DO FIRMS LEARN TO MANAGE? EXPERIENCE AND COLLABORATIVE RETURNS IN R&D ALLIANCES.

Abstract

This paper explores whether firms learn to manage their inter-firm transactions, in the context of R&D alliances. Specifically, I examine whether and how much a firm benefits from current collaborations as a result of prior alliance experience. Using a sample of 464 R&D alliances in the telecom equipment industry, I test learning based arguments linking prior alliance experience and firm benefits from R&D collaborations. I find that prior experience does increase collaborative benefits from the current alliance. However, firms do not benefit from extensive prior experience. Collaborative benefits are improved most with some experience, but extensive experience does not add to this effect. This lack of cumulative benefits from prior experience appears to be partly due to the depreciation of knowledge over time, since only recent experience has a positive impact on collaborative returns. Additionally, while experience positively affects outcomes for all types of R&D alliances, experience is more important for those alliances involving more substantial coordination challenges. I find that the effect of prior experience on collaborative benefits is more pronounced for alliances with complex activities or activities with more uncertain outcomes. This result suggests that a broader set of alliance management processes allows the firm to manage situations of ambiguity more readily. Overall, these results provide empirical evidence of the effect of prior experience on collaborative benefits, both directly and conditional on alliance characteristics, and have implications for learning to manage organizations more generally.