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Market uncertainty, innovation of firms in alliance and alliance partner characteristics

JungYun Han (National Taiwan University, Taipei, Taiwan)
Ribuga Kang (The Chinese University of Hong Kong, Hong Kong, China)

European Journal of Innovation Management

ISSN: 1460-1060

Article publication date: 16 October 2020

Issue publication date: 12 October 2021

868

Abstract

Purpose

While prior alliance literature has focused on how firms exploit alliance strategies to enhance performance and innovation, little is known about whether market uncertainty increases, decreases or has no effect on innovation outcomes of firms involved in alliances, and under what conditions these firms promote innovation in an uncertain market through alliances. Relatedly, innovation research has examined the impact of environmental uncertainty on innovation; however, this line of research does not answer the question in the alliance context.

Design/methodology/approach

Using data of firms engaged in alliances in the US pharmaceutical and biotechnical industries between 1990 and 2015, the authors examine firms' alliance partner characteristics and innovation outputs in terms of innovation quantity and exploratory innovation.

Findings

We find that market uncertainty hampers innovation quantity and exploratory innovation of firms involved in alliances, because in this environment, relational risks and coordination challenges outweigh the benefits of knowledge sharing from partners. However, the authors find that alliance partners' characteristics such as a different industry and different country origins mitigate the negative effect of market uncertainty on these firms' innovation by offering new business opportunities and enhancing their learning capability.

Originality/value

This study contributes to the alliance literature by addressing a significant question of whether and how market uncertainty matters in the innovation output of firms involved in alliances and how these firms address the environmental challenges and promote innovation. The study also contributes to innovation research by delineating the nature of market uncertainty and its impact on innovation in an alliance context.

Keywords

Acknowledgements

The authors appreciate editorial guidance of Prof. Vincenzo Corvello and that of the two anonymous EJIM reviewers. It received the funding from CUHK business school direct grant in Hong Kong and from the Ministry of Science and Technology in Taiwan. Two authors equally contributed to the paper.

Citation

Han, J. and Kang, R. (2021), "Market uncertainty, innovation of firms in alliance and alliance partner characteristics", European Journal of Innovation Management, Vol. 24 No. 5, pp. 1883-1905. https://doi.org/10.1108/EJIM-05-2020-0195

Publisher

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Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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