Exploiting cognitive distance for enhanced innovative capabilities: The role of collaboration controls in incumbent-startup partnerships

Collaborations between incumbent and startup firms are hailed for enhancing incumbent innovation capability. Yet, these collaborations often face challenges, notably cognitive distance, highlighting the need to balance potential novelty and mutual understanding between partner firms. Drawing on prior research that indicates a non-linear relationship between cognitive distance and innovation outcomes, we focus on collaboration controls—tools and practices that guide and motivate managers responsible for startup collaborations— serving as critical mechanisms for incumbents to exploit cognitive distance. We hypothesize that the use of collaboration controls mediates the non-linear relationship between cognitive distance and realizing enhanced innovation capabilities. Empirical findings from a survey of 239 French incumbents confirm an inverted U-shaped relation between cognitive distance and enhanced innovative capabilities. Notably, we find that use of collaboration controls mediates this relationship, highlighting the importance of controls in exploiting cognitive distance. This research contributes to unveiling the intricacies of successful collaborations between incumbents and startups by uncovering a critical role for collaboration controls in realizing novelty potential.