The Formation of Tie Strength in a Strategic Alliance's First New Product Development Project: The Influence of Project and Partners' Characteristics†

This paper draws on theories of interorganizational learning, social networks, and transaction cost economics to investigate the formation of tie strength between first-time alliance partners. It focuses on a strategic alliance's first new product development (NPD) project, which is characterized by a lack of prior experience and insufficient trust between partners and explores how the interaction between (1) interorganizational learning (the �degree� [amount of knowledge shared] and �type� [tacit or explicit nature of the knowledge]); (2) the required communication (�frequency level� and �degree of media-richness�) to transfer and exchange knowledge; and (3) economic transaction considerations (reducing cost and avoiding opportunism), in highly uncertain and dynamic environments, and, in the absence of an assumption of trust, will determine the future strength of the ties between partners. We argue that the �degree� and �type� of interorganizational learning that are required to efficiently develop an alliance's first NPD project determine the strength of the ties between the partners. Each �degree and type� of learning has a different impact on the frequency and media richness of the partners' communication, and consequently each leads to a different level of social tie strength between the partners. This relationship is moderated by the partners' market overlap. We suggest that the required �degree and type� of interorganizational learning is contingent on the project characteristics (degree of innovation; �radical versus incremental,� and the mode of development; �modular versus integrated�). This relationship, however, is moderated by the partners' technical skills (complementary versus similar).