The Effects of Legal, Normative, and Cultural-Cognitive Institutions on Innovation in Technology Alliances

• Adopting an institutional lens, this paper examines the interaction between different levels of legal, normative and cultural-cognitive institutions on the level of innovation associated with the choice of alliance governance mechanism as equity or contractual.
• Using patent data, this paper undertakes multilevel modelling of 314 technology alliance portfolios located in Europe, North America and the Asia-Pacific region.
• Key findings indicate normative and cultural-cognitive institutions do affect the performance outcomes of alliances. Equity alliances provide supporting mechanisms that quell fears about organizational risk in alliances under conditions of uncertainty avoidance as the dominant cultural-cognitive frame, and hence contribute to better innovation performance. Contractual alliances are associated with higher levels of innovation under normative contexts that value collectivism rather than individualism.
• Contrary to expectation, the results do not support the literature of a fit between equity alliances and weak intellectual property rights protection on innovation. However, the presence of highly formalized legal processes for enforcing contracts is associated with higher levels of innovation from alliances.