strong ties as sources of new knowledge: how small firms innovate through bridging capabilities

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Strong Ties as Sources of New Knowledge: How Small Firms Innovate through Bridging Capabilities *by Sandor Lowik, Daan van Rossum, Jeroen Kraaijenbrink, and Aard Groen While extant literature assumes an inverted U-shaped relationship between tie- strength and new knowledge acquisition, our study suggests a positive, curvilinear relationship. Our multiple case study shows that firms use specific relational capabilities—which we define “bridging capabilities”—to acquire new knowledge. These bridging capabilities mitigate the risk of overembeddedness in strong ties through increasing multiplexity, that is, through establishing and leveraging multiple relations within a single tie. Our findings suggest that small firms should invest more in the exploration of strong ties instead of increasing their weak tie network. Doing so helps them to reduce alliance complexity, thereby increasing alliance management efficiency and alliance ambidexterity. Introduction New knowledge acquisition is a key factor that determines a firm’s innovation performance (Cohen and Levinthal 1990; Yli-Renko, Autio, and Sapienza 2001). To acquire new knowledge, small firms rely more and more on their networks (Baum, Calabrese, and Silverman 2000; Groen, Wakkee, and De Weerd-Nederhof 2008; Street and Cameron 2007). To con- tinuously capture value from these Sandor Lowik is a PhD candidate in innovation and knowledge management at the Netherlands Institute for Knowledge Intensive Entrepreneurship (NIKOS), University of Twente, The Netherlands. Daan van Rossum is a master student in Business Administration at the University of Twente, The Netherlands. Jeroen Kraaijenbrink is assistant professor in strategic management and entrepreneurship at NIKOS, University of Twente, The Netherlands. Aard Groen is professor of innovative entrepreneurship and scientific director of NIKOS, University of Twente, The Netherlands. Address correspondence to: Sandor Lowik, P.O. Box 217, 7500 AE Enschede, The Nether- lands. Tel: +31(0)53 489 4513. E-mail: [email protected]. *The authors are grateful to guest editor Massimo Colombo and three anonymous reviewers for their helpful comments on earlier versions of this paper. Journal of Small Business Management 2012 50(2), pp. 239–256 LOWIK, VAN ROSSUM, KRAAIJENBRINK, AND GROEN 239

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Page 1: Strong Ties as Sources of New Knowledge: How Small Firms Innovate through Bridging Capabilities

Strong Ties as Sources of New Knowledge:How Small Firms Innovate throughBridging Capabilities*jsbm_352 239..256

by Sandor Lowik, Daan van Rossum, Jeroen Kraaijenbrink,and Aard Groen

While extant literature assumes an inverted U-shaped relationship between tie-strength and new knowledge acquisition, our study suggests a positive, curvilinearrelationship. Our multiple case study shows that firms use specific relationalcapabilities—which we define “bridging capabilities”—to acquire new knowledge.These bridging capabilities mitigate the risk of overembeddedness in strong tiesthrough increasing multiplexity, that is, through establishing and leveraging multiplerelations within a single tie. Our findings suggest that small firms should invest morein the exploration of strong ties instead of increasing their weak tie network. Doingso helps them to reduce alliance complexity, thereby increasing alliance managementefficiency and alliance ambidexterity.

IntroductionNew knowledge acquisition is a key

factor that determines a firm’s innovationperformance (Cohen and Levinthal 1990;Yli-Renko, Autio, and Sapienza 2001). To

acquire new knowledge, small firms relymore and more on their networks(Baum, Calabrese, and Silverman 2000;Groen, Wakkee, and De Weerd-Nederhof2008; Street and Cameron 2007). To con-tinuously capture value from these

Sandor Lowik is a PhD candidate in innovation and knowledge management at theNetherlands Institute for Knowledge Intensive Entrepreneurship (NIKOS), University ofTwente, The Netherlands.

Daan van Rossum is a master student in Business Administration at the University of Twente,The Netherlands.

Jeroen Kraaijenbrink is assistant professor in strategic management and entrepreneurship atNIKOS, University of Twente, The Netherlands.

Aard Groen is professor of innovative entrepreneurship and scientific director of NIKOS,University of Twente, The Netherlands.

Address correspondence to: Sandor Lowik, P.O. Box 217, 7500 AE Enschede, The Nether-lands. Tel: +31(0)53 489 4513. E-mail: [email protected].*The authors are grateful to guest editor Massimo Colombo and three anonymous reviewers fortheir helpful comments on earlier versions of this paper.

Journal of Small Business Management 2012 50(2), pp. 239–256

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networks, firms are advised to establishheterogeneous alliance portfolios con-sisting of both strong and weak ties(Ahuja 2000; Capaldo 2007; Hansen1999; Obstfeld 2005; Reagans andMcEvily 2003; Tiwana 2008). For smallfirms, the management of a broad andheterogeneous alliance portfolio can beproblematic, though, because of limita-tions in resource availability and man-agement attention (Duysters and Lokshin2011; Lang, Calantone, and Gudmundson1997). Despite these problems, smallfirms are still able to innovate, oftenthrough alliances with strong-tie part-ners, like customers and suppliers (Streetand Cameron 2007; Yli-Renko, Autio,and Sapienza 2001). Therefore, the ques-tion arises how these small firms usetheir strong ties to innovate.

Extant literature on networks and alli-ances assumes an inverted U-shapedrelationship between tie strength andnew knowledge acquisition (McFadyenand Cannella 2004; Uzzi 1996). After acertain point, stronger ties suffer from“overembeddedness,” resulting in dimin-ishing availability of new knowledge asthe partner firms become too similar(Hagedoorn and Frankort 2008; Uzzi1996). In contrast, some studies foundthat firms that applied relational capabili-ties were able to acquire new knowledgefrom strong ties over a long period oftime (Lorenzoni and Lipparini 1999). Inour study, we aim to integrate both per-spectives by answering two researchquestions: Do specific relational capabili-ties mitigate the negative effect of over-embeddedness? And if so, what are thesecapabilities?

