisms

Organizational learning in inter‐firm exchange relationships poses a double‐edged sword. On one hand, inter‐firm learning is a desirable extension of organizational learning, developing a firm’s knowledge base, and providing fresh insights into strategies, markets, and relationships. On the other hand, inter‐firm learning can lead to unintended and undesirable skills transfer, resulting in the potential dilution of competitive advantage. This risk can be exacerbated by disparities in inter‐firm learning, resulting in uneven distribution of benefits and risks in the collaborative relationship. This paper articulates these two different views on inter‐firm learning, and second, develops a framework for the role of governance in regulating knowledge transfer. In particular, appropriate governance mechanisms must be crafted which match the learning intentions of the partners, the type of knowledge sought, and the designed duration for the collaboration, so as to maximize the benefits of learning while minimizing the risks. Implications for strategy and future research are offered.