Degree and type of inter-organizational learning required in strategic alliance´s first new product development project: The tradeoff between benefits and risks

We draw on theories of inter-organizational learning, social networks, and transaction cost economics to examine two strategic options available to a firm in managing a new strategic alliance´s first NPD project. These two strategic options are “benefits-driven strategy” and “risk-driven strategy.” In the first option, the management may encourage its project team to have a highly intense level of communication, and use rich communication media with the firm´s partner team so as to reap maximum benefits of inter-organizational learning. In the second option, due to transaction-cost-economizing considerations and the fear of partners´ opportunistic behavior, the management may encourage its project team toward low intensity level of communications, and a lower degree of media-richness. Under each option, we identify: the amount and type (tacit vs. simple) of inter-organizational learning required and the risks of partner´s possible opportunistic behavior and cost of communication with this partner. We examine the strategic option that would be selected under several conditions and propose the optimum option, based on the trade-offs between the benefits and risk. These conditions are: i) type of innovation (radical/incremental), ii) competitor/non-competitor partners (high/low partners´ market overlapping), iii) NPD mode of work (separate vs. integrated) and iv) partners with similarity/complementary technical skills.