The results of our multiple case studyon four small technology firms show thatthese firms have established long-lastingrelationships and that they acquire newknowledge from these strong tiesthrough the application of six “bridgingcapabilities.” These capabilities buildand leverage multiple relations within astrong-tie relationship, thereby proac-

tively expanding the scope of knowledgeacquisition through an increasing level ofmultiplexity. Based on our findings, wepropose that the extent to which strongties can be sustainable sources of newknowledge depends on the applicationof bridging capabilities by the focal firmin combination with the innovativenessof the partner firm.

This study contributes to network andalliance literature in three ways. First, weextend literature on alliance capabilitiesby explaining the underlying processesand mechanisms that affect new knowl-edge acquisition. We provide a taxonomyof bridging capabilities and explain theireffect through multiplexity. Second, wechallenge the assumption in network lit-erature of an inverted U-shaped relation-ship between tie strength and newknowledge acquisition. Our findingsindicate a positive curvilinear relation-ship, which results from the applicationof bridging capabilities on innovativestrong-tie partners. Third, our study sug-gests that small firms should engagemore in innovative strong-tie partner-ships rather than expanding their weak-tie network. This way they can reducetheir alliance portfolio complexity andstill benefit from increased allianceambidexterity.

The remainder of this paper startswith a brief literature review and concep-tual framework that guide our study.After an explanation of the researchdesign and method, we present theresults of the multiple case study alongthe lines of the conceptual framework.We discuss the implications for theoryand practice, and provide suggestions forfuture research.

Theoretical BackgroundTie Strength and KnowledgeAcquisition: The Effect ofOverembeddedness

Weak and strong ties are both impor-tant for innovation and fulfill differentyet complementary roles. Weak ties are

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network relations that stimulate signifi-cant innovation by providing access tonovel knowledge that is distant from thefirm’s own knowledge base (Burt 1982,2000; Granovetter 1973). However, cap-turing value from this new knowledge isoften difficult as weak ties are generallycharacterized by few interactions, a lowlevel of emotional intensity and trust,and few reciprocal services (Granovetter1973). Although weak ties can facilitatethe exchange of simple and codifiedknowledge, they are not well suited toexchange complex and more tacit knowl-edge (Hansen 1999). The latter is oftenneeded for the acquisition of competitivecapabilities (McEvily and Marcus 2005)and for the creation of more significantinnovations (Zollo, Reuer, and Singh2002). For this exchange of tacit andcomplex knowledge, strong ties areused. These ties are characterized byhigh levels of interaction, communica-tion, emotional attachment, and trust(Gulati 1995), thereby reducing the risksof opportunism and facilitating complexknowledge transfer. Examples of thepositive effects of strong ties on signifi-cant innovations are found in recentstudies of Li et al. (2008) and Phelps(2010).

However, the effect of tie strength onnew knowledge acquisition seems to becurvilinear, represented by an inverted Ushape (McFadyen and Cannella 2004;Uzzi 1996). At the left-hand side of theinverted U-shape the weak tie graduallytransforms into a strong tie, therebyestablishing collaborative routines, build-ing trust, and disclosing ever moreknowledge. At a certain point in time therelationship becomes “embedded,”which means that repeated collabora-tions with the known partner firm arepreferred over starting new collabora-tions with strangers (Hagedoorn 2006;Uzzi 1996). The advantages of embed-dedness entail reduced transaction coststhrough established trust and collabora-tion routines, and access to more

complex and tacit knowledge as a resultof more fine-grained knowledgeexchange (Hagedoorn and Frankort2008; Uzzi 1996). However, over time,embeddedness may lead to diminishedknowledge benefits, as the knowledgebases of the firms converge throughintensive mutual learning. This effect isrepresented by the right-hand side of theinverted U-shape, where “overembed-dedness” in strong ties results in dimin-ished performance of knowledgeacquisition (Hagedoorn and Frankort2008; Uzzi 1997).

The curvilinear effect of tie strengthon new knowledge acquisition leads tothe so-called “search-transfer-problem”(Hansen 1999). There it is argued thateffective knowledge acquisition does notresult from weak or strong ties alone,but results from their complementarynature. As weak ties transform intostrong ties to capture value from thenew knowledge (Burt 2009; Hagedoornand Frankort 2008), the diminishingknowledge benefits from strong tiesforces firms to search for new knowl-edge through weak ties. This impliesthat the firm needs to establish a “dualnetwork” that consists of a core ofstrong ties with a periphery of weak ties(Ahuja 2000; Burt 2009; Capaldo 2007;Hansen 1999; Obstfeld 2005; Reagansand McEvily 2003; Tiwana 2008). Thisdual-network solution becomes manifestin the firm’s alliance portfolio, contain-ing alliances with suppliers andcustomers—mostly considered as strongties—and alliances with research insti-tutes and universities—mostly consid-ered as weak ties (Faems, Van Looy, andDebackere 2005).

Although a broad and diverse allianceportfolio is considered a solution for thesearch-transfer problem, this solutioncan sometimes become too complex andcounterproductive. When a firm engagesin different types of alliance activitiessimultaneously, this can lead toincreased managerial costs and, eventu-

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ally, to inferior performance (Duystersand Lokshin 2011). Especially in smallfirms the knowledge acquisition activi-ties are concentrated in a fewindividuals—mostly managers—whohave to divide their attention overseveral activities (Lang, Calantone, andGudmundson 1997). As such, managinga broad and heterogeneous portfolio ofboth strong and weak ties can take alarge share of these managers’ time thatthey cannot spend otherwise. So, the rec-ommended solution of a broad anddiverse network to guarantee sustainablesources of new knowledge for innova-tion just might lead to unsatisfyingresults because of ineffective alliancemanagement, which in turn is caused bythis broad and diverse network.

