Cooperation in International Strategic Alliances and Impact on Host Economies: Knowledge Transfer and Diffusion to Local Firms

Researchers have suggested that linkages between multinational enterprises entering developing countries and local firms can promote knowledge upgrading in local firms. Alliances are a particularly intense type of linkage, and this study investigates how the construct of cooperation, which is the essence of alliance activity, relates to knowledge transfer from foreign to local alliance partners, and then to how large a proportion of that knowledge is subsequently diffused to other local firms. The results suggest that although alliance cooperation is positively associated with knowledge transfer from the foreign to the local partner - thus raising the potential for knowledge diffusion - it is negatively related to the proportion of that knowledge that is diffused to the local partner's competitors, and only insignificantly to the proportion diffused to its suppliers and customers. However, the difference between the coefficients for diffusion to competitors and to suppliers and customers is significant.