R&D alliances and the effect of experience on innovation: a focus on the semiconductor industry.

Table 4 shows the model (Model 3) that considers the dummy variable EXPERIENCE > 0 as the independent variable. This variable has value 1 if the firm has prior experience, regardless of the exact number, and 0 otherwise. Once again, the relationship is significant at the .09 level, showing that indeed prior alliance experience per se has a positive impact on postalliance patenting activities. This is an important result because firms without experience should expect lower returns (in terms of innovation) than firms that have at least one alliance in their history. Following a previously described method to predict the change of patent output when prior experience goes from 0 to 1, a significant result is obtained. The predicted number of patents (E[PATENT]) increases in 53 patents, a number that is substantial if we take into account that the median value of PATENT is 82. This shows exact correspondence with Sampson's (2005) results and reinforces the notion that it is the existence rather than the amount of alliance experience that determines whether a firm will benefit from past alliance activity.

This of course calls for a more detailed analysis of the relationship between experience effects and patent activity. To achieve this objective, three dummy variables are used for a specific amount of previous alliances: EXPERIENCE: 1-5 has value 1 if the firm has 1 to 5 prior alliances, inclusive; EXPERIENCE: 6-10 is 1 if the firm has somewhere between 6 and 10 alliances; EXPERIENCE > 10 is 1 if the firm has more than 10 prior experiences. The results of this model are shown in Model 4. This model shows some interesting and unexpected results; interesting because they are in opposition to Sampson' (2005) results. For instance, where Sampson reported coefficients that are significant at the .05 level, the fitted model for the semiconductor industry shows that only firms with more than 10 prior alliances should expect a larger patent activity. This result suggests that the extent matters as much as the existence of alliance experience, at least for the chosen industry. Clearly, this contradicts Hypothesis 1 because more experience appears to be more important than the mere fact of having some experience.

Now we turn our attention to the point in time when prior alliance experiences took place. Here, the main concern is whether the recency of past experience has a role to play in the studied relation. In other words, we look at the possibility of recent experience's having a larger impact on new alliance formation (Sampson, 2005). With this in mind, the EXPERIENCE variable is decomposed into six variables, including EXPERIENCE: 1 YEAR to EXPERIENCE: 6 YEARS, where the first variable includes only the firm's alliances announced 1 year before the focal period of time (1997 to 1998), the second represents the number of alliances in the year 1995, and so on. The model is shown in Table 5, and the results suggest that neither very recent nor old alliance experience has much impact on the weighted number of patents. Only two variables have significant coefficients, EXPERIENCE: 2 YEARS and EXPERIENCE: 3 YEARS, thus indicating that only the number of prior alliances conducted 2 and 3 years previous to the time period selected for this study are significant at p < .05. EXPERIENCE: 4 YEARS and EXPERIENCE: 5 YEARS have negative coefficients even though these are not significant. Negative coefficients might indicate the presence of multicollinearity, thus we conducted a test to determine if this was the case in our sample. Indeed, a small multicollinearity problem is present for EXPERIENCE: 4 YEARS and above. This could be verified by dividing the sample in two groups and comparing the coefficients of each regression. Even though the differences are not significant, tolerance ([VIF.sup.-1]) in one case was low (< .1). Therefore, as a check for robustness, we grouped the experience in groups of 2-year periods and verified that multicollinearity was no longer an issue. The results for this regression are shown in Table 5, Model 6. In this case, instead of the original six variables, we used three dummy variables, each one accounting for 2 years (EXPERIENCE: YEARS 1 AND 2, EXPERIENCE: YEARS 3 AND 4, EXPERIENCE: YEARS 5 AND 6). The results in this case support the original claim and verify that recent experience is not significantly associated with higher innovative output, whereas experience that is a couple of years old appears to have an impact on the dependent variable. EXPERIENCE: YEARS 5 AND 6 does not show a statistically significant coefficient.

This hints at a possible inverted-U shaped relationship between the number of alliances at a specific point in time and the benefits a firm can gain in terms of new alliance success. This confirms, as Sampson (2005) predicted, that experience depreciates with time, but it does not support the claim that the more recent the alliance experience the better. Indeed, too recent an experience appears to have no effect on patenting activity in this industry.

Conclusion and Discussion

It has been shown that firms can indeed reduce production costs by means of experience, but it is still veiled if this premise applies to management practices and if so, how. In particular, R&D alliances are a managerial practice that research suggests is amenable to experience effects. This article builds on existing research that indicates that a firm's experience with alliances can increase its probability of conducting new ventures successfully. In a very recent study, Sampson (2005) looked at alliances conducted by firms in the telecomm equipment industry, and she reported that the experience effects, even when this refers to a single alliance, are significant and substantive. This claim is confirmed here as expected, but the nature of the relationship appears to be in contradiction to what was stated in the aforementioned analysis. Namely, prior alliance experiences are important only when these alliances took place 2 to 3 years prior to the focal alliance. For the semiconductor industry, very recent R&D alliance experiences seem to have no impact on the firm's innovativeness, measured as its postalliance patenting activity.

As for the depreciation of experience, there are some explanations that can be offered. First, there is the possibility of a rapid change in managerial practices contributing to the loss of benefits to be gained from lessons learned in the past. Technological industries such as telecommunication equipment and semiconductors are particularly susceptible to this kind of effect. An alternative explanation could be found in the rate of managerial turnover. Managers departing after conducting alliances might take with them the knowledge obtained in the alliance formation process, thus forcing the organization to face a new venture with little or no practical experience. The implications of either explanation are clear for a firm that is looking for a way to enhance its innovativeness through a collaborative project. These firms need to ensure the assimilation of prior alliance experiences to benefit from them. One way to do so is the creation of "alliance management offices" within the organization. Of course, the existence of this organizational function is still relatively new, and the real impact on alliance management practices are still to be established as the next step for the line of research proposed in this article. Moreover, and in relation to the lack of impact of recent experience discussed in the next section, these offices could not only reduce the pace of depreciation of experience, but they might also contribute to reduce the period of time for recent experience to be a contribution to new ventures.

More elusive is the explanation for the lack of significance of the most recent experience on patenting activity. One possible explanation is again, the process of assimilation and diffusion of past experience within the organization, namely, firms might need more time to assimilate the lessons obtained from past experiences, particularly if they are conducting several alliances at the same time. The semiconductor industry shows a large number of alliances both before and during the focal period that might help to explain the delayed impact of alliance experiences when compared to Sampson's (2005) results. On average, the firms in this sample have a mean experience of 10 previous alliances and a median value of 11. Moreover, during the focal period of time (1997 to 1998), 137 firms were involved in 182 alliances, thus suggesting that a single firm initiated more than one alliance at the same time. A firm conducting parallel alliances has to devote its resources to more than one task, and this could be translated into a larger period for the consolidation of the alliance. Naturally, this conclusion calls for a more detailed analysis at the organizational level to understand the processes that contribute and those that hinder the organization from using more recent experience.

There are many limitations to this study. Besides the fact that the sample size must be increased by looking at a longer time period, one major limitation is that this study assumes that each prior alliance has the same weight on the firm's ability to conduct new collaborative ventures successfully. Given the large number of alliances in the selected industry, this is of particular importance because a firm will not deem each alliance as equally important, and consequently, it will not deploy the same amount of resources. Second, this study focuses exclusively on R&D alliances. Future research should focus on other kinds of alliances, such as manufacturing and marketing alliances.