Conflict Effects of Homophilies on Knowledge Diffusion between Acquiring and Target Firms

Abstract

Using transaction cost and information asymmetry as theoretical lenses, this study examines the influence of origin, status, and knowledge homophily (i.e. a preference for similar others) among inventors on knowledge diffusion between acquiring and target firms after an acquisition. Given that the range of knowledge diffusion is highly limited to immediate collaborators, this research uses cross-collaboration, which refers to a co-work between inventors from acquiring firm and those from target firm, as a knowledge diffusion mechanism between acquiring and target firms. After an analysis of an intra-firm collaboration networks of 319 inventors from Pfizer Inc. and Warner-Lambert Co., I find that origin homophily discourages knowledge diffusion across organizations. Moreover, contrary to what one might have expected, status homophily among lower-status inventors encourages knowledge diffusion between organizations. Despite low transaction costs and information asymmetry, high-status inventors are less like...