If the Alliance Fits . . . : Innovation and Network Dynamics

Robin Cowan & Nicolas Jonard


Network formation is often said to be driven by social capital considerations. A typical pattern observed in the empirical data on strategic alliances is that of small world networks: dense subgroups of firms interconnected by (few) clique-spanning ties. The typical argument is that there is social capital value both to being embedded in a dense cluster, and to bridging disconnected clusters. In this paper we develop and analyze a simple model of joint innovation where we are able to reproduce these features, based solely on the assumption that successful partnering demands some intermediate amount of similarity between the partners.

JEL Codes: D83, D85, L14, D74 Key words: Network formation; Strategic alliances; Knowledge portfolios

UNU-MERIT Working Papers ISSN 1871-9872