Partner Geographic and Organizational Proximity and the Innovative Performance of Knowledge-Creating Alliances

We adopt a knowledge-based perspective to investigate the individual and interaction effects of partner geographic and organizational proximity on the innovative performance of knowledge-creating alliances. Our econometric analysis on a sample of 1,515 interfirm dyadic knowledge-creating R&D alliances shows that both geographic distance between allied firms and their affiliation with the same business group negatively affect the alliance innovative performance. However, when jointly considered, the two examined partner characteristics positively moderate each other's effect on alliance innovative performance, so revealing a complementary effect on it. We argue that, while the existence of group ties between geographically distant organizations reduces the negative influence of geographic distance on the partners' ability to integrate their knowledge within the alliance, collaborating with remote partners weakens the negative influence of the existence of group ties between partners on knowledge diversity in alliances. We conclude that geographic distance and organizational proximity are contingent upon one another in their effect on the innovative performance of knowledge-creating alliances and that distance (proximity) in one dimension can be bridged (overcome) by proximity (distance) in another dimension.