Strategic alliances between firms yield more patents, innovation

Aug 3 2007

Larger numbers of patents and more perceptible innovation are the outcomes of certain well-designed strategic alliances between firms, according to the Management Insights feature in the July special issue of Management Science on Complex Systems.

Management Science is the flagship journal of the Institute for Operations Research and the Management Sciences (INFORMs).

Management Insights, a regular feature of the journal, is a digest of important research in business, management, operations research, and management science. It appears in every issue of the monthly journal.

"Interfirm Collaboration Networks: The Impact of Large-Scale Network Structure on Firm Innovations is by Melissa A. Schilling of the Stern School of Business at NYU and Corey C. Phelps of the University of Washington.

Strategic alliances are widely-used and important vehicles for firm growth and innovation. As firms form and maintain alliances, they weave a network of direct and indirect relationships. The pattern of these relationships constitutes the structure of the alliance network.

The authors believe that a firm benefits when it participates in a network that exhibits both high clustering and high reach."

A highly clustered network is one in which subsets of firms in the larger network are densely connected to each other. Clustering enables information to travel quickly and with high fidelity because it creates paths between firms and increases the level of cooperation among them.

A network in which firms are directly or indirectly connected to many others via short paths has high reach. Reach increases the amount and diversity of information available to a firm by increasing the number of other firms that provide information and by decreasing the path length the information has to travel.

The authors analyzed the innovative performance of 1,106 firms in 11 industry-level alliance networks over a six-year period, and concluded that large-scale alliance networks that exhibited high levels of clustering and reach enhanced firm innovation.

The current issue of Management Insights is available at http://mansci.journal.informs.org/cgi/reprint/53/7/iv. The full papers associated with the Insights are available to Management Science subscribers. Individual papers can be purchased at http://institutions.informs.org. Additional issues of Management Insights can be accessed at http://mansci.pubs.informs.org/.

The Insights in the current issue are:

• Cooperation in Evolving Social Networks by Nobuyuki Hanaki, Alexander Peterhansl, Peter S. Dodds, Duncan J. Watts
• Bilateral Collaboration and the Emergence of Innovation Networks by Robin Cowan, Nicolas Jonard, Jean-Benoit Zimmermann
• Patterned Interactions in Complex Systems: Implications for Exploration by Jan W. Rivkin, Nicolaj Siggelkow
• Membership Herding and Network Stability in the Open Source Community: The Ising Perspective by Wonseok Oh, Sangyong Jeon
• Call-Center Labor Cross-Training: It's a Small World After All by Seyed M. R. Iravani, Bora Kolfal, Mark P. Van Oyen
• Interfirm Collaboration Networks: The Impact of Large-Scale Network Structure on Firm Innovation by Melissa A. Schilling, Corey C. Phelps
• The Statistical Mechanics of Complex Product Development: Empirical and Analytical Results by Dan Braha, Yaneer Bar-Yam
• Analyzing Consumer-Product Graphs: Empirical Findings and Applications in Recommender Systems by Zan Huang, Daniel D. Zeng, Hsinchun Chen
• Complexity and the Character of Stock Returns: Empirical Evidence and a Model of Asset Prices Based on Complex Investor Learning by Scott C. Linn, Nicholas S. P. Tay
• Emergent Properties of a New Financial Market: American Venture Capital Syndication, 1960-2005 by Bruce Kogut, Pietro Urso, Gordon Walker

INFORMS journals are strongly cited in Journal Citation Reports, an industry source. In the JCR subject category operations research and management science," Management Science ranked in the top 10 along with two other INFORMS journals.