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Abstract: Drawing on the real options approach, we analyse which factors motivate firms to choose technological joint venture formation as their technology strategy. Scholars researching joint ventures through the real options lens have usually focused on the ending stage of the alliance rather than on its formation. Using a panel of 29 376 observations from 4050 manufacturing firms operating in Spain between 1998 and 2005, our results are consistent with real options approach predictions. We find that the greater the firm’s absorptive capacity and the higher the degree of technological risk, the more likely the firm is to form a technological joint venture. Results also suggest that the greater the risk of pre-emption by rivals and the higher the opportunity costs associated with technological joint venture formation, the less likely the firm is to choose such a technology strategy. A further step towards bridging the gap between finance theory and strategic analysis is thus taken.

The extensive academic literature on innovation has long recognized product users as a potentially important source of ideas. While prior work has primarily focused on understanding the unique motivations and knowledge that allow users to generate their own innovations, we extend existing theory to investigate the contribution of users to corporate invention. We draw on the knowledge-based view of the firm, evolutionary theory, and the user innovation literature to theorize that corporate inventions that integrate user knowledge will be of greater importance than other corporate inventions, contribute to a broader set of follow-on technologies and occur earlier in the product life cycle. We test these propositions with a large data set of medical device inventions. We find support for our predictions, and discuss the implications of our results for the theoretical and empirical literature on organizational innovation.