Relational Capabilities to MitigateOverembeddedness Effects

To manage alliances effectively, litera-ture suggests that firms need to developtwo kinds of alliance capabilities: alli-ance portfolio management capabilitiesand relational (or single alliance manage-ment) capabilities (Wassmer 2010). Alli-ance portfolio management capabilitiesconcern the ability to develop the alli-ance portfolio strategy, establish analliance management system, andcoordinate and monitor the portfolio(Hoffmann 2005). Their main goal is tolearn from prior alliance experiences andto institutionalize these experienceswithin the firm, for instance through theestablishment of a centralized alliancefunction or the provision of alliancetrainings (Draulans, de Man, and Vol-berda 2003; Heimeriks and Duysters2007; Kale, Dyer, and Singh 2002).

The second alliance capability men-tioned in literature is the relational capa-bility, which is the ability to interact withother companies (Lorenzoni and Lippa-rini 1999). Here, the unit of analysis isthe dyad instead of the alliance portfolio,and it concerns the management of asingle alliance. When firms repeatedly

collaborate, they develop partner-specific routines as they learn from pastexperiences (Dyer and Singh 1998),which results in better alliance perfor-mance (Zollo, Reuer, and Singh 2002).For instance, the study of Lorenzoni andLipparini (1999) showed that lead firmsin the Italian packaging machineryindustry developed relational capabili-ties, leading to a selective number oflong-lasting relationships with key sup-pliers. These lead firms considered thesuppliers as “knowledge generators” andas trainers of the lead firm’s capabilities.

Two observations from the alliancecapability literature are of primary inter-est to our study: (1) relational capabilitieshave a positive effect on the acquisition ofnew knowledge (Lorenzoni and Lipparini1999) and innovation performance (Zollo,Reuer, and Singh 2002), and (2) thesecapabilities appear in long-lasting embed-ded relationships (Lorenzoni and Lippa-rini 1999). In other words, long-lastingembedded relationships—which can beconsidered as strong ties—can providenew knowledge over a long period oftime. In contrast, as referred to before,extant literature assumes that after acertain level of tie strength, furtherincrease of tie strength leads to diminish-ing knowledge acquisition benefits. So,on the one hand, network literature sug-gests an inverted U-shaped relationshipbetween tie strength and knowledgeacquisition, whereas on the other hand,alliance capability literature suggests apositive relationship.

The question that arises is to whatextent the development and use of rela-tional capabilities could explain theseseemingly contradictory findings in lit-erature. Could it be that the deploymentof specific capabilities mitigates thenegative effect of overembeddedness,which is assumed to be one of the maincauses of diminished knowledge ben-efits when ties get stronger over time?And if so, what then are these specificcapabilities? These two questions guide

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our study and are translated into theconceptual model as presented inFigure 1. Our review of network and alli-ance literature shows that with increas-ing tie strength the liability ofoverembeddedness might lead to dimin-ishing returns on the acquisition of newknowledge, represented as an invertedU-shaped relationship. However, wepropose that the effects of overembed-dedness can be mitigated by the deploy-ment of certain relational capabilities,which is represented in Figure 1 by itsmoderating effect on the relationbetween tie strength and new knowl-edge acquisition.

Research Setting andDesign

This research is designed in twostages. During the first stage we examinethe effect of tie strength on new knowl-edge acquisition. The question that weanswer there is whether strong ties overtime still provide access to new knowl-edge. If this is the case, the assumedinverted U-shaped relationship betweentie strength and knowledge acquisitioncould be affected by our proposed rela-tional capabilities. The second stage aimsto identify the kinds of relational capa-bilities that firms deploy in these casesand to examine their underlying mecha-nisms that might cause the proposedmitigating effect on overembeddedness.

As our research is explanatory innature, we designed it as a multiple casestudy (Yin 2009) of four small technol-ogy firms in the Netherlands: Metal,Plastic, Engineer and Micro. The caseswere selected based on small firm size(between 5 and 50 employees), age(over 10 years to ensure they had theopportunities to establish strong ties),and innovativeness (Metal and Plasticwon several innovation awards; Engi-neer and Micro develop high-tech pro-duction platforms). Metal is amanufacturer of customer-specific metalproducts and markets two own prod-ucts: block cutters and pipe grinders.Plastic is a manufacturer of high-technical polyurethane products. Engi-neer is an engineering firm, as asubsidiary of a manufacturer of metalcomponents and final assembly ofautomated production lines. Micro isalso a manufacturer of automated pro-duction lines with a specialization inmicroassembly.

Data Collection and MeasuresWe conducted semistructured inter-

views with the chief executive officer(CEO) or operations manager as theprimary source of information on firm-level capabilities. The interviews lastedbetween one and one-and-a-half hours.Topics that were discussed included thefirm’s sources of external knowledge,types of relationships, acquisition strate-gies, partner choices, and kinds ofknowledge exchanged. Next to the CEOor operations manager, we interviewedat least two other employees at eachcompany who have frequent interactionwith external knowledge sources, whichenabled us to acquire in-depth knowl-edge on firm-specific capabilities andnetwork ties, and to avoid single respon-dent bias. Typical functions of the inter-viewees were sales engineer, productengineer, or project manager. A total of20 interviews resulted into 24 hours ofrecorded material.

