Intermediaries, indirect local ties, and innovation output: evidence from an interfirm R&D alliance network during the emergence of the biopharmaceutical industry

This study explores the impact of indirect local ties on firms’ innovation output, focusing on the role of intermediaries connecting firms to their indirect partners in an interfirm R&D alliance network. Our findings reveal a positive relationship between indirect local ties and innovation output. Moreover, this study introduces a comparative approach to examine two alliance governance mechanisms, relative governance strength and relative trust. Relative governance strength as a formal governance mechanism, through equity-based vs. non-equity structures, strengthens the positive impact of indirect local ties on firms’ innovation output. Yet, relative trust as an informal, trust-based governance mechanism, through repeated vs. non-repeated partnerships, does not exhibit a significant moderating effect. These insights enhance our understanding of how firms can navigate intermediaries’ self-interested behaviour to optimise innovation output, offering practical implications for strategic alliance management in knowledge-intensive industries.