Disentangling the role of knowledge similarity on the choice of alliance structure

This paper examines the effect of knowledge similarity on the choice of alliance structure in the biotechnology industry. Knowledge similarity between two alliance partners has implications for both integrating and protecting knowledge. Alliance partners have incentives to select the alliance structure that maximizes efficiency in integrating knowledge. Likewise, alliance partners have incentives to select the alliance structure that protects appropriable knowledge. We draw upon the arguments of the knowledge accessing theory and causal ambiguity perspectives as well as the transaction cost economics perspective to predict the role of knowledge similarity on the choice of alliance structure. We empirically test the role of technological overlap and technological component on alliance structures-equity based versus non-equity based. The empirical results show that as technological overlap increases and technological component exists, the probability of equity based alliance structure increases.