Figure 1Conceptual Model

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To obtain an overview of the mostimportant ties of the firms, we followed atwo-step method during the interviews,starting with the generation of the 10most important external knowledgesources for innovation projects in the lasttwo years (Sammarra and Biggiero 2008).We used the fact that the firm receivedknowledge from an external source foran innovation project as a proxy for newknowledge acquisition. The notion thatfor innovation projects, like new productdevelopment, new external knowledge isacquired is generally acknowledged inliterature (e.g., Cohen and Levinthal1990; Yli-Renko, Autio, and Sapienza2001). The second step was to ask spe-cific questions for each relationship men-tioned to determine tie strength andknowledge acquisition strategy. Tiestrength was operationalized as a multi-dimensional construct consisting of theduration of the relationship (0 = less than2 years, 1 = between 2 and 10 years,2 = more than 10 years), the frequency ofcontact (0 = at least once a year, 1 = atleast once a month, 2 = at least once aweek), and the emotional intensity (0 = abusiness acquaintance, 1 = a businessfriend, 2 = a personal friend), based onCapaldo (2007), Granovetter (1973),Marsden and Campbell (1984), andPerry-Smith (2006). Tie strength was cal-culated by taking the sum of the scoreson the three dimensions, with aminimum of zero and a maximum of six.We used the cutoff value of four to definestrong ties. To determine the specificrelational capabilities, we built on thenotion of dynamic capabilities. Dynamiccapabilities include the routines and pro-cesses that are intended to change thefirm’s knowledge base, which can beused to develop other capabilities tocreate a competitive advantage (Eisen-hardt and Martin 2000; Zahra, Sapienza,and Davidsson 2006). Eisenhardt andMartin (2000, p. 1108) explicitly men-tioned “alliance and acquisition routines”as examples of dynamic capabilities.

These routines are characterized bylearned and repetitious behavior, whichis partly founded in tacit knowledge(Winter 2003). As we are interested inidentifying the relational capabilities thatmitigate the effects of overembedded-ness, we used a rather broad measure ofroutines and processes that are appliedto identify, access, and leverage newknowledge within existing relationships.

Data AnalysisThe data analysis is conducted in two

steps. First, the relation between tiestrength and new knowledge acquisitionwas examined. Tie strength was calcu-lated and the relationships were classi-fied as weak or strong.

Second, the types of relational capa-bilities have been identified using within-case and cross-case analysis (Miles andHuberman 1994). We built on the notionof Eisenhardt and Martin (2000) thatdynamic capabilities are idiosyncraticand firm-specific routines within onefirm but that they share commonalitiesacross firms. So, during within-caseanalysis we coded firm-specific routinesthat were related to identifying, access-ing, and leveraging new knowledge.After that, we used cross-case analysis tocompare the coded routines to determinecommonalities that could be identified asspecific relational capabilities.

ResultsThe Relation between Tie Strengthand New Knowledge Acquisition

First, we examine the relationbetween tie strength and new knowledgeacquisition as depicted in our conceptualmodel in Figure 1. During the interviews77 relationships were identified in totalas important sources of new knowledgein the last two years, of which 32 wereclassified as strong ties (41 percent).Within the strong ties the distribution ofknowledge sources was customers(40 percent), suppliers (50 percent), andknowledge institutes (10 percent). For

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weak ties the distribution was customers(25 percent), suppliers (50 percent), andknowledge institutes (25 percent).

The findings show that the studiedsmall and medium-sized enterprises(SMEs) use both weak and strong ties toacquire new knowledge, which is inaccordance with literature. This supportsthe dual-network solution to have a coreof strong ties and a periphery of weakties. The simultaneous use of both kindsof ties is illustrated with several quotesfrom our respondents. For instance, theoperations manager of Metal said:“Where I search for knowledge when wehave a project with new technologies?We use Internet, I ask my CEO ‘Have youseen something on trade-fairs lately?’ andI ask our existing business partners.”Another example is Micro, who sends itsengineers to trade fairs and seminars(weak ties) to expand their generalknowledge on available technologieswhile at the same time specific andin-depth knowledge is acquired from keysuppliers (strong ties). The CEO stated itthis way: “On the one hand you need toknow what [knowledge] is available,what its possibilities and impossibilitiesare, and where to find it. (...) On theother hand you get questions from cus-tomers that need answers. You try tomatch the questions with your ownknowledge or that of your suppliers. Ifthat does not work, you have to get itelsewhere.”

With respect to strong ties as knowl-edge sources for innovation, weobserved that 50 percent of the men-tioned strong ties had a duration of morethan 15 years up to even 25 years. This isin line with the findings of Lorenzoni andLipparini (1999), who also found thatlong-lasting embedded relationships(with an average duration of 14 years intheir study) have a positive effect oninnovativeness. Furthermore, these find-ings challenge the assumption of aninverted U-shaped relationship betweentie strength and new knowledge acquisi-

tion, as found in the studies of McFadyenand Cannella (2004) and Uzzi (1996).

An explanation that we found for thelong-lasting strong relationships assources of new knowledge is thatnetwork partners develop their knowl-edge base themselves over time. Assum-ing that strong partners reside at leastpartially in the same network or industry,these firms also need to renew their capa-bilities and knowledge bases to stay com-petitive. As the CEO of Plastic said: “Ourraw material suppliers regularly have newproducts and developments. (...) In thelast seven years they made polyurethaneantistatic and heat-resistant (...). When wewere looking for ultraviolet radiationproof polyurethane it appeared that oneof our suppliers had done some experi-ments in the past. Based on their experi-ence together we developed a newproduct.” The CEO of Micro explainedwhy he approaches existing relationswhen he needs knowledge to solve aproblem: “You search for new knowledgesources when you reach the limits of whatyou know. But often it appears that in themeantime existing relations have pushedout their knowledge frontiers.”

In conclusion, our results show thatsmall firms maintain a dual network,consisting of both weak and strong ties,as suggested in literature. However, wealso find that strong ties are used assustainable sources of new knowledge.This finding challenges the assumptionof an inverted U-shaped relationshipbetween tie strength and new knowledgeacquisition. An explanation for this isfound in the innovative character ofthese strong-tie partners.

