EGO-NETWORK STABILITY AND INNOVATION IN ALLIANCES

Much research has shown that firms' ego network configurations-i.e., structural holes or network closure-help them achieve superior innovation outcomes. However, little is known about how the stability of the firm's ego-network composition affects the firm's innovation. In this paper, we investigate the outcomes of ego-network stability in an alliance context, arguing that stability actually reduces innovation for the focal firm. We further investigate two contingencies-namely, the structural holes the focal firm spans and the geographic concentration of its inventive activities-that moderate the detrimental innovation effects of ego network stability. Focal firms can limit the negative effects of ego-network stability on innovation by spanning structural holes in their alliance portfolios, whereas the negative effects are worsened when the focal firms' inventive activities are geographically concentrated in a single country. We empirically test our hypotheses using 198 biopharmaceutical firms headquartered in the United States over a 21-year period from 1985 to 2005. Our results support our predictions.