Research institutes mainly engage in product innovation for the purpose of applying, testing and usually also transferring knowledge or technology. Managing product innovation processes in this type of environment leads to various problems with the establishment and managent of alliances and alignment. In this paper a systematic analysis of product innovation at two energy research institutes is presented, paying explicit attention to the strategic alliances in terms of alignment mechanisms. The cases illustrate clearly how the research institutes manage their external networks for product innovation, allowing comparison of the strengths and weaknesses of the two research institutes, and an indication of lessons to be learned from each other. The systematic analysis contributes to the identifying of the appropriate product innovaiton objectives to be pursued through strategic alliances, as well as the determination of suitable alignment mechanisms for product innovation. Lessons learned are presented in the area of context and contingency influences, crossing organizational barriers, differences in culture and the balancing of operational effectiveness and strategic flexibility.