Abstract
Our study tests hypotheses concerning the relation between innovative performance and cognitive distance in inter-firm alliances. The central hypothesis is that performance is an inverted-U shaped function of cognitive distance, which implies a certain optimal cognitive distance. A second hypothesis claims that optimal cognitive distance is higher for exploratory than for exploitative learning. A third hypothesis claims that optimal cognitive distance is a function of absorptive capacity, which depends on cumulative past R&D. Most hypotheses are confirmed on the basis of data from 994 alliances in a variety of industries, in the ten-year period 1986-1996. The results indicate a new hypothesis that with a large stock of knowledge one needs greater cognitive distance for further novelty.
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