This study centers around the way in which firms can enhance alliance performance through the development of an alliance capability. Whereas most research has focused on inter-firm antecedents of alliance performance (i.e. factors influencing the quality of the relationship), research on intra-firm antecedents points to prior experience and internal mechanisms fostering knowledge transfer. As little is known about how firms need to develop an alliance capability, this study aims to uncover the relationships between critical concepts underlying the alliance capability development process. To this end, the results of a worldwide survey among 151 firms and expert interviews yield a number of findings. First, a model of alliance capability development is proposed which is derived from a multitude of theories and links experience, micro-level mechanisms, routines, capabilities and performance. Second, whereas prior research has shown that experience is a key determinant of alliance performance, our study finds that alliance capability mediates between experience and performance. These results provide empirical evidence of the need for firms to leverage prior experience by dispersing and sharing knowledge through micro-level mechanisms. These results extend current understanding of the critical intra-firm determinants of alliance performance and the underpinnings of capability development research in general. Moreover, they also enable firms to take appropriate action at the micro-level.
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