Specific Relational Capabilities toLeverage New Knowledge withinStrong Ties

To benefit from the innovative char-acter of strong-tie partners, firms need toget access to their partners’ renewedknowledge bases. To do so, firms couldapply specific relational capabilities, as

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suggested in our literature review. In ourstudy we identified the processes androutines that the case study firms use toidentify, access, and leverage newknowledge within strong ties. In linewith Eisenhardt and Martin (2000), wefound that the specific relational capa-bilities are idiosyncratic and firm spe-cific, which is illustrated in Table 1 withillustrative quotes from our single-caseanalysis. However, Eisenhardt andMartin (2000) also stated that dynamiccapabilities share commonalities acrossfirms. With cross-case analysis we deter-mined these commonalities to develop ataxonomy of six relational capabilities.Table 2 shows which capabilities couldbe identified across the four cases. In thissection we will explain each relationalcapability in more depth.

Systematic Meetings with Customers toDiscuss Their Latest Developments.Through this first relational capability,firms proactively explore and leveragethe knowledge bases of their customerson a regular basis. This way the existingrelations are extended by connecting tonew people and by entering new knowl-edge domains. An example is Metal,who regularly invites customers’ engi-neering departments to discuss theirnew developments with its own engi-neers. This way Metal takes the initiativeto exchange knowledge beyond thecurrent problems in ongoing projectsand to create new relations among engi-neers from both firms who otherwisewould stay unconnected. Also, Microcollects a lot of information about itscustomer’s products, processes, andbusiness case before designing a newassembly line. At Micro, the relationalcapability of systematic meetings withcustomers to acquire new knowledge ispart of the project management system,where they intentionally acquire knowl-edge beyond the mere technologicalaspects to provide the best solution. Thisway they increase their market and

managerial knowledge, which can beused for future projects. Within thecases, we found this capability onlyapplied in strong relationships with keycustomers for which the firm is a pre-ferred supplier or with which it hasestablished a strategic partnership.

Systematic Meetings with Suppliers toDiscuss Their Latest Developments. Allcase study firms use strong-tie suppliersnot only as a contact to buy products orservices but also as an adviser. The mul-tiple roles that these key suppliers fulfilland the proactive exploration and lever-aging of the suppliers’ knowledgedomains lead to increased knowledgeacquisition. The most used routines toacquire new knowledge are mutual visitsto each other’s manufacturing sites andregularly discussing new developmentswith the suppliers’ sales representativesor (sales) engineers. An important goalto apply this relational capability is tostay informed on the latest developmentsthat are not on the market yet. As themarketing manager of Micro noted:“They [suppliers] need to tell you whatthe real new things are they are workingon—the things that are not listed in theircatalogs yet.”

Getting Reacquainted with Customersand/or Suppliers beyond Their RegularBusiness Relations. This relationalcapability aims to get into contact withthe partner firm in other settings thanusual, offering new perspectives on thecapabilities of the partner firm. Anexample is how Plastic discovered newcapabilities of Metal with which they hada business relationship for over a decade,which resulted in an innovative product.When the manager of Plastic attended acompany tour at its customer Metal,which was organized by the local busi-ness club, he was surprised to see andhear about Metal’s manufacturing capa-bilities. Metal appeared to have operateda tube-laser-cutting machine for five

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Table 1Illustrative Examples of Specific Relational Capabilities

Specific RelationalCapabilities

Illustrative Examples

Systematic meetings withcustomers to discusstheir latestdevelopments

“For customers for which we are preferred supplier, we are part of their technology development”(marketing manager, Micro).

“We invite customers to visit us with their engineers, to discuss mutual activities and developments”(operations manager, Metal).

Systematic meetings withsuppliers to discusstheir latestdevelopments

“Most suppliers visit us at least once a year to inform us about their innovations” (design engineer,Engineer).

“Our competitive advantage is mostly based on the constant communication with our suppliers. Allour competitors maintain contacts with the raw materials suppliers, but the question is to whatextent they challenge these suppliers to come up with new solutions. We are one of the fewcompanies that really challenge our suppliers on technological knowledge” (sales engineer, Plastic).

“We visit the suppliers’ application labs to get informed about their possibilities and newdevelopments” (engineer, Micro).

“We visit suppliers to know more about their latest technological developments” (operations manager,Engineer).

Getting reacquainted withcustomers and/orsuppliers beyond theirregular buyer–supplierrelationship

“Besides that Metal and Plastic have a long lasting history together, I know the operations managerof Metal also as fellow board member of the regional industry association. This way you meet in adifferent setting, discuss different issues, which lead to new ideas” (CEO, Plastic).

“We use conferences, sponsor activities, joint subsidiary projects and social media to get to know ourpartners better” (marketing manager, Micro).

“After a trade fair in Münster [Germany], I went with a customer to the local Christmas market, wherewe, with a glass of beer in one hand and a “Currywurst” [curried sausage] in the other, developeda new product on the back of a coaster” (CEO, Plastic).

“We share our stand at trade fairs with a key customer to stress that we develop and manufactureproducts together. We even jointly hold patents” (CEO, Plastic).

“I want to get into contact with other companies, like in business club Y, that offers a look behindthe scenes at member firms, and strengthens the relationships with these members through thejointly presentation at trade fairs. This increases the understanding of what other member firms do,which has already resulted in jointly attracting and serving a new customer” (CEO, Micro).

“We have a good relationship with supplier A, who assists us with technical problems and trainings.They also take part in the same informal business network group, where managers of the memberfirms discuss and share management best-practices” (engineer, Metal).

Intentionally establishingrelationships withcustomers and/orsuppliers on multipleorganizational and/ordepartmental levels

“Weekly I take an engineer or production worker with me to meetings with customers. Notonly to use their technical knowledge to solve customers’ problems, but also to make them[Metal’s employees] aware of their social interactions and communication skills” (operationsmanager, Metal).

“Two weeks ago we send an engineer to Taiwan to evaluate a project with the customer. Normally adirector would do that, but the engineer had done the project. He learned and experienced a lot”(operations manager, Metal).

“We try to establish strategic alliances with customers to create more links between the two firms”(sales engineer, Plastic).

