Embeddedness of Inter‐firm Ties and Knowledge Creation†

This study examines consequences for knowledge creation due to differences in embeddedness of inter‐firm ties, more specifically, between informal or Arm's Length Relationships (ALRs) and formal collaborations. Qualitative data from 41 respondents across 22 SMEs is used to examine knowledge conversion processes comprising the SECI (Socialisation, Externalisation, Combination, Internalisation) framework of knowledge creation. We show a difference based on embeddedness of ties for how knowledge creation unfolds. Implications for spin off between ties and for firm attention to deliberating and managing a varied portfolio of ties for superior performance, are also drawn.