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TABLE 3     
Benefits of Cooperation Between Two Firms In An Alliance
With Separate, Distinct, and Complementary Knowledge Resources*  

Firm One Cooperate Not Cooperate Opportunism
Firm Two      
Cooperate 20,20 0, 10 -5, 5
Not Cooperate 10, 0 0, 0 -10, -10
Opportunism 5, -5 -10, -10 -20, -20

*The first quantity is for Firm One; the second quantity is for Firm Two.

H3a:  Access to the expertise and skills of an alliance partner will be positively associated with alliance success.

H3b:  Access to the expertise and skills of a larger alliance partner will be positively associated with the performance of the entrepreneurial firm.

Knowledge in entrepreneurial firms

    Economists have concluded that entrepreneurial activity is a product of information asymmetry, arguing that such activity cannot exist in a world of perfect information (Klein, 1977).  Entrepreneurial activity ultimately depends on some firms possessing and exploiting knowledge that other firms do not have, reflecting asymmetries in knowledge about what is currently done and what could be done (Kirzner, 1973, 1979; Mises, 1949, Schumpeter, 1934).

    Cohen and Levinthal (1990) demonstrated that organizational innovation is dependent upon the organization’s knowledge base.  Failure on the part of organizations to learn eventually results in decline and dissolution.  Simon (1991) argues that organizational learning takes place inside the individual and is passed on to the organization in two ways:  by the learning of the organization members, or by ingesting new members who have knowledge the organization didn’t previously have.  Finally, a number of researchers (Argyris & Schon, 1978; Hedberg, 1981; Shrivastava, 1983; Weick, 1979) argue that unless learning becomes embedded in the systems, structures and procedures of the organization, individuals will have learned, but the organization will have not.

    We propose that another benefit of alliances is that not only do alliances create value for the small entrepreneurial firm, but they also promote economies of learning.  Approaches to the acquisition and profitable exploitation of productive knowledge, such as the experience curve, must be taken into account in any discussion on innovation (Winter, 1987).  An accepted theme in strategy is that a producer may become more efficient as experience is gained.  If the knowledge base underlying this efficiency gain is tacit, it may become a source of competitive advantage if it cannot be imitated or transferred to other producers (Rumelt, 1987).  We are suggesting that alliances allow firms to specialize their knowledge base, and to exchange this specialized knowledge in an alliance, while acquiring the tacit and specialized knowledge of the other firm.  Alliances represent an organizational structure which allows firms to acquire new knowledge from individuals, without actually hiring those individuals.  From this discussion, we present our final hypothesis:

H4: Firms will acquire the knowledge of their alliance partners.

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