“I create formal collaboration projects to bring my engineers in contact with other companies tobroaden their experiences” (operations manager, Engineer).

“After design and delivery we offer maintenance programs, to stay connected with our customersthrough service employees” (marketing manager, Micro).

Intentionally establishingrelationships withorganizations to getaccess to their largenetworks

“You hire a university student, but get a whole lot more: access to research facilities, research staff,library, etc.” (marketing manager about their summer school, Micro).

“We provide workshops to starting entrepreneurs to teach them about manufacturing techniques, butalso to get informed about new developments” (marketing manager, Micro).

“A really new contact has been established through our partnership with Micro. (...) They brought usin contact with a reliable Malaysian supplier that we could not have found ourselves” (operationsmanager Engineer).

“Our welding programmer starts as a teacher at a regional school for secondary professionaleducation. It is not only that he teaches fifteen and sixteen year olds how to weld, but he alsolearns about these students, who are our future employees. We can select the good ones, andadjust our personnel management to fit the requirements of this new generation” (operationsmanager Metal).

Exchanging personnel “I worked for 4 months at engineering firm X (...). They helped me to improve our projectmanagement at Metal by showing their way of working. I learned how to organize a project andhow to deal with additional customer requirements during the project” (engineer, Metal).

“My colleague works as a consultant at our customer and is physically located there”(engineer, Micro).

“I temporarily placed my marketing assistant at another firm to let him take a look behind thescenes, and to apply the newly learned things here” (marketing manager, Micro).

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years, and it had a fully automatedsingle-piece welding line—without themanager of Plastic knowing this. Someweeks later, when a customer askedPlastic to provide a solution to substitutea full-metal product for polyurethane,the manager recalled Metal’s tube-cuttingcapabilities. Plastic and Metal developeda new product for this customer basedon Metal’s tube-laser-cutting technologyand Plastic’s polyurethane molding.

Intentionally Establishing Relationshipswith Customers and/or Suppliers on Mul-tiple Organizational Levels. In SMEs,the contacts with external parties areusually maintained by a few persons(Lang, Calantone, and Gudmundson1997), like the CEO or sales represen-tative. However, establishing additionalrelations on other organizational levelsbetween employees of the partneringfirms increases insights in the partners’marketing, manufacturing, logistical and

managerial capabilities, and thereforegives access to new knowledge.Examples from our cases are Engineerand Metal, where the operationsmanagers actively stimulate their engi-neers to engage in additional relation-ships with their counterparts atcustomers to exchange knowledge andto increase their social and communica-tion skills.

Intentionally Establishing Relationshipswith Organizations to Get Access to TheirLarge Networks. This relational capabi-lity concerns the use of strong ties toaccess the networks of their partners. Byusing the partner firm as a gateway tonew contacts, the firm can tap newknowledge sources. This means that therole of the strong-tie partner changesfrom a direct knowledge source into aknowledge broker (Hargadon and Sutton1997; Yli-Renko, Autio, and Sapienza2001). For instance, Micro maintains a

Table 2Specific Relational Capabilities across Cases

Observed Specific RelationalCapability

Case Company

Metal Micro Plastic Engineer

Systematic meetings with customers todiscuss their latest developments

✓ ✓

Systematic meetings with suppliers todiscuss their latest developments

✓ ✓ ✓ ✓

Getting reacquainted with customersand/or suppliers beyond their regularbusiness relations

✓ ✓ ✓

Intentionally establishing relationshipswith customers and/or suppliers onmultiple organizational and/ordepartmental levels

✓ ✓ ✓ ✓

Intentionally establishing relationshipswith organizations to get access totheir large networks

✓ ✓ ✓

Exchanging personnel ✓ ✓

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strong relationship with the regional uni-versity, as a lot of employees have gradu-ated there and have maintained theircontacts. Micro uses its strong-tie rela-tionship to get access to the universities’network. For instance, Micro providesworkshops within the universities’ entre-preneurship training program to teachstarting entrepreneurs about manufactur-ing techniques. This way they get incontact with entrepreneurs and acquireknowledge about new developmentsthese entrepreneurs are working on.Another example is how Engineer usedits strong relationship with Micro to getadvice on outsourcing to productionfacilities in Malaysia. Micro introducedEngineer to a trustworthy manufacturerin Malaysia, which encouraged Engineerto take the first step to expand toAsia.

Exchange of Personnel to Acquire NewKnowledge. The exchange of person-nel increases the breadth and depth ofthe relationship and gives access to newknowledge. The externally placedemployees get socialized at the partnerfirm, thereby getting better insight in allkinds of the partner firm capabilities.Examples of personnel exchange as arelational capability is found at Metal,who physically locates its engineers at aclosely connected engineering agencyto acquire new knowledge and projectmanagement methods. Also, Microphysically locates an engineer at a maincustomer that is located in the same cityto get an in-depth insight in the cus-tomer’s processes to enable joint devel-opment of products and manufacturingprocesses.

In sum, our study shows that the casestudy firms apply several kinds of rela-tional capabilities to acquire new knowl-edge within strong ties. Although theroutines and processes are idiosyncraticand firm specific, commonalities acrossthe firms result in the identification of sixspecific relational capabilities.

DiscussionThis study aims to understand how

small firms innovate through the use ofstrong ties. To guide our research wedeveloped a conceptual model thatexpressed how the use of specific rela-tion capabilities would enable newknowledge acquisition within strong ties.The findings from our qualitative casestudy support our assumption that strongties can be sustainable sources of newknowledge and that SMEs can use spe-cific kinds of relational capabilities toacquire new knowledge from these ties.We proposed that the use of these rela-tional capabilities could mitigate thenegative effects of overembeddednesswithin strong ties.

