Knowledge Sharing Decisions in Alliances With Cooperative Technology Development: Codevelopment Mode Selection and Knowledge Sharing Level Setting

ABSTRACT Firms frequently participate in alliances to develop new products cooperatively. Knowledge sharing in a cooperative development alliance positively affects product innovation. However, sharing knowledge also creates technology leakage and misappropriation risks that constrain partners' willingness to use their technology for the alliance's goals. How to alleviate partners' concerns about these hazards arouses wide concern among academics and managers. We develop a two‐stage model to explore the operations of two strategies: a commitment that restricts knowledge sharing and an exclusive codevelopment commitment. These alleviate partners' concerns about these knowledge‐sharing risks. We show that if the focal firm chooses to restrict the knowledge‐sharing level of the alliance, the alliance's firms will increase their use of their proprietary technology to improve the new product performance. The focal firm can mitigate the hazards of knowledge sharing by committing not to cooperate with rivals of the follower firm, but doing so does not always benefit the focal firm. Our results show that the focal firm may prefer to change its partner in the second stage if its development desire and capability are small. We also show that firms prefer to cooperate with partners whose development capacities and desires are similar to their own.