A hidden cost of strategic alliances under Schumpeterian dynamics

Recently, proponents of interfirm R&D collaboration have emphasized its benefits. We develop a dynamic model of Schumpeterian competition to examine whether Such collaboration is indeed beneficial in the long run. We find that interfirm R&D collaboration is more likely to be a losing Strategy when Partners form alliances mainly to reduce R&D costs. On the other hand, partners collaborating to seek synergy by accessing each other's complementary assets/capabilities are more likely to be successful. Out study suggests that firms should not use strategic alliances Merely to reduce R&D costs in a catch-up situation or to avoid head-on competition with rivals. (C) 2009 Elsevier B.V. All rights reserved.