Differential effects of geographic-cluster and alliance resources on firm innovation: The moderating role of firm technological capability

In this study, we focus on two significant sources of a firm’s external knowledge—geographic clusters and strategic alliances—and examine whether a firm’s technological capability influences the effectiveness of these two sources of knowledge for firm innovation performance in different ways. We theorize that clusters and alliances differ in their knowledge flow mechanisms, leading to varying roles of internal technological capability. Specifically, we argue that a firm’s capability is more crucial for absorbing and integrating knowledge from clusters, where information flows in a fragmented form through informal channels. Furthermore, firms are less concerned about knowledge loss due to the nature and pattern of knowledge flows in clusters. In contrast, in alliances, where knowledge flow is more integrated and structured, technologically capable firms are generally more concerned about knowledge loss, which adversely affects reciprocity and, consequently, the flow of knowledge between partners. Moreover, since knowledge in alliances is transferred through structured mechanisms, the advantages of high internal capability in absorbing and integrating partner knowledge become less significant. Using 15 years of longitudinal data from the U.S. semiconductor industry—a sector characterized by innovation, strategic alliances, and clustering tendencies—we find that technologically stronger firms derive greater innovation benefits from clusters in enhancing the value of their innovations. In contrast, technologically weaker firms gain more from strategic alliances. Overall, our study supports our hypotheses and provides a nuanced understanding of how internal technological capability operates differently in leveraging external knowledge from clusters versus alliances.