However, to understand how thesecapabilities affect overembeddedness,we need to determine the key mecha-nism that underlies these relational capa-bilities. Closer examination of our resultsreveals that the explaining mechanism isfound in “multiplexity.” Multiplexity is atie characteristic that denotes the extentto which multiple types of relations existbetween network partners within asingle relationship (Burt 1982, p. 32).Examples of multiplex relationships arecombinations of coworker, adviser, andfriend relations (Lazega and Pattison1999), combinations of buyer–supplierrelations, equity relations and directorrelations (Mahmood, Zhu, and Zajac2011), or combinations of knowledgeexchange relations concerning techno-logical, market, or managerial knowl-edge (Sammarra and Biggiero 2008).Several studies have shown that multi-plexity improves access to new knowl-edge and other resources within existingrelationships (Beckman and Haunschild2002; Coleman 1988; Mahmood, Zhu,and Zajac 2011; Uzzi and Gillespie 1999).The reasons for this are that multiplerelationships create more opportunitiesto get in contact with new knowledgeand that multiple interactions increase

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trust, which stimulates further knowl-edge exchange.

Our study showed that the firms applyrelational capabilities to build and lever-age multiplex relationships. For instance,the relational capabilities of exchangingpersonnel and establishing relations onmultiple organizational levels physicallyconnect people who otherwise wouldstay unconnected. Also, the otherrelational capabilities—systematicallymeeting customers and suppliers, gettingreacquainted beyond regular businessrelations, and using the partner firms’networks—create new knowledge rela-tions beyond existing ones. By establish-ing these multiple relations andleveraging the knowledge from theserelations, firms expand the scope ofknowledge exchange within strong tiesover time, which prevent the risk ofoverembeddedness.

From our study we derived a tax-onomy of six capabilities that are used tobuild and leverage multiplexity withinstrong ties. We introduce the term“bridging capabilities” to denote the spe-cific character of these capabilities and todistinguish them from other alliance andrelational capabilities. We define bridg-ing capabilities as the processes and rou-tines that are intentionally deployed toestablish multiple relations within asingle relationship and to leverage theknowledge from these multiple relations.They denote the creation of multiplebridges that give access to different kindsof knowledge and resources. We con-sider bridging capabilities as a specifickind of relational capabilities, with aspecial focus on the multiplex characterof relationships and alliances. In linewith relational capabilities, bridgingcapabilities are considered as dynamiccapabilities (Eisenhardt and Martin2000).

The main implication of our findingsis that the assumption of an inescapableinverted U-shaped relationship betweentie strength and new knowledge acquisi-

tion needs refinement. Our cases showedthat even over a long period of time—upto 25 years—strong ties still provide newknowledge. Further, our findings suggestthat the acquisition of new knowledgefrom strong ties depends on the combi-nation of the innovativeness of thepartner firms and the characteristics oftheir respective networks, and thedeployment of bridging capabilities.When the partner firm within a strong tiedoes not innovate nor can provide accessto an innovative network, we expect aninverted U-shaped relationship betweentie strength and new knowledge acquisi-tion as predicted by extant theory.

However, when the partner firm inno-vates, over time its knowledge basechanges and renews, thereby increasingthe availability of potentially valuableknowledge. This new knowledge canonly be appropriated through the appli-cation of bridging capabilities. So theextent to which strong ties keep provid-ing new knowledge over time is a func-tion of the use of bridging capabilities bythe focal firm and the innovativeness ofthe partner firm. This leads to the follow-ing proposition, which is graphicallyillustrated in Figure 2.

Proposition: The use of bridging capa-bilities will have a mitigating effect onthe inverted U-shaped relation betweentie strength and new knowledge acquisi-tion in such a way that the extent of newknowledge acquisition is a function ofthe application of bridging capabilitiesby the focal firm and the innovativenessof the partner firm.

Contributions to Theoryand Practice

Our study contributes to network andalliance literature in three ways. First, itshows that strong ties can be valuablesources of new knowledge and that theliabilities of overembeddedness can bemitigated by the use of bridging capabili-ties. This way, our study contributes toalliance capability literature by extending

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our understanding of what type of rela-tional capabilities enhance knowledgeacquisition from strong ties. Wherestudies of Lorenzoni and Lipparini (1999)and Capaldo (2007) mainly focus on theantecedents and outcomes of relationalcapabilities, our study examines theirprocesses and routines. In addition tothese studies, we provide a taxonomy ofsix bridging capabilities that firms use tobuild, develop, and maintain multiplexrelationships, in order to access andleverage new knowledge from theserelationships.

Second, our study challenges the gen-erally assumed inverted U-shaped rela-tionship between tie strength andknowledge acquisition. Our findingssuggest that overembeddedness instrong ties can be mitigated by proac-tively exploring the partner firms’ knowl-edge base, under the condition that thesepartner firms innovate themselves. Thisis in line with earlier work of Yli-Renko,Autio, and Sapienza (2001) on knowl-edge acquisition between entrepreneur-ial high-technology ventures and theirkey customers. They found that knowl-edge acquisition is positively related to

the level of social interaction but nega-tively related to high levels of trust. Theirexplanation is that too much trust mightlead to the expectation of the entrepre-neurial firms that their strong-tiepartner—the key customer—will providethem the necessary knowledge whenrequired. In relation to our study, wewould argue that the entrepreneurialfirms lack the required bridging capabili-ties to proactively explore the key cus-tomer’s knowledge base. This leavesthem unable to prevent the overembed-dedness trap.

The lack of application of bridgingcapabilities might also explain why somescholars did find an inverted U-shapedrelationship. For instance, McFadyen andCannella (2004) studied interpersonalrelationships between academic scien-tists. We expect that on an individuallevel scientists generally have a specia-lized knowledge base, which gets morespecific over time. In these cases,increased multiplexity does not yieldnew different insights, which couldexplain why over time scientists prefercollaborations with new colleagues overknown ones. This suggests that the

Figure 2Effect of Bridging Capabilities and Partner Innovativeness

on the Relationship between Tie Strength and NewKnowledge Acquisition

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effects of bridging capabilities are con-tingent upon the knowledge breadth ofthe alliance partner. This implies that asimilar study on the organizational levelmight lead to different results, as knowl-edge diversity within organizations islarger.

