The relationship between partner diversity and innovation performance in multi-partner alliances: The moderating effect of power asymmetry

Research examining the inter-organizational differences conceptualized and operationalized variety in multi-partner alliances is usually based on the assumption of equal power. However, power differences exist in almost all alliances, especially in multi-partner alliances. As a result, little is known about the impact of power asymmetry as moderator variable on the relationship between variety and innovation in R&D alliances with multiple partners. Therefore, we investigate the moderation effect of power asymmetry on the relationship between variety and the innovation performance in multi-partner R&D alliances. To address this question, we use a database of 409 R&D alliances with multiple partners granted funding from the Netherlands Technology Foundation STW between 2000 and 2004. We found a mutual reinforcing effect of power asymmetry on the relationship between variety and innovation performance in multi-partner alliances. The innovation-related benefits associated with organizational and industry variety can encourage use of power to facilitate coordination in high power asymmetric relationships, and begin positive reinforcement loops. The coordination challenges associated with functional variety can encourage the opportunistic use of power in high power asymmetric, and initiate a negative spiraling effect. This implies that researchers should always consider power asymmetry to fully understand the effects of variety in multi-partner alliances.