Learning horizon and optimal alliance formation

Hans T. W. Frankort, Johan Hagedoorn, Wilko Letterie

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We develop a theoretical Bayesian learning model to examine how a firm’s learning horizon, defined as the maximum distance in a network of alliances across which the firm learns from other firms, conditions its optimal number of direct alliance partners under technological uncertainty. We compare theoretical optima for a ‘close’ learning horizon, where a firm learns only from direct alliance partners, and a ‘distant’ learning horizon, where a firm learns both from direct and indirect alliance partners. Our theory implies that in high tech industries, a distant learning horizon allows a firm to substitute indirect for direct partners, while in low tech industries indirect partners complement direct partners. Moreover, in high tech industries, optimal alliance formation is less sensitive to changes in structural model parameters when a firm’s learning horizon is distant rather than close. Our contribution lies in offering a formal theory of the role of indirect partners in optimal alliance portfolio design that generates normative propositions amenable to future empirical refutation.
Original languageEnglish
Pages (from-to)212-236
Number of pages25
JournalComputational and Mathematical Organization Theory
Issue number2
Early online date14 Nov 2015
Publication statusPublished - Jun 2016

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