The study of Uzzi (1996) in the dressapparel economy also found an invertedU-shaped relationship between embed-dedness and firm survival. He arguedthat too much embeddedness bears therisk of getting shielded from importantdevelopments in the larger network,leading to lower focal firm survival.However, he did show that the knowl-edge diversity of the partners’ networkpositively affects the likelihood of focalfirm survival. This finding implicitly sug-gests that some firms in Uzzi’s (1996)study seem to be able to leverage theknowledge of their partners’ networks.We suggest that this could be explainedby the fact that some firms applied bridg-ing capabilities to access new knowledgefrom their direct partners or throughthese direct partners, thereby increasingtheir chances of firm survival. Stated dif-ferently, the capability to leverageknowledge from innovative strong-tiepartners might prevent the risk ofoverembeddedness.

The third contribution of our study isto provide an alternative solution for thesearch-transfer problem as the one givenby Hansen (1999). Whereas extant litera-ture suggests investing in weak ties toensure sufficient supply of new knowl-edge, our study suggests investing morein the development of innovative strongties. Particularly small firms could benefitfrom this strategy as it reduces complexityin their alliance portfolio and improvesalliance management efficiency in threeways. First, firms do not need to invest inthe risky and costly process of searchingand finding new partners. Second, firmscan concentrate on only a few key alli-ances, which enables them to managethese alliances more effectively. As Draul-

ans, de Man, and Volberda (2003)showed, the number of alliances that canbe managed effectively without establish-ing additional alliance managementsystems is around six. This implies thatinvesting in only a small number of strongties would increase the likelihood of alli-ance success. Third, the use of strong tiesin innovation projects that both providenew knowledge and facilitate knowledgeimplementation reduces coordinationand integration costs, and enhances alli-ance ambidexterity. For instance, Tiwana(2008) showed that “bridging ties”—thatpromote creativity and innovations—and“strong ties”—that facilitate cooperationand coordination—act as complements inalliance tie portfolios. Integration of thesetwo kinds of alliance ties within one inno-vation project leads to higher allianceambidexterity (Tiwana 2008), whichreflects the project performance to meetproject goals (exploitation) while beingadaptive to changes (exploration). Ourstudy suggests that the use of bridgingcapabilities within strong ties turns thesestrong ties into “bridging ties,” therebyreducing the number of ties requiredwithin an alliance. This, in turn, reducesthe need for knowledge integration capa-bilities and lowers coordination and inte-gration costs.

Next to these positive effects of bridg-ing capabilities on alliance managementefficiency, there could be a limiting effectas well. In alliance management literat-ure the establishment of a centralizedalliance function is considered an impor-tant factor for efficient alliance manage-ment (Draulans, de Man, and Volberda2003; Kale, Dyer, and Singh 2002; Kaleand Singh 2007). The assumption is thatcapability development depends onlearning and that centralization of alliancemanagement activities would improve theaccumulation of experiences. Forinstance, Hoang and Rothaermel (2005)found that smaller biotechnology firmshad better alliance performances thantheir larger pharmaceutical alliance part-

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ners. They suggested that smaller firmshave an advantage over larger firms as themanagement of alliances in smaller firmsis often in the hands of only one keyindividual, mostly the founder or CEO. Incontrast to this alliance capability litera-ture, our study just proposes that firmsshould invest in multiplex relation-ships and to involve multiple employeeson different organizational levels. Weencourage further research on theeffects of the application of bridging capa-bilities on overall alliance managementefficiency.

Limitations and Future ResearchThis study is not without limitations.

First, the generalization of our findingsshould be treated with care. The studyhad an explorative character and wasbased on four cases of small firms, oper-ating in the business-to-business activi-ties within the manufacturing industry.We may also not have identified all pos-sible bridging capabilities as our samplewas small. We encourage researchers tofurther explore other manifestationsof bridging capabilities and to deter-mine their effect on new knowledgeacquisition.

This brings us to a second limitation,regarding the novelty and complexity ofthe acquired knowledge. In our study weonly focused on the fact that the knowl-edge was new to the firm, neglectingdifferences in novelty and its impact oninnovation performance. Although weobserved several instances of the use ofstrong ties’ knowledge in the develop-ment of significant innovations by thecase study firms, we have not studied thedirect relationship between new knowl-edge from strong ties and innovationperformance. An interesting researchavenue would be to include knowledgenovelty, knowledge complexity, andinnovation outcomes in the analysis onthe performance of bridging capabilities.

Another limitation of this study is thefocus on the dyadic relationship between

two embedded partners, thereby neglect-ing overall network characteristics anddynamics. As we argued, the potentialfor new knowledge acquisition withinstrong ties is strongly dependent on theinnovativeness of the partner firm and itsrespective network. Hagedoorn (2006),Hagedoorn and Frankort (2008), andUzzi (1997) argued that dyadic, network,and environmental levels of embedded-ness interact and could jointly strengthenthe effect of (over)embeddedness. Thiscan be understood from the perspectiveof a firm that applies bridging capabili-ties on a relationship with a partnerwithin a network that suffers from over-embeddedness itself. In that case the useof bridging capabilities will not yield anynew knowledge. We recommend futurestudies on the effect of bridging capabili-ties to explicitly take the network levelinto account.

ConclusionThe goal of this study is to examine

how small firms can use strong ties assources of new knowledge for innova-tion. We found that small firms canbenefit from strong ties through theapplication of bridging capabilities toavoid the overembeddedness trap. Ourfindings suggest that firms should investmore in innovative strong ties instead ofincreasing the number of weak ties. Thisway small firms can simplify their alli-ance portfolio and increase allianceeffectiveness.

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