The Formation of Tie Strength in a Strategic Alliance's First New Product Development Project: The Influence of Project and Partners' Characteristics

This paper draws on theories of interorganizational learning, social networks, and transaction cost economics to investigate the formation of tie strength between first-time alliance partners. It focuses on a strategic alliance's first new product development (NPD) project, which is characterized by a lack of prior experience and insufficient trust between partners and explores how the interaction between (1) interorganizational learning (the degree [amount of knowledge shared] and type [tacit or explicit nature of the knowledge]); (2) the required communication (frequency level and degree of media-richness) to transfer and exchange knowledge; and (3) economic transaction considerations (reducing cost and avoiding opportunism), in highly uncertain and dynamic environments, and, in the absence of an assumption of trust, will determine the future strength of the ties between partners. We argue that the degree and type of interorganizational learning that are required to efficiently develop an alliance's first NPD project determine the strength of the ties between the partners. Each degree and type of learning has a different impact on the frequency and media richness of the partners' communication, and consequently each leads to a different level of social tie strength between the partners. This relationship is moderated by the partners' market overlap. We suggest that the required degree and type of interorganizational learning is contingent on the project characteristics (degree of innovation; radical versus incremental, and the mode of development; modular versus integrated). This relationship, however, is moderated by the partners' technical skills (complementary versus similar).